Charity sales by for-profit companies face crackdown by retailers

You’ve seen them in shopping malls and retail outlets across Canada — young people selling toys, cosmetics and other products to raise money for charity. But a CBC News investigation has found that customers and even some retailers were unaware some sellers were working for for-profit companies.

Sellers make substantial commissions, companies keep lion's share of proceeds

Sellers make substantial commissions, companies keep lion's share of proceeds 1:21

You've seen them in shopping malls and retail outlets across Canada — young people selling toys, cosmetics and other products to raise money for charity.

The sellers work for private, for-profit companies who keep the lion's share of the proceeds for themselves, something the customers and host retailers may be unaware of, a CBC News investigation has found.

Dozens of outfits across Canada, all with different names, appear to be co-ordinated by an Ontario-based company called Eagle Eye Events. The products come from a Toronto-based distributor.

Many retailers allow community groups and registered charities to use store property in their high-traffic space, and private marketing companies that donate a portion of their proceeds to charity have also gained access.

Mark Blumberg, a Toronto-based lawyer, says charities should avoid scenarios involving private and commission-based marketers. (CBC)
But as a result of the CBC investigation, Walmart, Sobeys and Loblaws now say they are cracking down and reinforcing policies that restrict store space to non-profits.

Former employees of some of the companies told CBC that salespeople make substantial commissions on the campaigns. That's not illegal, but it raises a red flag for charity experts.

"Charities are best to avoid these scenarios," says Mark Blumberg, a Toronto-based lawyer and expert in registered charities.

"It really incentivizes some practices that aren't for the benefit of the charity sector."

As a result, some charities specifically reject associations with private and commission-based marketers. But the CBC investigation found that doesn't stop some marketing companies from going ahead with their campaigns anyway.

Charities still named

Momentum Marketing of Winnipeg, for example, approached Macdonald Youth Services to collect toys and cash on their behalf, but the agency said no.

Momentum went ahead with its campaign, inviting shoppers to pay between $10 and $40 for a toy that the company then donated on the customer's behalf.

A Momentum worker dropped off some toys for Macdonald and posted a picture on its website. When Macdonald found out what happened, the agency demanded the picture be removed (which it was).

Winnipeg Harvest, a food bank, was approached last November by Momentum Marketing to be a partner in fundraising efforts, but it didn't agree.

Winnipeg's Macdonald Youth Services found this photo on Momentum Marketing's Facebook page after a worker dropped off toys. The organization says it had said no to the company when it was approached last fall. (Facebook)
Momentum still used Harvest's name at its charity drive until Harvest told the company to stop.

"We are very, very careful about who we affiliate ourselves with, because we have to protect our donors," said Kate Brenner, Winnipeg Harvest's director of development.

Brandon Farr of Momentum Marketing refused to be interviewed, but said in a statement that the dispute with Winnipeg Harvest resulted from miscommunication. He said the company was disappointed not to be able to support the food bank's work.

The Ottawa Children's Aid Society said it has received about 800 toys over two years from Twillingate International, a Barrie, Ont., company.

When CBC contacted the charity, it said it knew the company sold the toys but didn't know how it profited. Twillingate International turned down our request for comment.

In Montreal, a company called Les Promotions Synergie used to sell products and donate a portion of the proceeds to the Missing Children's Network. But the charity severed the relationship in 2011 after customers complained about having to buy products from the company as a way of donating to the network. The company didn't return calls.

Unlike registered charities, third-party marketers who raise money for charities are under no legal obligation to report sales figures or to prove what percentage of proceeds end up with charitable organizations. Charity experts say that as long as the companies are donating some of the profits, it's a legitimate business transaction.

Andrea McManus, past chair of the International Association of Fundraising Professionals, said private companies that use commissioned salespeople to collect for charity are problematic.

"It's probably one of the most unethical activities that a fundraising professional could do," said McManus, who is also president of The Development Group, a group of charity consultants in Calgary.

"It becomes about personal gain."

Ontario charity happy with arrangements

The Breast Cancer Society of Canada, a small charity based in Sarnia, Ont., said it has corporate arrangements with 14 companies that provide donations of 10 per cent of the retail price of cosmetics and other products.

The society, which is not affiliated with the much larger Canadian Breast Cancer Foundation, confirmed that Momentum Marketing of Winnipeg has donated $8,000. Halifax's Impact Industries has donated $20,000 since the partnership began. The society refused to name all the other companies, but said donations over the last two years amounted to $250,000.

"I'm very happy with that," said Dawn Hamilton, the charity's corporate partners and events co-ordinator, but added that she has had complaints about the sellers.  

"I'm not going to say it's been a perfect ride. Sometimes a new employee's over-ambitious," she said. "You know they stretch the truth, and someone follows up and contacts me. Then the truth is told."

The society provides tax donation receipts to the marketing companies for their contributions.

"If any consumer has concerns about the charitable claims linked to the sale of a product, we recommend that they do not purchase the product," a statement from the charity also said.

McManus said that if a charity chooses to work with a third-party marketer, it's a legitimate business transaction, but charities have a responsibility to control what's being said on their behalf.

A video obtained by CBC News from a former Momentum employee shows a Winnipeg team leader pumping up sales staff during recent campaigns.

"Go out and make some goddamn money," the team leader said. "We aren't getting paid what we're worth. We're paid for what we go out and do."

With files from Vera-Lynn Kubinec, Rachel Ward, Jack Julian, Raffy Boudjikanian and Amy Dodge


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