30 June 2011

Learning From Lady Gaga's Lawsuit

Lady Gaga, to raise money for the Japan earthquake and tsunami, sold bracelets for $5 to her fans. It was a resounding success and raised enough money for Gaga to have made a $1.5 million donation at the end of March. However, some fans are not happy that there were extra costs such as shipping and tax. From USA Today:
[N]ow a Michigan law firm, 1800LAWFIRM, is contesting all of that. In a lawsuit filed on Friday in Detroit, the firm claims that the pop star is scamming her fans and the victims because she's not actually donating all of the money. The lawsuit notes that an unnecessary sales tax and a $3.99 shipping charge were added to each order. Detroit-area attorney Alyson Oliver told AP she wants an accounting. Oliver told Reuters Gaga may have "inflated reports of total donations."

The lawsuit seeks class-action status and possible refunds for people who bought wristbands.

Today, however, a Gaga rep issued a statement to E! News, saying, "This misguided lawsuit is without merit and unfortunately takes attention away from the kind deeds of the fans around the world who are supporting the people of Japan.

"The entire $5 donation made with the purchase of each bracelet is going to support the disaster relief. No profit is being made on shipping costs. Sales tax charges were made in accordance with local legal requirements. Lady Gaga has personally pledged her own funds to this cause and continues to support the victims of the disaster."
It does not seem that there is much merit in the accusation. Unless the lawyers can prove that the money was mishandled, Gaga's charity has done nothing wrong. In fact, they have done the same thing that every other NGO does when attracting donors for a cause. They set out an issue, offer a simple solution, and give a call to action for supporters.

All in all it is a silly lawsuit, but it proves two points. The first is that donors need better education. The $5 for the bracelet covers the item, but it is not free to ship it. If the money for the shipping was included in the $5 then the upset supporters would have been equally as upset since it still would have meant that all of the $5 did not get donated.

Second, building off the first, the fallacy of overhead being bad has to come to an end. Education will help that, but the costs to deliver a good or service need to be better communicated and understood. Scores of people could have donated time and effort to Gaga's charity, but that does not mean that there were no costs to produce, package, and ship the bracelet. That does not even cover the fact that people have to process the order, collect the money and allocate the funds.

Finally, to avoid these problems, giving directly is always the best solution. Rather than buy the bracelet, Gaga fans could have given $5 to her favorite charity. Better yet, they could have calculated the additional fees and given that sum which would have had an even greater impact. It means that they would not have a bracelet to show their support for Japan and Gaga, but the impact could have been greater.