The attorney general of Washington state sued largest thrift retailer in the world with what amounts to deception and acting like a fake charity.
One reason many of us give our used clothes or out-of-date TVs to Goodwill or the Salvation Army is that we know that the funds these organizations get from our donations are used for charitable purposes.
When you drop off your donations at Value Village, a nationwide chain based in Bellevue, Washington, it appears that your gifts help others. ‘DONATE TO A NONPROFIT HERE,” a banner in front of a typical Value Village says. But then on smaller letters at the bottom of the banner it says, “Value Village is a for-profit national fundraiser.”
As it turns out, Value Village is a for-profit company that does not appear to be a social enterprise but has adopted the protective mimicry of a charity.
Washington state attorney general Bob Ferguson has filed suit against the company and its parent corporation Savers LLC charging it with fraudulently posing as a charity and insinuating to donors that most of the money Value Village earns goes to charity. Francesca Lyman of Investigate West has the details.
What makes General Ferguson’s suit interesting is that his office considers his lawsuit to be a donor intent case, according to the complaint his office filed with King County, Washington Superior Court.
Their 87-page complaint refers to “the bedrock of charitable giving—honoring a donor’s intent.” In the state of Washington’s view, a donor who thinks that most of her gift to Value Village is going to charity has just as much right to have her wishes honored as the large donor who creates a foundation does.
At issue is this: Money from Value Village sales does go to charity.
Savers LLC says it donated $13 million to partner charities in Washington State in 2016 and $106 million between 2006-2016. In addition, some charities, such as ARC of Washington State, say they make deals with Value Village because it’s easier to get contracts with Value Village than it is to run a thrift store.
The problem is that not very much of a Value Village donation goes to charity. Contracts InvestigateWest received said that charities would receive anywhere from four cents a pound for “soft goods” such as clothes if they were dropped off at a Value Village Center to 44 cents a pound if the charities trucked in the goods. For “hard goods” such as furniture, the rate ranges from 2 cents a pound to 19 cents. So, a 50-pound set of drawers that Value Village might sell for $50 would earn a charity as little as a dollar.
But Value Village makes it appear that their donations to charity are far higher than they actually are.
Their official list of what they want has on top “items to give to charity.” The company issued tax receipts for a particular charity, even though the money from a particular sale might be split between several charities.
Moreover, the state charges that Value Village staffers are told to evade the question if asked how much of a particular donation goes to charity. The state of Washington, as part of their case, submitted findings from a focus group they convened about Value Village that said that 75 percent of the people in the focus group thought Value Village was a nonprofit, and 90 percent substantially overestimated the amount of money Value Village gave to charity.
Savers LLC says its policies are commercial free speech, and cite a 1988 Supreme Court decision in their defense. I wish Lyman had named this decision, but she doesn’t.
However, she does cite a 2003 case, which I found was Madigan v. Telemarketing Associates, in which the Supreme Court, reversing the Illinois Supreme Court, said that Illinois Attorney General Lisa Madigan could sue Telemarketing Associates, which raised $7.6 million for VietNow between 1987-95 and kept $6.6 million. But Justice Ruth Bader Ginsburg, writing for the majority, said that the states couldn’t sue a telemarketer for high fees or not disclosing a contract with a client, but could sue if the telemarketer said anything that was deceptive.
Perhaps this is why Value Village employees often don’t answer the question when they’re asked how much of a particular donation goes to charity.
I’ve written about the abuses of state attorneys general in the past, but one legitimate function they have is upholding the rule of law, including contracts. Value Village is justified in setting up contracts with nonprofits, and they are performing useful functions in saving people money and extending the life of recyclable goods.
But they shouldn’t pretend to be a charity.
The state of Washington is seeking a seven-figure fine from Savers LLC. I am strongly opposed to this fine if it went to the state’s treasury and less opposed if it was a one-time payment to some of the charities that contract with Savers LLC. I would favor terms of a settlement that would require Value Village to place in an easily accessible location, such as flyers near a donation site, details of how much of a donor’s gift goes to charity.
Lyman interviewed Wise Giving Alliance CEO Bennett Weiner. If a donor asks, “How much will a charity receive from my donation?” Weiner said, “If you don’t get a straight answer, move on.”
That strikes me as excellent advice.
(Hat tip: Nonprofit Quarterly)
7 thoughts on “For-profit thrift store chain gets sued for dressing like a charity”
In March 2022, the state of Washington’s Supreme Court agreed to hear the lawsuit the Washington Attorney General brought against Value Village.
In November 2019 King County (Washington) Superior Court Judge Roger Rogoff ruled that Value Village left a “deceptive net impression” that it was a charity. He declared that statements in Value Village stores such as “Your donations and purchases help us fund programs and services. How’s that for shopping with a smile?” were deceptive. However, he declared that the business model of Savers Inc., parent of Value Village, was worthwhile and that the company did do some good for the communities in which it operates. Judge Rogoff said he planned to rule on damages in the case in the spring of 2020.
Thank you for catching that, Francesca. We’ve just corrected it in the main text. Thanks!
FYI It’s Bennett ‘Weiner,’ not Weiser. Better late then never? (Sadder than weiser?)
Ms. Lyman: Thank you for the clarification and the link to your earlier article, which I recommend to readers who want more background on the Value Village case.
Thanks for throwing a spotlight on this issue. With the “Marie Kondo” decluttering craze going on right now, charity watchers say that it’s especially important for donors to be well-informed about where their donations go, and to know about charitable fundraising laws affecting them. Savers’ defense is not that their fundraising is “commercial free speech,” as you wrote, but rather that charitable fundraising is protected as free speech under the First Amendment. This principle was upheld in the 1988 Supreme Court decision, (Riley v. National Federation of the Blind of North Carolina). https://supreme.justia.com/cases/federal/us/487/781/ . It is the first of a trilogy of court cases, known often as the “Riley Trilogy.” These cases were described in greater detail in an earlier article in this series “Profiting from Thrift” series.
“Supreme Court: Telemarketing is protected speech: Importantly, three 1980s U.S. Supreme Court decisions say that communities can’t force charity telemarketers to disclose how much donations benefit charity versus how much goes to the commercial fundraiser, such as a for-profit thrift shop….This trilogy of cases for years defined how states regulate charitable solicitation.”
You can find more details here: http://www.invw.org/2015/12/15/can-regulators-overcome-high-barriers-to-rein-in-for-profit-thrift-stores/
The 1988 case Ms. Lyman undoubtedly was referring to in her article is Riley v. National Federation of the Blind, 487 U.S. 781 (1988).
You can read a little more about the background of the case and the attorney who brought it in one article from the excellent series of articles by the Tampa Bay Times and the Center for Investigative Reporting here: https://www.revealnews.org/article/meet-the-lawyer-who-keeps-some-of-americas-worst-charities-in-business/