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Council of Better Business Bureaus, Inc.

Better Business Bureau

our VISIon: An ethical marketplace where buyers and sellers

can trust each other

our MISSIon: To be the leader in advancing marketplace trust

We Do tHIS BY:• Creating a community of trustworthy businesses• Encouraging and supporting best practices• Setting standards for marketplace trust• Celebrating marketplace role models• Denouncing substandard marketplace behavior

The Council of Better Business Bureaus is the umbrella

organization for 113 local, independent, non-profit BBBs

across the U.S. and Canada. The system as a whole

(CBBB and BBBs) has a combined budget of $200

million, with approximately 2,000 employees serving

consumers and the business community. CBBB is also

home to our globally-recognized national programs on

dispute resolution and industry self-regulation.

2013 was the first year of BBB’s second century, and it was a year in which we were challenged and stretched in new ways. Opportunities and difficulties both gave us the chance to live out our mission and reinforce our standards of trust. We’ve made this the theme of this year’s annual report, and I invite you to peruse these pages and learn more about our successes and achievements.

The Council of Better Business Bureaus (CBBB) board of directors made numerous decisions this year; three stand out as moves that will shape our next century in significant ways.

In March, we expelled the former BBB of the Southland (Los Angeles) for recurrent failure to meet standards. This decision came after every reasonable option was exhausted. But, rather than let this vital territory “go dark,” the entire BBB system pulled together to create a virtual BBB to serve the consumers and businesses of the greater Los Angeles area. More than 100 BBB professionals from CBBB and across the U.S. and Canada processed a record number of complaints, handled arbitration hearings, reviewed and renewed accredited businesses, answered questions from consumers and businesses, and kept the operations going until the territory could be reassigned. The board explored a number of options and, in the end, reassigned the territory to a coalition of three California BBBs with experienced CEOs committed to standards. The transition was marked by the December grand opening of a new full-service BBB office, the first in downtown Los Angeles in decades. In addition, the virtual BBB team won a prestigious Summit Award from the American Society of Association Executives.

In September, the board voted to accept a proposal from business leaders in Mexico to explore launching a new Better Business Bureau in that country. The team of experts in market relationships, competition, regulation and marketplace analysis is led by Bernardo Altamirano Rodríguez, former Consumer Protection Federal Attorney, through the organization Buró de Mejores Practicas Comerciales S.C. An initial announcement was made at the Mexican Cultural Institute in Washington, DC, where the Mexican Ambassador to the United States, the Honorable Eduardo Medina-Mora, welcomed representatives of BBB and Buró, government officials, and the business community to celebrate the news.

In December, following a year-long search, we offered the position of CBBB president and CEO to Mary E. Power, a Certified Association Executive with 25 years experience in industry and non-profits. She was executive director of the HR Certification Institute, which is affiliated with the Society for Human Resource Management, and before that she served as president and CEO of the Convention Industry Council, a federation of 34 associations serving the hospitality industry. Mary’s breadth of experience on issues related to certification, globalization and training, as well as her financial acumen, will serve us very well, and we are delighted to welcome her to BBB.

BBB’s mission of advancing marketplace trust by fostering honest and responsible relationships between businesses and consumers is a worthy cause, and I thank you for your continued support of this vision.

Best regards,

Sharon AbramsChair, Board of DirectorsCouncil of Better Business Bureaus

Letter from the Chairman

®

Grand opening of the new downtown LA office of Better Business Bureau serving Los Angeles and Silicon Valley. (l to r) Soyoung Angie Park, Los Angeles Korean Chamber of Commerce; Blair Looney, President and CEO of BBB Serving Central California and Inland Empire Counties; Steve McFarland, President and CEO of the new BBB of Los Angeles and Silicon Valley; Sheryl Reichert, president and CEO of BBB of San Diego, Orange and Imperial Counties; Carrie Hurt, President and CEO of CBBB; and Gary L. Toebben, President and CEO of the Los Angeles Area Chamber of Commerce. (Photo by Joanne Herr, Herr Photography)

2 | Council of Better Business Bureaus

National Partners of CBBB are a network of nearly 200 corporations, associations and law firms that have pledged to align with our core values and to actively work to increase the spirit of trust between businesses and consumers.

National Partners support and further CBBB’s work to be the leading voice for industry self-regulation, funding essential programs in advertising self-regulation, privacy, and dispute resolution.

In 2013, the National Partners Leadership Circle, a top-level advisory committee to the CBBB board representing National Partners and their industries, held three meetings to provide feedback and support for key self-regulatory initiatives, such as the launch of BBB in Mexico and a new conference on best practices, which will take place June 2014, in Washington, DC. Bringing forward key ideas and helping to gain industry support around best practice solutions provides National Partner representatives with the opportunity to serve their customers and their industry—a hallmark of effective self-regulation.

A Rising Star to the SouthIn September 2013, the CBBB board approved the business plan for BBB Mexico. Some of Mexico’s largest and most prestigious businesses are backing BBB Mexico, which will serve 120+ million Mexican residents, millions of Mexican businesses, and many millions of consumers across the U.S., Canada and elsewhere who do business with Mexican businesses.

