Better Business Bureau

What It Means

The Better Business Bureaus (BBB) system is a nonprofit organization (meaning that its primary goal is to benefit the public rather than achieve financial gain) in the United States whose mission is to promote fair and ethical business practices in sales and advertising. The organization achieves this mission by establishing standards for good business practices, receiving and investigating consumer complaints about unfair practices, evaluating and reporting on the practices of specific businesses, and alerting the public to deceitful or fraudulent tactics in sales and advertising. The BBB is not a government agency, nor does it have the power to take legal action or impose sanctions or penalties against businesses that engage in improper practices. It does, however, have considerable power to influence a company’s public image (positively or negatively) by disseminating information about its business practices. Using this leverage, the BBB can compel most companies to regulate their own business practices voluntarily and to make good faith efforts to resolve disputes with customers in a timely way.

The Better Business Bureau is funded by membership dues paid by the companies who belong to the organization. Belonging to the BBB is like a badge of honor: a company that becomes a member enhances its reputation as an ethical business that is concerned with consumer rights and consumer satisfaction, and it benefits thereby from the increased trust (and patronage) of customers. Not all businesses qualify for BBB membership, however; applicants must be reviewed, approved, and invited by the BBB to join. In order to maintain its own reputation and integrity, the BBB maintains strict standards for its members and reserves the right to revoke the membership of any business that fails to meet these standards.

BBB membership is composed of a range of business interests, including retailers, manufacturers, advertising agencies, and media representatives; nearly 300 leading national corporations and more than 100,000 local, regional, and state companies belong to the BBB. The BBB system consists of more than 150 branches in the United States, Puerto Rico, Canada, and Israel. Individual BBBs are licensed and overseen by the Council of Better Business Bureaus (CBBB; founded in 1970), a parent organization with headquarters in Arlington, Virginia.

When Did It Begin

The Better Business Bureau traces its origins to the first decade of the twentieth century, when the issue of fraudulent (or dishonest) advertising provoked a wave of public concern and activism. The need for truth in advertising was first promoted by the National Federation of Advertising Clubs of America (later renamed the Associated Advertising Clubs of America), a volunteer organization that formed in 1904 to “expose fraudulent schemes and their perpetrators.” Shortly thereafter, Samuel C. Dobbs (1868–1950) emerged as a leading figure in the truth in advertising movement. A sales manager at the Coca-Cola company who went on to become its president and chairman from 1919 until 1922, Dobbs was shocked to hear a Coca-Cola attorney defend the company’s advertising practices in court by proclaiming that all advertising was exaggerated. Dobbs began to investigate the advertising industry, and in 1909 he became president of the Associated Advertising Clubs of America (renamed again as the American Advertising Federation, or AAF). In 1911 he helped to establish one of the first codes of ethical advertising, known as the Ten Commandments of Advertising. The following year he oversaw the formation of local Vigilance Committees, which took it upon themselves to monitor the advertising practices of businesses in their areas, receive public complaints, and attempt to resolve hundreds of disputes between customers and businesses involving allegations of advertising abuse. These Vigilance Committees were the earliest incarnations of the Better Business Bureaus as we know them today.

More Detailed Information

Reliability Reports

The Better Business Bureau is most widely used as a source of information about specific businesses. An individual bureau may receive as many as 1,000 inquiries per day from consumers seeking information about the reputation of a certain business before they make a purchase or otherwise patronize that business. In response to consumer inquiries or complaints, the BBB collects information on millions of individual businesses (both members and nonmembers) in a wide range of categories, including automotive, clothing and accessories, computers and electronics, construction and contractors, food and dining, home and garden, media and communications, real estate, shopping, travel and transportation, and others.

The BBB’s findings are published in what are called Reliability Reports. Available on the BBB website, these reports include information about the ownership and management of the business; its products and services; its location, phone, and fax numbers; the date it was established, incorporated, or both; whom to contact with questions; the terms of its refund and exchange policy; and whether the business is a BBB member. The report also details the company’s complaint history over a given reporting period (typically three years), including the nature of the complaints, whether the company made efforts to resolve the issues, and whether the customers accepted the resolutions. Depending on the size and nature of the business, the report may also divide complaint issues into subcategories. A Reliability Report on the Home Depot Corporation, for example, lists disputes in such categories as advertising, billing or collection, sales practices, delivery, repair, customer service, warranty, refund or exchange, and others. The BBB identifies a pattern of complaints if it perceives one, rates the company’s business performance as satisfactory or unsatisfactory, and notes whether the company has been subject to any enforcement actions taken by a government agency, such as the Federal Trade Commission, the Food and Drug Administration, the U.S. Postal Inspection Service, or the state attorney general.

Dispute Resolution

Another major function of the BBB is to facilitate dispute resolution through its arbitration program. Established in 1973, the arbitration program aims to settle disagreements between businesses and customers without the use of lawyers and courts. Maintaining its position as a “staunchly neutral” third party and upholding a core belief that voluntary self-regulation is ultimately in the self-interest of every business that depends on consumer trust, each BBB offers access to trained volunteer arbitrators (judges) from the local community whose services are available at no cost to the customer and usually at no cost to the business. A hearing is held during which the arbitrator or arbitrators listen to both sides of the dispute and deliver a decision within 10 days thereafter. Most informal arbitration cases are successfully settled within 40 days.

Charity Review

In addition to collecting information on businesses, the BBB also evaluates local and national charities in order to help prospective donors make good decisions about where to give their money and to foster public confidence in the reliability of philanthropic organizations. The BBB’s Philanthropic Advisory Service was established in 1971 under the umbrella of the Council of Better Business Bureaus’ Foundation (CBBBF). In 2001 it merged with the National Charities Information Bureau to form the BBB Wise Giving Alliance (WGA). A self-described “charity watchdog,” the organization uses its Standards for Charitable Accountability (developed in 2003) to review the governance, spending practices, truthfulness in representation, and willingness to disclose basic information of hundreds of philanthropic organizations.

Recent Trends

In response to the rapid rise of e-commerce in the mid-1990s, the CBBB established BBBOnline in 1996, an agency devoted to promoting ethical relationships between businesses and consumers on the Internet. The agency seeks to identify websites that meet its standards for advertising, sales practices, information privacy and security, and customer satisfaction and complaint resolution, among other things. BBBOnline recognizes that consumer confidence is more important than ever when shopping online. Just as BBB approval is desirable for regular businesses, BBBOnline promotes its Reliability Seal and its Privacy Seal as important ways for online businesses to distinguish themselves among hundreds of thousands of online businesses and to establish trust with prospective customers. According to the BBBOnline website, “Seventy-three percent of purchasers and 82 percent of nonpurchasers cite reliability of business as a major concern when shopping online”; and “almost 90 percent of online shoppers would feel more confident shopping on a site that displays the BBBOnline Privacy Seal.”