The Ethics of Not-For-Profit Organizations Capitalizing on Small Business Saturday

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I wasn’t going to write a post about this so I did a short blurb on Facebook (you can read the post and the excellent comments even if you don’t have Facebook). But the conversation was very enlightening and I have decided to do a post.

On Saturday, American Express sponsored Small Business Saturday (SBS). To help promote small businesses (and their brand) AMEX offered a $25 credit to anyone who used a registered AMEX card at a participating small business.

Many schools and charity organizations urged their supporters to register and donate $25 using their AMEX. This would give the institution a $25 (minus fees) donation and the donor would recoup the $25 from AMEX. So in essence it was a free $25 for the institution. Sounds like a win / win.

On its face, the participation of charities and religious institutions seems like it could be an issue. The concept here is to promote small business with purchases. “Spending $25” at a shul or school simply for the sake of a donation is  not within the spirit of the promotion. But reasonable people could argue this point.

The problem is that SBS has rules. The rules state:

The Program is only available to qualifying small businesses. For the purpose of this Program, qualifying small businesses include small, locally-owned storefront and online businesses with $10 million in annual revenue or less. Businesses in the following industries are excluded: government agencies, charities, non-profits, trade associations, shopping property management firms, political, religious and educational organizations.

 It seems pretty clear that shuls, yeshivas, tzedaka organizations, and any other frum (or not frum) Not-For-Profit would not be eligible to participate in SBS. (And by the way, we were able to find a few Churches that asked for $25 donations on SBS).

But things are not so simple.

First of all, AMEX knows which vendors are NFPs or religious institutions. Yet, they accept SBS submissions from these vendors. This seems to be in defiance of their own rules. Further, at least a few institutions contacted AMEX and asked if they were in fact eligible for SBS and AMEX told them that they were eligible! Once again, AMEX defied their own rules. Complicating things even worse is the fact that AMEX told several other institutions that they were not eligible for SBS.

Turns out, AMEX has no idea what they are doing. Different organizations were told different things and they don’t even know their own rules. So what’s the verdict?

Here is what I think. If you asked AMEX and they said your organization is not eligible, there is no question that you should not be participating. Yes, that is even if they will accept your charges. Taking advantage of their mistake when you know that they are making a mistake is unethical. Sure, “taus akum” is permissible. But that doesn’t mean you should take advantage. And it might only apply after the mistake happened, but to knowingly take advantage of a mistake is different.

If you asked AMEX and they said your organization is eligible and you did not know that their own rules said that your organization was not eligible, I have no problem with your organization participating in SBS. I don’t love it, but it’s hard for me to complain.

If you asked AMEX and they said your organization is eligible and you did know that their own rules said that your organization was not eligible, I think you should still refrain from participating in SBS. While it is true that someone at AMEX told you that you could participate, you knew that you could not participate. It seems difficult for me to sign off on that. Just because a call-center agent doesn’t know AMEX’s rules doesn’t exonerate you from following those rules. Imagine one idiot police officer told you that you could drive 80 in a clearly marked 55 MPH zone and another officer pulls you over for speeding. You’re not going to be able to blame it on the first officer. You’re going to get a citation. It’s not the exact same thing, but it’s close.

If you didn’t ask AMEX if your organization could participate I think you might think that ignorance is bliss. But it’s not. If you are going to participate in a promotion like this, especially one that involves free money, you need to do your due diligence. You need to make sure you can participate. If you didn’t even care to look into it, I find that problematic.

I hope that at the very least, AMEX will clarify their position for SBS 2013 and the halachically conscious public will be sure to ascertain their eligibility before spamming their supporters to “spend $25” on a donation to their institution.

Thanks to Mark, Dani, and Binyamin and all the Facebook commenters.

  • Azi Grae

    Sheilot U’Shuvot

  • MarkSoFla

    Not sure how exactly “taus akum” applies when it comes to a public company. A public company has akum and non-akum owners.

    • It goes according to the Partners / Officers, I believe.

      • MarkSoFla

        Every shareholder is a partner. Officers are another matter, but an officer may not even be a partner (thought they usually are, at least nominally).

        And Amex officers include Daniel Henry and Daniel Schulman and Josh Silverman and Linda Zukauckas who may well not be akum.

        • I believe this issue has been dealt with extensively with regards to ribbis, credit crd companies etc. Wondering if the SCOTUS ruling in Mccain Feingold that companies are people affects this in any way.

  • milhousetrabajo

    1) u should note that these “donations” are not tax deductible, so those who chose to do this are kinda shooting themselves in the foot (as my wife notes, to the extent $25 is a shot in the foot) and not getting as much bang for the buck as if they used the money for something they need (groceries etc.) and then gave a donation separately. not just moral, but common sense.

    2) Amex reps are told to make every customer happy no matter what. i forgot to use my $25 credit on saturday so i sent them a message. and they immediately just credited my account for $25 anyway! and many others got even more credit for forgetting to shop small (just google it). Amex is really customer friendly, but top level people there probably feel as a policy that charities should not be included.

    • Good points!

    • MarkSoFla

      As a general rule, and donation has to be reduced by the amount of money/items/benefit received to determine the amount deductible. So when you go to your shul dinner and pay $250/pp, if the dinner is valued at $50, you may deduct $200.

  • Machshavos

    1. I don’t understand. Looking at the Facebook post, it seemed there was some lack of clarity about which rules were correct. Why are you looking at the rules for the advertising program?

    2. I think there’s another relevant category of organization administrators: Those that didn’t ask AmEx but asked other organizations. I would assume that there are some who fit into that category. If they “researched” the promotion by discussing it with other administrators, and thus determined they were eligible, I think we can give them some leeway.

    • 1) I think the advertising program rules are clear that the the “eligibility” section is not only with regard to eligibility for online ads rather are the general eligibility terms.

      • Machshavos

        I don’t think so. It says “The Program is only available to qualifying small businesses” and then goes on to lay the ground rules. This is on a document titled “2012 Small Business Saturday Free Online Advertising Program.” Is Small Business Saturday ever referred to as a “program?”

        • The document is about online ads. But the eligibility component is universal. The part about the ads begins in a later paragraph.

          • Machshavos

            Why would you think the eligibility component is universal when the other document has its own – different – eligibility component?

            • Because the other document is not comprehensive at all.

              • Machshavos

                What do you mean?

    • 2) Eh. Maybe.

  • Yanky

    To be dan l’kaf zchus, maybe these organizations have done it in the past, and the non-profit exclusion is a new rule that they didn’t realize was added. I couldn’t find a copy of last year’s rules on the AMEX website, but found the following on a website promoting last year’s SBS:

    Eligible small business merchants are independently owned small businesses located in the United States that accept the American Express Card. Purchases made at large or national chain stores, at franchised business locations and at government agencies are not eligible. Prepaid, Corporate Cards and ExpressPay transactions are not eligible.