National Partner and CBBB board member George Schell of The Coca-Cola Company addresses attendees at the 2013 International Assembly of BBBs.

to Be tHe leADer In ADVAnCInG MArKetplACe truSt…

We do this by… Creating a Community of Trustworthy Businesses

“It [BBB] not only keeps you connected and attuned to the rest of the industry, but it is a great trademark of integrity.”– Svetlana Walker

on why Clorox is a National Partner

CBBB team (center) with members of the Mexican business community

2013 Annual Report | 3

CorporAtIonS3MAbbott Nutrition

Products DivisionADT Security Services*Alticor†American Express

CompanyAnheuser-Busch

CompaniesAOL Inc.Apple Inc.AT&T Inc.†Avon Products, Inc.Bayer HealthCare*BBDOBIC GroupBoston Beer CompanyBridgestone CorporationBurger King CorporationCampbell Soup

Company†Capital OneCargill Health & Nutrition

and Salt Business UnitsCenturyLink*Chase Bank USA, N.A.Church & Dwight Co.,

Inc.ClearPoint Financial

SolutionsThe Clorox CompanyThe Coca-Cola

Company†Colgate-Palmolive

CompanyCombe IncorporatedConAgra Foods, Inc.Coty Inc.*Cramer-KrasseltThe Dannon CompanyDel Monte FoodsThe Dial CorporationDiscover Financial

Services*DNA Dreamfields

CompanyDr. Bronner’s Magic

SoapsDr. Pepper Snapple

GroupDun & Bradstreet

Credibility Corp.Dyson Inc.*E. I. du Pont de Nemours

and Company

E. T. Browne Drug Company

EnergizerEuro-Pro Operating LLCEuroPharma Inc.*Expedia, Inc.The Ferrero GroupFord Motor Company†FTD.com, Inc.Fujifilm CorporationGeneral Mills†General MotorsGeorgia-Pacific

ProfessionalGlaxoSmithKline

Consumer Healthcare, L.P.

Grey Group*Hearst CorporationHenley Management

Realty, Inc. The Hershey CompanyHewlett-Packard

CompanyHighlights for ChildrenHillshire Brands

CompanyHormel Foods

CorporationHydro Aluminum

Metal Products North America*

Hyundai Motor AmericaI.L. Long ConstructionIntersections, Inc.JelmarThe J.M. Smucker

CompanyJohns Manville

Company*Johnson & JohnsonKao CorporationKellogg Company†Kimberly-Clark

CorporationKraft Foods Group†LEGO SystemsLeo Burnett Company†Lifestyle LiftL’Oréal USALuxottica GroupMars, Inc.Mary Kay, Inc.Maserati North America*Mazda Motors of

America

McDonald’s CorporationMead Johnson &

CompanyMerck & Co., Inc.Merisant USMichelin North America

Inc.Midas International

CorporationMission Pharmacal

CompanyMondelēz InternationalThe Nestlé GroupThe Nielsen CompanyNilfisk-Advance GroupNissan North America,

Inc.Novartis AGNu Skin Enterprises, Inc.Ocean Spray

Cranberries, Inc.Ogilvy & MatherOverstock.com, Inc.Pep BoysPepsiCo Inc.†Pfizer Consumer

HealthcarePost Holdings, Inc.Priceline.comProcter & Gamble

Company†Purdue Pharma LPReckitt Benckiser GroupRubin Postaer &

AssociatesS.C. Johnson & Son, Inc.† Shaklee CorporationShell Oil CompanyShiseido AmericaSpecialty Fertilizer

Products Subway Franchisee

Advertising Fund TrustThe Sun Products

CorporationTarget CorporationTempur-Pedic

International Inc. Tupperware Brands

CorporationUnilever United StatesVerizon CommunicationsVerizon Wireless Visa, Inc.Wahl Clipper

Corporation

Weight WatchersThe Western Union

CompanyWeyerhaeuser CompanyWhirlpool Corporation†

lAW FIrMSArent Fox LLPArnold & Porter LLPBryan Cave LLP*Coblentz, Patch, Duffy &

Bass, LLPCovington & Burling LLPCrowell & Moring LLP*Davis & Gilbert LLPDavis Wright Tremaine

LLPDebevoise & Plimpton

LLPDentonsDLA Piper*Dorsey & Whitney LLPFaegre Baker & Daniels

LLPFaruqi & Faruqi LLPFenwick & West LLPFoley & Lardner LLPFrankfurt, Kurnit, Klein

& SelzGreenberg Traurig LLP*Heenan BlaikieHogan Lovells US LLPHusch Blackwell LLPHyman, Phelps &

