AO 2010-21: Corporate affinity program for purchase of used mobile phones

ReCellular, Inc., a for-profit corporation that recycles and resells used mobile phones and accessories, may offer an affinity program to transmit to political committees contributions that result from its purchase of consumers’ used phones. 

Background 

ReCellular collects used cell phones in several ways, including purchasing phones directly from consumers via its website. A consumer visiting the website may enter the brand and model number of his or her phone and receive a purchase quote from ReCellular. If the consumer accepts the offer, ReCellular provides them a shipping label–a common industry practice that improves consumer follow through. Upon receipt, ReCellular assesses the phone to ensure that it meets certain sales criteria, and then sends the consumer a check for the agreed purchase price. 

ReCellular allows each consumer the option of donating the sale proceeds from his or her phone to one of several 501(c)(3) charitable organizations listed on the company’s website. If the consumer elects this option, ReCellular sends a check in his or her name for the full purchase price of the phone as a donation to the selected charity. 

Now, ReCellular plans to allow consumers to choose to contribute their sale proceeds to federal candidates’ authorized committees, national political party committees, and nonconnected committees. Committees will pay to be listed on the website, and ReCellular will post a statement that it does not endorse any of the committees. Consumers choosing to contribute sale proceeds to political committees will be asked to confirm that their contribution complies with the source and amount restrictions of the Act. Finally, ReCellular plans to collect the recordkeeping and reporting information committees need and use that information to generate two emails: the first to each consumer, will confirm completion of the sale and the amount of the contribution; the second to each recipient political committee, will list the contribution amount and contributor information provided by the consumer. ReCellular will not forward any proceeds from the sale of a phone to a political committee until it has ensured that the phone meets ReCellular’s criteria. 

ReCellular asks if its plan to allow consumers to direct the company to send proceeds from the sale of their used cell phones to a political committee chosen by the individual complies with the Act and Commission regulations. ReCellular also asks if it must charge the recipient political committee for the company’s costs for shipping the phone, processing the transaction, confirming the sale, and transmitting the payment, even though that cost is already reflected in the price that ReCellular pays each consumer. Finally, ReCellular asks if recipient political committees must each pay ReCellular the incremental cost of sending a notification email to the committee with the contributor’s name, address, occupation and employer, and date of contribution, if that cost is not already paid by the consumer. 

Analysis 

In prior advisory opinions, the Commission has allowed corporations to offer affinity programs and enter into affinity-type business arrangements so long as the corporation and political committee enter into a commercially reasonable transaction in which the committee pays the usual and normal charge for any services provided, and the amounts contributed to political committees via rebates or rewards are from individual customers’ funds and not corporate funds. AOs 2010-06, 2008-18 and 2003-16. 

The Commission concluded that ReCellular proposal represents a commercially reasonable transaction. ReCellular is not required to charge political committees for costs that are already reflected in the purchase price offered to the consumer, such as the cost of shipping phones and processing payments. However, committees must pay to be listed on the ReCellular website and must cover the cost of the notification emails, unless the cost is borne by the consumers. The Commission stated ReCellular could bill committees for these services monthly, so long as doing so would be “commercially reasonable.” See AO 2006-34; 11 CFR 114.2(f)(1) and 116.4. 

The Commission also determined that the proceeds of each phone sale are the property of the consumer. ReCellular does not disburse the proceeds of a phone sale until it confirms that the phone meets its purchase criteria. Additionally, the consumer has ultimate control over the disposition of the funds: upon agreeing to sell a phone to ReCellular, the consumer decides whether the company sends the proceeds to the consumer, a charity, or a political committee. Under ReCellular’s proposal, each consumer must confirm that his or her contribution complies with the limitations and prohibitions of the Act: that it is not made by a corporation, national bank, labor organization, Federal contractor, or a foreign national. This is consistent with the conditions approved by the Commission in previous advisory opinions. AOs 2010-06, 2006-35 and 1995-09. 

Finally, the Commission concluded that ReCellular’s plan to forward sale proceeds to recipient committees within ten days of confirming that “the consumer’s phone was worth the quoted price” complies with the Act and Commission regulations. 2 U.S.C. § 432(a) and (b); 11 CFR 102.8. 

AO 2010-21: Date issued: October 8, 2010; Length: 9 pages.