In March of 2013, Time magazine reported that the Better Business Bureau expelled one of its affiliates, the BBB of Southland, which had served the greater Los Angeles area. The expulsion was due to a scandal involving the BBB, initially reported by the ABC news Show 20/20 in 2010 in a story entitled “The Best Ratings Money Can Buy.”
ABC’s story demonstrated that the Southland BBB had conducted extortionate actions against local businesses. In a nutshell, it became a matter of public record that businesses that paid the BBB annual dues were rewarded with A ratings and “accreditation” status by the organization. Businesses that did not join, however, received lower grades, even in the absence of any complaints against them. Even more worrying, the investigators created a totally fake application for a non-existent business they called Hamas (yes, the same name as the infamous terrorist group), and in exchange for a $425 fee were rewarded with accreditation and an A- grade.
While it was good that the BBB eventually expelled the Southland branch, the fact that it took them more than two years to close down a branch that was engaged in open extortion was obviously very worrying. Carrie Hurt, the then president and CEO of the Council of the Better Business Bureau (CBBB, the overseer of BBB conduct nationwide) said in a press release at the time that, “We hold businesses to high standards for honesty, transparency, fairness and integrity, and we hold ourselves to those same standards.” That these standards are not necessarily applied in a timely fashion was apparently not part of the scope of her declaration.
Despite this controversy, Time reported that consumer inquiries rose 20% from 2011 to 2012, and that the number of complaints made by consumers against businesses rose to nearly 1,000,000. According to Hurt, these numbers proved the BBB was “more relevant than ever.”
It certainly seems as if the BBB is still perceived as an iconic brand in consumer protection, a self-acknowledged myth (“We are not a consumer watchdog,” says their site) likely perpetuated by ongoing consumer services such as the periodic publication of lists of most popular internet scams, etc. In addition, many people believe that the BBB is a kind of quasi- (or even official) governmental agency, another myth no doubt perpetuated by the fact that BBB affiliates around the country are often listed in local Yellow Pages under the category of “Government Offices.” But what is the BBB, really? And how can it serve as an unbiased source of information for business and consumers when it apparently provides clear and documentable bias in favor of those businesses that are members, at the expense of those who are not?
What is the BBB?
In 1912, the “National Vigilance Committee” was formed in Dallas to prevent people falling prey to false advertising claims made by the manufacturers and distributors of various medical nostrums, whose claims of efficacy and safety were not well monitored at the time. (Today, of course, complaints about the alleged professional malpractice of physicians and lawyers are referred to the associations that self-regulate those professions.)
The National Vigilance Committee, whose mandate was based on the “Ten Commandments of Advertising” by Samuel Dobbs of Coca Cola, soon gave way to the opening of the first “Better Business Bureau,” in Minneapolis Minnesota, followed by affiliates in Cleveland and Salt Lake City in 1913.
In 1915, the organization’s archives show that the top industry for complaints was, generically, “Door-to-Door Sales,” with over 1.4 million responses from the organization even a hundred years ago.
In fact, the historic perception of the BBB has always been that it is a kind of official agency charged with protecting consumers from the most egregious marketing and sales practices. But in fact this is not the case. Rather than being a government agency, the Better Business Bureau is structured as a 501(c)(6) non-profit, with over $215,000,000 a year in revenues. Services include providing reviews, business accreditation, and dispute resolution services.
There are approximately 112 Better Business Bureaus in the United States, overseen by the Council of the Better Business Bureau (CBBB), headquartered in Arlington, Virginia. These local BBB’s are independently owned, and governed by their own board of directors (who may not know who the local owners are), and are supposed to meet International standards, as monitored by the CBBB. Revenues for each BBB are chiefly funded by its accredited businesses, the owners of which often also serve on its board. Income is generated from selling memberships to businesses, and yearly membership fees. That these revenues may be significant, allowing for high executive salaries, and expensive junkets to wine country, for example, is all opaque to the public, since as a non-profit the BBB does not have to declare its revenues.
The financial performance of each BBB entity therefore depends on its ability to sell memberships, and its competence on the integrity and capability of its owners, staff, and board. The fairly wide latitude that each BBB has to self-regulate can lead to regional or local discrepancies in effectiveness of services, and even ethical standards, as witnessed by the dismissal of the Southland BBB.
Pros and Cons of Membership in the BBB
Suppose you are a local business, and one day you receive a call from the local BBB suggesting you join. Membership is approximately $450/year, and the self-interested (to you) appeal will be made that being able to put the iconic BBB torch logo on your website and other promotional literature will generally instill a sense of comfort among your prospective customers that you are a credible and honest provider of the goods and services you provide, a public, third-party-endorsed statement of how you conduct your business.