McNamara, P.C.*K&L Gates, LLPKeller and Heckman

LLP*Kelley Drye & Warren

LLPKilpatrick Townsend &

Stockton LLPKirkland & Ellis LLPKramer Levin Naftalis &

FrankelLocke Lord LLP*Loeb & Loeb LLPManatt, Phelps & Phillips

LLPMaune Raichle Hartley

French & Mudd, LLC*Morrison & Foerster LLPOlsson Frank Weeda

Terman Matz PC*Patterson, Belknap,

Webb & Tyler LLP

Pillsbury Winthrop Shaw Pittman LLP

Proskauer Rose LLPQuarles & Brady LLP*Reed Smith LLPRumberger Kirk &

Caldwell*Sidley Austin LLPSimpson, Thacher &

Bartlett LLPSkadden, Arps, Slate,

Meagher & Flom LLP & Affiliates

Troutman Sanders LLPVenable LLPWeil, Gotshal & Manges

LLPWiley Rein LLPWilson Sonsini Goodrich

& Rosati P.C.*Winston & Strawn LLP

ASSoCIAtIonS American Advertising

FederationAmerican Association of

Advertising AgenciesAmerican Society of

Composers, Authors and Publishers†

Association of National Advertisers

Building Performance Institute, Inc.*

Broadcast Music, Inc.Consumer Healthcare

Products AssociationCouncil for Responsible

NutritionDirect Selling

AssociationGrocery Manufacturers

AssociationNational Pest

Management Association*

Portable Lights American Trade Organization*

Toy Industry Association†

National Partners

†Founding Partner, 1971*New Partner, 2013


Dispute Resolution BBB AUTO LINE®, started in 1981, and administered by CBBB and local BBBs, is the longest running and largest dispute resolution program, having served more than 2 million consumers. Its mission is to help businesses and consumers resolve automotive warranty or lemon law disputes in a timely, cost-effective manner that complies with all applicable laws and regulations.

BBB AUTO LINE continues to adapt to the needs of automotive customers and the industry. It has incorporated 50 state lemon laws into the program administration and provides online access to consumers to educate them about their warranty rights. It provides a dispute resolution forum that is highly recommended by consumers using the program (over 83% would recommend the process to family and friends) and is much less costly and faster than legal alternatives.

As a result of BBB AUTO LINE’s strong performance, Jaguar North America expanded its participation in BBB AUTO LINE in 2013, joining Ford, GM, Nissan and most major automotive brands. BBB incorporates the best practices for dispute resolution programs (e.g. transparency, accessibility, fairness and due process) as a leader in the industry. BBB AUTO LINE continues to emphasize the voluntary settlement process as the best possible outcome for both parties involved in a dispute and is the best way to restore trust between a customer and a business.

BBB AUTO LINE continues to be a major force supporting best practices in one of the country’s most important industries. The BBB system continues to develop and provide dispute resolution programs as a proven method to encourage best practices regardless of industry.


We do this by… Encouraging and Supporting Best Practices

ACURA/HONDA

AUDI/VOLKSWAGEN

ASTON MARTIN

BENTLEY/ROLLS ROYCE

BMW/MINI COOPER

BMW MOTORCYCLES

FORD

GENERAL MOTORS

HYUNDAI

INDIAN MOTORCYCLE

INFINITI/NISSAN

JAGUAR/LAND ROVER

KIA

LAMBROGHINI

LOTUS

MASERATI

MERCEDES-BENZ

SUBARU

VOLVO

WINNEBAGO

National Participants In BBB AUTO LINE

2013

J.D. Power Initial Quality Survey (2013)- Copyright J.D. Power/McGraw Hill Financial

Defects Per Vehicle

The volume of complaints coming to BBB has dropped from 36,672 in 1998 to 15,914 in 2013. This is a direct result of auto manufacturers adopting best practices such as improving product quality and providing better customer service.


BBB EU Safe HarborThe European Union’s (EU) Data Protection Directive prohibits transfers of personal data from EU countries and Switzerland to destinations, including the United States, that do not meet the European “adequacy” standard for privacy protection. Created in 2000 (EU) and 2009 (Switzerland), the Safe Harbor Privacy Frameworks allow U.S. businesses to self-certify their compliance with European privacy standards, assuring European consumers that their data will be adequately protected. Participating companies must also offer consumers an independent dispute resolution option for privacy complaints.

CBBB has been helping U.S. businesses meet Safe Harbor privacy requirements since 2000. The BBB EU Safe Harbor program, which attracted more than 110 new participants in 2013, provides education on program requirements, assists participating companies with Safe Harbor self-certification and privacy policy development, and offers secure, accessible online complaint handling to European consumers.

BBB EU Safe Harbor processed more than 100 consumer complaints in 2013. The program resolves the majority of eligible complaints through conciliation, but on the request of either party, it may convene a data privacy hearing before an impartial panel selected from the CBBB Data Privacy Board, recognized experts in the field of data privacy law. The first data privacy hearing was concluded and a decision was issued in June 2013.

The Need for Trust has No BoundariesIn 2013, CBBB hosted visitors from the China Association of Small and Medium Enterprises (CASME) to discuss ways to work together to promote cross border trade. CASME has been working on a process to rate businesses in China using standards and best practices similar to those used by BBB.

As consumers are more routinely buying from businesses in other countries via the Internet, it is important for them to be able to differentiate between problematic businesses and those they can trust. CBBB will continue to engage CASME to determine if it is possible to develop a partnership that educates Chinese consumers to use BBB resources to guide purchasing decisions and vice versa.

CBBB also attended a meeting with representatives of the Cabinet Office of Japan and the Japan Ambassador to the U.S. to continue the dialogue on best practices in self-regulation and to further strengthen the relationship between the Japan Consumer Affairs Agency and BBB. The BBB delegation provided tangible examples of the self-regulatory programs of BBB at work in the North American marketplace and agreed to continue to provide assistance and support at the request of the Japanese government.

