Better Business Bureaus (BBBs) are private nonprofit organizations that collect and report information to help consumers make informed decisions when dealing with businesses or charitable organizations. The BBB is not a government or law enforcement agency; it does not have the power to collect money, administer sanctions, or impose other penalties against companies or individuals that engage in poor business practices. But its ability to disseminate a company's operating track record make it a force to be reckoned with. Faced with the prospect of losing customers because of unfavorable BBB rankings, companies have a significant incentive to adhere to proper business practices and address customer complaints. In addition to their information-gathering activities, local BBBs also provide mediation services when disputes arise between customers and businesses, promote ethical business standards, maintain standards for truthful advertising, and share pertinent information (about possible fraudulent activity, etc.) with local and national law enforcement agencies. With the rise of e-commerce in the late 1990s, they have also become involved in efforts to address business fraud on the Internet. BBBs are licensed by the Council of Better Business Bureaus (CBBB) and governed by their own local boards of directors.
The most widely-used service of the Better Business Bureau is its inquiry and information service, which features information that is updated on a daily basis. In fact, the BBB receives as many as 1,000 inquiries a day from consumers and businesses seeking reports on firms. These reliability reports are limited to marketplace practices; they do not provide information on either individual or business credit information. BBB reliability reports contain information about the nature of the business, its principal officers, a three-year summary of any complaints processed, and any government action involving the company's marketplace practices. Most Bureaus also note BBB membership (if any) in its public report and indicate whether the firm in question participates in any special BBB programs to improve customer satisfaction. In addition, the BBB issues reports on products, services, and general business topics to promote educated comparison shopping by consumers and businesses alike. These reports are available on the Better Business Bureau web site, which also provides businesses and consumers with the ability to file complaints.
Many small businesses and consumers also utilize the BBB's arbitration program. This system was instituted in 1973 as a way to help businesses and customers avoid litigation. "[It] uses trained volunteer arbitrators from the community," noted Business First-Columbus. "[They] perform their duties as a public service, the arbitration process is provided at no cost to the consumer and, in most instances, at no cost to the business. Depending on the dollar amount in dispute, the arbitration is either conducted by a single arbitrator or by a panel of three. The arbitrators' decisions are rendered within 10 days after the close of the hearing, and most cases are completed within 45 days after the process has been chosen by the parties." According to the Better Business Bureau, its arbitration service, combined with its inquiry and information service, had a part in an estimated $2 billion of economic activity in the United States in 1999.
Each Better Business Bureau is independently supported by businesses that operate within their designated service area. BBBs receive their operating funds from the membership dues that are paid by business and professional groups in those service areas. Companies that become members of their local Better Business Bureau receive several benefits in return. These usually include: 1) membership identification on the company's place of business; 2) access to all BBB publications, programs, and services; 3) right to participate in BBB training programs in such areas as arbitration, customer service, and mediation;4) affiliation with other member businesses.
But the BBB maintains certain standards for membership to ensure that the organization's integrity remains unquestioned. Companies with bad track records are not accepted, and companies that do become members have to adhere to certain rules. For example, BBB members must respond to consumer complaints presented by the BBB; if they do not do so, they lose their membership. In addition, it should be noted that the BBB attaches a number of conditions to ensure that companies do not join simply for the purpose of trumpeting their membership. BBBs do not endorse or recommend businesses or what they sell. Moreover, they do not allow members to advertise their membership, because the public could conceivably reach the erroneous conclusion that such advertising means that the BBB is endorsing the member's business. In addition, BBB membership dues are not tax deductible for federal income tax purposes, though they may be tax deductible as an ordinary and necessary business expense. Finally, the CBBB has noted that membership does not confer any advantages when complaints arise: "The BBB's integrity is on the line every time we review and process a complaint. If a Bureau were to favor members over non-members in a complaint, such action would destroy our most valuable asset—the public trust that we have held for over 80 years."
In addition, a branch of the Council of Better Business Bureaus known as the Philanthropic Advisory Service maintains information on various charitable organizations. These reports, which are maintained by the national Council but updated by local BBBs, cover all sorts of charitable and other nonprofit organizations. Information typically included in these reports includes the group's background, its current programs (if any), the structure of its governing body, its tax-exempt status, its fund raising practices, its financial standing, and notification as to whether the organization complies with the CBBB's "Standards for Charitable Solicitations."
These reliability reports can be invaluable to both individual and business customers who want to make sure that they are conducting business with an ethical company. The BBB cautions, however, that it does not maintain reports on every business operating in a given area. The reasons for this vary. In some cases, the business is relatively new. In other instances, the company may simply operate in such a manner that customers see no reason to file a complaint.