Kirby Horton, advisory board member of the Middle Tennessee BBB, affirmed this view. “The BBB brand implies a set of ethics and systems in your business process, that goes over and above you just saying you have them. Everybody says they have these systems, but when the BBB agrees you have them, you gain credibility.”
And, according to Mr. Horton, the benefit of BBB membership does not stop with perceived credibility. The BBB can “provide the business owner with rigorous training, and a series of benchmarks that challenge you to operate the way you say you are going to operate. You don’t have to belong (to the BBB to get this done), but no other organization has the same focus and structure in place to help you match your behaviors against an external benchmark.”
I asked Mr. Horton if he had heard negative criticism about the BBB, and he acknowledged that some people had told him “that it’s just a racket, you have to pay to get a good grade.” But he also asserted that these instances were very few and far between, and only a “handful of people” during his tenure as an Advisory Board member had made such allegations.
“I don’t know how you can be an “A” or “A+” member without membership,” Mr. Horton went on, but in his experience this wasn’t simply because paying members were given a free ride while non-members were shut out in the cold. “(Our) members who receive these high ratings have to demonstrate they have certain standards in place to deal with complaints, and they receive training on complaint resolution, and also how to conduct business so that they don’t receive many complaints to begin with. (At least in Middle Tennessee) you can’t just become a member and get an “A+” rating: you have to earn it. The BBB is a trusted source of information about businesses that have integrity, as well as those that don’t.”
There is, apparently, still some bite left in the BBB brand, whatever criticisms have been leveled against the organization. A resident of Franklin, Tennessee, shared with me that he kept receiving a free newspaper called “YES!” delivered to his door by the Gannett Company (owners and distributors of USA Today, as well as the Nashville daily, “The Tennessean.”) Repeated calls to Gannett to stop this unsolicited delivery were met with no action. However, a single call to the BBB not only resulted in cessation of the unwanted delivery, but also a personal letter of apology from Gannett’s Regional VP. Would such prompt action have resulted if the complainant had not also been a BBB member business owner? That is an unknown.
Balanced against Mr. Horton’s positive views, however, are more sinister ones that suggest the BBB is some sort of strong-arm, “mafia,” not only awarding higher ratings to members than non-members, but also affording a dispute resolution bias that is much more favorable to members than non-members.
Certainly, the investigators in the Southland BBB case found evidence of extortionate practices, whereby businesses who paid received high BBB ratings (without meeting any of the rigorous benchmarks that Mr. Horton described) while those who did not received lower ones, thereby causing many businesses to join for fear of receiving low ratings if they didn’t. As egregious as this case was, and as disappointingly long as it took the CBBB to deal with it, it is important to note that it does appear to be an isolated instance, aided in no small part by the local BBB’s ability to, in large measure, “run their own shows.”
Suggestions of a member bias in dispute resolution abound online, and more than one business owner I interviewed leveled this criticism against their local BBB. Chris S, who owns a collections agency in California, flat out stated: “it (the BBB) is just a scam. I only joined several years ago because a debtor complained against a client I was representing, and named me in the complaint as well. I was told I wasn’t able to dispute the complaint, as I wasn’t a member, and I got an F rating. After I joined, I was able to dispute the complaint, and now I have an A+ rating, and have made no changes to the way I’ve always done business. It’s protection money.”
Now, Chris S. is out in California, and, as noted, the way that a California BBB conducts business can be very different than the way any other BBB does. And his experience in itself is not how the BBB is supposed to operate. Non-member businesses are supposed to universally have the right to dispute a complaint free of charge (although some non-member businesses in other parts of the country have complained that their local BBB has charged them to do so). For instance, when Robert L., another non-member collections business owner in Nashville, had a complaint made against him, he promptly addressed the complaint with the local BBB, received a satisfactory resolution in his favor, and did not have to pay for the ability to do so, which is exactly how the CBBB mandates things be done.
Should you become a BBB member?
The short answer is, it depends. Do you look at the BBB website to research a company? Does seeing a BBB logo on a business’s promotional materials or website influence whether you want to business with them? Does having an A or A+ BBB rating plus/minus accreditation influence you when you choose a vendor? If not, then membership in the BBB may not be a fit for you.
If, on the other hand, you are impressed by the fact that the BBB’s website is one of the top 300 most-visited websites in the country, you find yourself comforted by the sight of the blue “Start with Trust” logo on a vendor’s marketing materials, and by a high rating or accreditation status, then exploring BBB membership might be an entirely reasonable thing to consider.
Either way, keep in mind that each BBB is a different entity, and ensure you do your own “Buyer Beware” due diligence when investigating the prospective value of membership in your local BBB affiliate.