CBBB was invited to Brussels in December 2013, to attend the IAPP Europe Data Protection Congress. CBBB participated in discussions with U.S. and European regulators on the future of the U.S.-EU Safe Harbor Framework and the role of dispute resolution mechanisms like BBB EU Safe Harbor.

CBBB meets with representatives of the Cabinet Office of Japan (3rd from left) Kenichiro Sasae of the Japanese Embassy, Rod Davis, SVP, CBBB, and Yoshitami Kameoka, Parliamentary Secretary of the Cabinet Office of Japan.


Advertising Self-RegulationThe advertising industry is vibrant and dynamic and it has, for more than 40 years, relied on the advertising self-regulation programs administered by CBBB to encourage high standards of truth and accuracy and demonstrate the industry’s ability to police its own practices.

In 2013, the advertising self-regulation programs provided strong guidance to the advertising industry on issues that included deceptive advertising formats, disparaging product demonstrations, children’s privacy, consumer choice and transparency in online interest-based ads and substantiation for claims made in the lead-generation and coaching and mentoring industries.

Advertising Self-Regulatory Council (ASRC)Policies and procedures for advertising industry self-regulation are established by ASRC, a strategic alliance of CBBB and six of the nation’s largest advertising and marketing trade associations: American Association of Advertising Agencies (4A’s), American Advertising Federation (AAF), Association of National Advertisers (ANA), Direct Marketing Association (DMA), Electronic Retailing Association (ERA) and Interactive Advertising Bureau (IAB).

Since its founding in 1971, the self-regulatory system has issued thousands of decisions and earned the trust of the advertising industry. Advertisers comply with the decisions of the self-regulatory system more than 90 percent of the time.

National Advertising Division® (NAD®)NAD’s mission is to examine national advertising in all media for truth and accuracy. Launched in 1971, NAD has issued more than 6,000 decisions related to the truth and accuracy of advertising claims for goods and services that consumers use every day. In 2013, NAD opened 71 cases brought by one advertiser against another.

NAD is also recognized for its careful analysis of emerging issues in advertising. In 2013, the practice of “native” advertising generated strong debate within the industry and the regulatory community. NAD – focused on assuring that advertising does not deceive or mislead consumers – helped lead that conversation through staff-written articles, media interviews, participation at a Federal Trade Commission (FTC) workshop and a series of decisions on the practice.

NAD also tackled the issue of post-production enhancements in cosmetics advertising, cautioning that the beauty shots accompanying claims for mascara may be product demonstrations that require appropriate disclosures.

NAD’s work is reviewed every year at the annual NAD conference, the nation’s premier event for advertising industry self-regulation. Attendance is driven by rich content, which in 2013 included panels on social media, online and mobile disclosures, issues in claim substantiation, ethics related to use of social media by attorneys and an in-depth look at NAD decisions.

NAD 2013 Annual Conference


We do this by… Setting Standards for Marketplace Trust


Children’s Advertising Review Unit® (CARU®) CARU’s mission is to protect children and encourage responsible advertising. CARU’s primary activities are the review and evaluation of child-directed media and online privacy practices as they affect children. To date, CARU has a compliance rate of greater than 95 percent.

Children’s privacy issues were center stage in 2013, following the FTC’s release of revised rules on the protection of children’s privacy. The revisions updated the 1998 Children’s Online Privacy Protection Act (COPPA) in several ways, expanding the types of companies required to obtain parental consent before collecting personal information from children under 13, as well as the types of information that would require parental consent. Faced with implementing a series of technical and complicated revisions, children’s advertisers looked to CARU in 2013 to help guide them through the process.

In addition to its focus on children’s privacy, CARU in 2013 published decisions in cases that examined health and safety issues, privacy concerns and adequate disclosures. CARU also offered guidance on “appropriate” advertising, recommending that two businesses discontinue advertising dietary supplements made for children in media directed to children.

Electronic Retailing Self-Regulation Program® (ERSP®)ERSP examines direct-response advertising for truth and accuracy. The direct-response industry includes long-form (infomercial) productions, short-form commercials, live home-shopping channels, print advertising, social media, online marketing, mobile marketing, and radio advertising.

In 2013, through both competitor challenges and its own monitoring program, ERSP reviewed a range of different product types, from dietary supplements to OTC medical devices. In addition, it continued to monitor and review wealth-creation products, a hot button issue for the FTC.

2014 promises to be a great year for ERSP, as it celebrates its 10th anniversary. ERSP, which is partially funded by the Electronic Retailing Association, is celebrating with a conference that will bring together industry professionals and leaders who were instrumental in the development of this highly successful and visible program.

“ERSP is vital because it not only helps to keep the bad shows off the air, but it also prevents

governing agencies, which are not entrepreneurs, from stepping in and legislating the industry.”

– Jon Congdon, President of the direct-response company Beachbody.com


Genie Barton, Director, The Accountability Program address conference attendees

The Online Interest-Based Advertising Accountability Program

The Online Interest-Based Advertising Accountability Program (Accountability Program) is a cutting edge self-regulatory program that focuses on privacy issues raised by data collection and use for interest-based advertising in the online and mobile environments. The Accountability Program was created by the Council of Better Business Bureaus to provide an independent, third-party enforcement mechanism for the Digital Advertising Alliance’s (DAA) Self-Regulatory Principles for Online Behavioral Advertising (OBA

Principles), a set of industry-wide consensus standards. The mission of the Accountability Program is to build consumer trust by ensuring that companies engaged in interest based advertising on digital platforms comply with these best practices.

Two studies in 2013 highlighted the importance of the Accountability Program’s work in building consumer trust in online advertising and commerce. The first, a poll by Zogby, demonstrated that consumers are 51.3 percent more likely to click on an ad that bears a trust mark such as the AdChoices Icon. The second, TRUSTe’s 2013 Consumer Data Privacy Study, reported that 44 percent of Internet users feel more positive about the advertiser when the AdChoices Icon is present in an ad. These results show that the Accountability Program’s work is generating real results for both businesses and consumers.

The Accountability Program is strongly supported by leading brands, advertising agencies, ad networks and publishers. It has resolved 32 formal inquiries with a record of 100 percent company compliance with its recommendations. This year, the Accountability Program was once again singled out by regulators and policymakers both in the United States and Europe as an exemplar of the positive role that self-regulation can play in the digital world of today and tomorrow.

In 2013, the Accountability Program conducted vigorous educational outreach efforts by speaking at over 20 conferences and meetings across the U.S. and in Europe, hosted informational webinars for CBBB National Partners and BBBs in the US and in Canada, as well as for privacy compliance programs and trade associations.

The Accountability Program’s global influence also continued to grow, in 2013. The Accountability Program keynoted and conducted workshops for self-regulatory organizations (SROs) at a conference on the implementation of DAA programs in Canada (DAAC) and the European Union (EDAA), which attracted industry leaders and SROs from the European Union, Canada and Latin America. The Accountability Program spearheaded the creation of an SRO working group to develop consensus enforcement standards for the EDAA, DAAC and the U.S. DAA programs. This is an important step towards international interoperable privacy enforcement.

Through the work outlined above, the Accountability Program furthered the CBBB’s mission to build trust between consumers and businesses online and on mobile devices. The Accountability Program continues to demonstrate the important, pro-competitive role self-regulation can play in the rapidly evolving technology sector, which is a significant driver of U.S. (and global) economic growth.


Children’s Food and Beverage Advertising InitiativeThe Children’s Food and Beverage Advertising Initiative (CFBAI) is an advertising self-regulation program that was created in 2006 to change the foods advertised to children under age 12 to those that are healthier or better-for-you. The participants’ commitments have resulted in substantial changes to the children’s advertising landscape. These include reductions in calories, sugar, sodium or saturated fat and increases in the fruit, dairy, and whole grain content of foods advertised to children.

During 2013, Mondelez Global LLC and Ferrero joined CFBAI bringing the number of participants to 18. Four had commitments to not engage in child-directed advertising and the other 14 used meaningful nutrition standards to determine what foods they would advertise.

CFBAI continued to be a significant voice in the children’s food advertising conversation, engaging with opinion leaders and speaking at high level conferences. Notably, CFBAI’s Director was a speaker at the White House Convening on Food Marketing to Children in 2013. At the event, the First Lady commended CFBAI, stating,

The new standards the First Lady referenced are category-specific uniform nutrition standards that CFBAI announced in 2011 and that went into effect on December 31, 2013. These new criteria are stronger than the company-specific criteria that they replaced and have resulted in a number of additional improvements in foods advertised to children.

In December 2013, in a first-of-its-kind event, CFBAI and the Interfaith Center on Corporate Responsibility co-convened a roundtable on food marketing to children. This event brought together CFBAI participants, investors, retailers, public health, advocacy and other groups to discuss possible enhancements to self-regulation to benefit children.

“I was so pleased that 17 major American companies came together on their own as part of the Children’s Food and Beverage Advertising Initiative to adopt new standards for marketing to kids. And I know this wasn’t easy. Forging consensus among fierce competitors is a challenge to say the least. But these new standards are beginning to have an impact, and I commend all of these companies for taking action.”– Michelle Obama

Elaine Kolish, Vice President, CFBAI, presents at the White House Convening on Food Marketing to Children

Key 2013 Accomplishments

• CFBAIissued A Report on Compliance and Progress During 2012 (Dec. 2013).

• CFBAIpresentedattheWhite House Convening on Food Marketing to Children.

• CFBAIpresentedattheGrocery Manufacturers Association’s Public Policy Summit.

• CFBAIissuedits May 2013 Cereals Snapshot.

http://www.unilever.com/

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The Strength of the BBB SystemThe strength of the BBB system has been the local, independent nonprofits that are licensed to serve as BBBs across the United States and Canada. In 2013, there were 113 BBBs covering every part of the United States, plus Puerto Rico and the Caribbean territories, and all of Canada except the French-speaking area of Quebec. To operate as a BBB, an organization must meet nine BBB Performance & Accountability Standards, including 67 specific requirements relating to organizational elements such as financial, governance, technology, accreditation and other programs central to the mission. BBBs undergo annual audit and compliance reviews to ensure they are meeting standards.

Another strength of the BBB system is the breadth of businesses – from solo contractors to multi-national companies – that support its mission of trust in the marketplace. In 2013, the number of BBB Accredited Businesses rose to 375,980.


We do this by… Celebrating Marketplace Role Models

Facts About the BBB System of North America132,385,251 Inquiries about BBB Business Reviews

918,695 Consumer Complaints Processed

375,984 BBB Accredited Businesses

11,007 Advertising Review Cases

10,787 Investigations Conducted

1,583 Accredited Businesses Revocation

Launching New WebsitesLate in 2013, CBBB launched a new website at bbb.org/council, with a clean, easy-to-read design and a new and powerful search function that helps visitors find what they need quickly. In addition, the Council worked closely with the local BBBs to create complementary websites for all 113 BBBs across North America (launching in the first quarter of 2014).

Top 10 Most Common Inquiries

1. Roofing Contractors

2. Contractors - General

3. Auto Dealers - Used Cars

4. Collection Agencies

5. Plumbers

6. Auto Repair & Service

7. Heating & Air Conditioning

8. Construction & Remodeling Services

9. Auto Dealers - New Cars

10. Home BuildersBBB’s websites are among the most visited in north America,

with more than 11 million visitors a month in 2013.

one of the most popular features of the website is the Council’s blog with more than 110,000 readers every month.

bbb.org/blog

Top 10 Most Common Complaints

1. Cellular Telephone Service & Supplies

2. Telephone Communications

3. Television - Cable, CATV & Satellite

4. Auto Dealers - New Cars

5. Collection Agencies

6. Auto Dealers - Used Cars

7. Internet Shopping

8. Furniture - Retail

9. Banks

10. Auto Repair & Service


Awards and RecognitionsBelow is a sampling of awards that recognized our organization in several areas in 2013, including business and workplace performance, and publication design.

Business Performance

Japan awards BBB for Cross-Border Complaint Assistance in 2013

Council of Better Business Bureaus

2012 Annual Report

START WITH TRUST

DISPUTERESOLUTION

TRUTH IN ADVERTISING

ONLINE PRIVACY AND

SECURITY

FPO Cover Mechanical Previously Released

2013 Summit Award from the American Society of Association Executives

Media Relations and Social Media Social media helps drive BBB’s high rate of consumer engagement and overall positive tone online. Research provided by Zócalo Group finds that BBB had a significant Share-of-Voice, comparable to Consumer Reports.

Media hits in 2013 increased by an impressive 23 percent over the previous year. Nearly 137,000 media mentions in the top 115 markets account for roughly 560 million impressions in 2013. CBBB is responsible for placing stories with national media and works with the BBBs on consistent messaging for local media.

You can find CBBB on social media with lots of tips for consumers and businesses:

facebook.com/betterbusinessbureau

twitter.com/bbb_us

linkedin.com/groups/BBB-US-1917928

pinterest.com/BBBConsumerNews

Silver Award in the Annual Report category in Association TRENDS’ 2013 All-Media Contest

General Award Workplace Award

2013 Commuter Connection Employer Recognition Award in the Telework category


The BBB system handles complaints between a business and its customers. In 2013, BBB received 918,695 complaints and conducted 10,787 investigations.

CBBB issued more than 56 “BBB Scam Alerts” in 2013, and the vast majority of our media coverage focused on scams and frauds, as well as other substandard marketplace behaviors.

2013 Media CoverageBBB’s media coverage included more than 500 million impressions in major national outlets. The most popular stories are about scams and how to avoid them. Highlights includes:

• ABCNewsonthe“TopTenScamsof2012,”talentagencyscams,scamsrelatedtotheAffordableCare Act, expulsion of BBB of the Southland

• The Wall Street Journal on Internet shopping, holiday scams, summer emergency scams, Christmas club savings accounts, charity scams in the wake of the Boston Marathon bombing

• U.S. News and World Report on BBB’s online shopping tips, rental scams that target federal and military employees

• Forbes on travel scams, real estate investment schemes• FOXBusinessNetworkonfloodedcarscams,onbuyingequipmentfromChina,retaillayaway,

scams related to the Affordable Care Act, issues related to moving, gift card scams• NationalPublicRadiooncharityscamsinthewakeoftheBostonMarathonbombing,veterans’

charities • Consumer Reports on charity scams in the wake of the Boston Marathon bombing, complaints and

ratings• USA Today on post-disaster scams, small business scams, Military Saves Week• The New York Times on complaint handling and ratings, an NAD ruling about native advertising,

the FTC’s first phone “cramming” case• CBSNewsonscamsrelatedtotheAffordableCareAct,diplomamills• Los Angeles Times on BBB’s virtual operations following the expulsion of BBB of the Southland,

scams related to the Affordable Care Act, telemarketing• NBC’s“TodayShow”onproblemswithwarranties,travelinsurancescams,“BBB’s12Scamsof

Christmas,” weight-loss scams


We do this by… Denouncing Substandard Marketplace Behavior

BBB Top 10 Scams of 2013

1. Medical Alert Scam

2. Auction Reseller Scam

3. Invisible Home Improvements

4. Casting Call Scam

5. Foreign Currency Scam

6. Scam Texts

7. Do Not Call Scam

8. Fake Friend Scam

9. Affordable Care Act Scam

10. Arrest Warrant Scam

go.bbb.org/topscams2013


CBBB’s consolidated operations (CBBB, BBB Wise Giving Alliance, and the BBB Institute for Marketplace Trust) increased its consolidated net assets in 2013 by $1,509,902, based on actual revenues of $21,765,742 and actual expenses of $20,255,840 (this includes restricted revenue from BBBs of $153,950 related to certain Information Technology activities). The 2013 annual budget was to increase net assets by $301,800 based on revenues of $21,728,810 and expenses of $21,427,010, resulting in a favorable variance of $1,208,102. Consolidated revenue was favorable to budget in 2013 by $36,932 while consolidated expense was favorable to budget by $1,171,170.

CBBB continued in 2013 to find ways to reduce costs, streamline its operations, and increase revenue sources. In 2013, CBBB overcame various financial challenges such as: Information Technology system architectural project expenses, hiring an interim Chief Operations Officer for the period January to November, the expulsion of BBB of the Southland, and establishing a virtual Los Angeles BBB. The virtual Los Angeles BBB generated revenue of $447,101, and after covering CBBB’s direct expenses, the remaining excess revenue was distributed to the three inheriting BBBs taking over the reporting area.

CBBB continues to work towards its financial goals of increasing both net assets and cash reserves. New and increased revenue sources were generated by the National Advertising Division, EU Safe Harbor Program, Online Behavioral Advertising, and the Children’s Food and Beverage Advertising Initiative program. The BBB Institute for Marketplace Trust

received a Cy Pres Award in the amount of $418,253, to be used to educate California consumers about their rights and available redress related to false advertising. All were recognized as revenue in 2013.

Dispute Resolution - BBB AUTO LINE’s revenue of $4,133,610 decreased slightly from 2012 revenue of $4,338,974 due to lower case hours. National Partner revenue of $2,541,400 finished the year $483,600 unfavorable to budget due to fewer new National Partners than budgeted. Restricted revenue in the amount of $153,950 was pledged by BBBs in 2013 to fund certain Information Technology activities and released from restriction as the program expenditures were incurred. Expenses in 2013 were favorable to budget mainly due to: BBB legal fee reimbursements, outside consulting services, salary and benefits due to unfilled positions, and various budgeted Marketing/Communications programs that were not implemented.

Capitalized software expenditures totaling $1,354,591 were recorded in 2013 for both the BBB website redesign and the Content Management System (CMS) projects, these capital expenditures will be depreciated over five years once the BBB website and CMS become operational.

CBBB’s consolidated cash balance as of December 31, 2013 is $3,769,181, representing 65 days of cash reserve. The average daily consolidated cash balance throughout 2013 was $3,632,455, or 63 days of reserve. Total net assets as of December 31, 2013 equal $4,355,652, with restrictions for Information Technology website redesign - $45,155, ASRC - $20,000, and the Bitly URL project - $15,150.

Financial StatementsThe Consolidated Statements of Financial Position of the Council of Better Business Bureaus, Inc., the BBB Wise Giving Alliance, and the BBB Institute for Marketplace Trust (CBBB) and the related Consolidated Statements of Activities, and all representations contained within, are prepared by and are the responsibility of CBBB’s management. Several integral parts of the statements, which are necessary for a complete understanding of the financial position and activities of CBBB, are not presented here. Those excluded items are the independent auditors’ report, the Statement of Cash Flows, and the Notes to the Financial Statements.

Internal Control SystemCBBB’s management has the responsibility for the adoption of sound accounting policies, as well as the development and implementation of both records keeping procedures and internal control systems designed to provide reasonable assurances to the board of directors. These assurances include controls for the safeguarding of assets against unauthorized acquisitions, use or disposition and preparation of reliable financial statements. The policies and procedures for an effective internal control system include an organizational structure that defines the segregation of duties, individual responsibilities and a code of conduct that fosters a strong ethical working environment.

Management Responsibilities

Results Of Operations


COUNCIL OF BETTER BUSINESS BUREAUS, INC. Statements of Financial Position

Consolidated operations Year Ended December 31,

2013 2012ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,769,181 . . . $ 3,114,783 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910,623 . . . . 661,491 Contribution receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . 154,400 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,124 . . . . 219,707 Furniture, equip., software and leasehold improvements, net . . . 3,088,871 . . . . 2,280,806 Funds held for service awards for BBB officers . . . . . . . . . . . . . . . 308,860 . . . . 276,686

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,249,659 . . . . 6,707,873

LIABILITIES AND NET ASSETS Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . 959,231 . . . . 914,893Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,091,940 . . . . 1,021,319Deferred rent and lease incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,533,976 . . . . 1,649,225Funds held for service awards for BBB officers . . . . . . . . . . . . . . . 308,860 . . . . 276,686

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,894,007 . . . . 3,862,123

Net assets Unrestricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,314,307 . . . . 1,957,029Temporarily restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,041,345 . . . . 888,721

Total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,355,652 . . . . 2,845,750

Total liabilities and net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,249,659 . . . $ 6,707,873


COUNCIL OF BETTER BUSINESS BUREAUS, INC. Statements of Activities

Consolidated operations Year Ended December 31,

2013 2012

CHANGE IN NET ASSETSRevenue

Seals and self-regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,254,777 . . . . . . $ 5,011,720BBB dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,225,003 . . . . . . . 4,951,068Dispute resolution - BBB AUTO LINE . . . . . . . . . . . . . . . . . . . . 4,133,610 . . . . . . . 4,338,974National partner dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,541,400 . . . . . . . 2,622,090Contributions and sponsorships . . . . . . . . . . . . . . . . . . . . . . . . . 2,432,766 . . . . . . . 2,523,321Dispute resolution - other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871,625 . . . . . . . 741,310BBB programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668,854 . . . . . . . 423,854FINRA Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 . . . . . . . 400,000Interest and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237,707 . . . . . . . 231,094

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,765,742 . . . . . . . 21,243,431

Expenses BBB programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,317,394 . . . . . . . 5,282,677Seals and self regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,603,090 . . . . . . . 5,549,349General and administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,040,275 . . . . . . . 3,885,773Dispute resolution - BBB AUTO LINE . . . . . . . . . . . . . . . . . . . . 3,037,688 . . . . . . . 2,966,603Children’s Advertising Review Unit . . . . . . . . . . . . . . . . . . . . . . 991,753 . . . . . . . 992,775Safe Harbor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276,537 . . . . . . . 513,123BBB Military Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264,344 . . . . . . . 406,630FINRA Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293,520 . . . . . . . 238,907National partner development . . . . . . . . . . . . . . . . . . . . . . . . . . 365,596 . . . . . . . 118,693Fundraising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,643 . . . . . . . 75,376

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,255,840 . . . . . . . 20,029,906

Changes in net assets before other items . . . . . . . . . . . . . . . . . . 1,509,902 . . . . . . . 1,213,525

Depreciation expense - contributed software . . . . . . . . . . . . . . - . . . . . . . (309,882)

Increase in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,509,902 . . . . . . . 903,643Net assets

Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,845,750 . . . . . . . 1,942,107 End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,355,652 . . . . . . $ 2,845,750


CBBB 2013 Board of Directors and Officers

CHAIr

Sharon e. Abrams Vice President and General

Counsel – North America and Global Corporate Services Proctor and Gamble

nAtIonAl MeMBer DIreCtorS

George K. H. Schell Assistant General Counsel The Coca-Cola Company

russ Schrader Chief Privacy Officer, Global Enterprise Risk Counsel Visa, Inc.

Steve tugentman Senior Vice President General Counsel Verizon

MeMBer BBB DIreCtorS

Bonnie Dean Owner and President Bonnie Dean Associates

Kent Friel Community Fellow KnowledgeWorks Foundation

Jennifer Murillo Vice President of Brand Discover Financial Services

Fred Chown Owner Chown, Inc.

Ken Hanby President Phoenix Telecommunications, Inc.

BBB Ceo DIreCtorS

tom Bartholomy President and CEO BBB of the Southern Piedmont

Michele Mason President and CEO BBB of North Alabama

ran Hoth President and CEO BBB of Wisconsin

Matthew Fehling President and CEO BBB of Central, Northern and Western Arizona

edward J. Johnson, III President and CEO BBB of Metro Washington DC and Eastern Pennsylvania

Jane Driggs President and CEO BBB of Utah

outSIDe MeMBer DIreCtorS

paul rand President and CEO Zocalo Group

Frank eliason Senior Vice President of Social Media Citibank

Kamal nigam Director, Engineering Google

puBlIC MeMBer DIreCtor

lydia parnes Partner Wilson Sonsini Goodrich & Rosati

CAnADIAn MeMBerS

Steven pink Managing Director Nelligan O’Brien Payne LLP Law Offices

Chris lawrence President and CEO BBB of Central and Northern Alberta

CBBB eX-oFFICIo DIreCtorS

Carrie A. Hurt Interim President and CEO Council of Better Business Bureaus, Inc.

richard Woods Vice President, General Counsel and Corporate Secretary Council of Better Business Bureaus, Inc.

CBBB StAFF oFFICerS

Genie Barton Vice President and Director Online Interest Based Advertising Accountability Program and Mobile Marketing Initiatives

Beverly Baskin Senior Vice President and Chief Mission Officer

edward t. Brenner Interim Chief Operating Officer

rodney l. Davis Senior Vice President, Marketing, Programs and Partnerships

Joseph e. Dillon Vice President and Chief Financial Officer

Victoria Doran Vice President, Digital, Web and Web Products

Wayne J. Keeley Vice President and Director Children’s Advertising Review Unit (CARU)

elaine D. Kolish Vice President and Director Children’s Food and Beverage Advertising Initiative

Andrea C. levine Senior Vice President and Director National Advertising Division (NAD)

peter Marinello Vice President and Director Electronic Retail Self-Regulation Program (ERSP)

C. lee peeler CBBB Executive Vice President and President Advertising Self Regulatory Council (ASRC)

Steve Salter Vice President, Standards and Services

Anaise Schroeder Vice President, Human Resources

Ben Steinberg Chief Information Officer

H. Art taylor President and CEO BBB Wise Giving Alliance

Mary lou Watkins Senior Vice President and Chief of Staff

Bennett Weiner Chief Operating Officer BBB Wise Giving Alliance

richard Woods Vice President and General Counsel

Council of Better Business Bureaus, Inc.

3033 Wilson Boulevard, Suite 600 | Arlington, VA 22201703-276-0100 | bbb.org

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