Council of Better Business Bureaus

2012 Annual Report

START WITH TRUST

DISPUTERESOLUTION

TRUTH IN ADVERTISING

ONLINE PRIVACY AND

SECURITY

V I S I O N An ethical marketplace where buyers and sellers can trust each other

M I S S I O N

To be the leader in advancing marketplace trust

What a great year! Our Centennial gave BBB the opportunity to celebrate 100 years as the premiere organization for advancing trust in the marketplace, and it gave us reason to look forward to our second century bringing our expertise to new markets and new audiences.

Communication in our busy world continues to expand exponentially, with the average consumer viewing as many as 5,000 media messages every day. Yet BBB continues to maintain its relevance despite myriad competing messages. In 2012, the number of consumers who turned to BBB reached an all-time high, our dispute resolution services continued to offer one of the most popular consumer benefits offered by any nonprofit organization, and our rigorous standards for becoming a BBB Accredited Business remained the “gold standard” for businesses large and small.

This report focuses on a number of key events and programs of our Centennial year. I’d like to point out just a few of the highlights:

• On July 27, Council CEO Carrie Hurt rang the closing bell of the New York Stock Exchange, flanked by BBB leaders and NYSE, a founder of BBB New York and an Accredited Business for 90 years (see photo on the inside front cover).

• On September 29, BBB leaders who have served in the military laid a wreath at the Tomb of the Unknowns in Arlington Cemetery in remembrance of those who gave their lives protecting the freedoms we enjoy (see photo on the inside back cover).

• On October 2, during the International Torch Awards Gala, we announced the BBB Centennial Honor Roll, a tribute to century-old companies that have supported BBB as an Accredited Business, a National Partner, or both.

• Our advertising programs expanded significantly into social media, with user privacy and consumer choice being paramount objectives as we help businesses negotiate the rapidly changing online landscape.

• Many of our national programs experienced “firsts” this year – the launch of the Ad Choices logo for online behavioral advertising, the first electronic retailing self-regulation conference, and the launch of a pilot program for cross border consumer complaints arising from ecommerce between the U.S. and Japan.

As we move into our second century, we recommit ourselves to BBB’s mission of advancing marketplace trust by fostering honest and responsible relationships between businesses and consumers. Thank you for your support of this vision.

Best regards,

Sharon AbramsChair, Board of DirectorsCouncil of Better Business Bureaus

Letter from the Chairman

The Council of Better

Business Bureaus is the

umbrella organization for

114 local, independent,

non-profit BBBs across

the U. S. and Canada.

The system as a whole

(Council and BBBs) has a

combined budget of $200

million, with approximately

2,000 employees serving

consumers and the

business community.

Council is also home to

our globally-recognized

national programs on

dispute resolution and

industry self-regulation.

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1912

1912FIRST BBB OPENS

in Minneapolis, Minnesota followed by Cleveland and Salt Lake City in 1913.

NATIONAL VIGILANCE COMMITTEE IS FORMED IN DALLAS based on “Ten Commandments of Advertising” by Samuel Candler Dobbs of Coca-Cola®

Top industries for complaints DOOR TO DOOR SALESTotal instances of service

1,432,228BBB Warns of Bait and Switch Tactics 19

15

CHAIRSharon E. AbramsVice President & General Counsel – North America and Global Corporate ServicesProcter & Gamble

NATIONAL MEMBER DIRECTORSSusan M. AngeleVice President, Deputy General CounselThe Hershey Company

George K.H. SchellAssistant General CounselThe Coca-Cola Company

Russ SchraderChief Privacy Officer, Global Enterprise Risk CounselVisa, Inc.

Steve TugentmanSenior Vice President & General CounselVerizon

MEMBER BBB DIRECTORSBonnie DeanOwner/PresidentBonnie Dean Associates

Kent FrielCommunity FellowKnowledgeWorks Foundation

Robert Reynolds Executive Vice PresidentSunTrust Mortgage, Inc.

Fred ChownOwnerChown, Inc.

Ken HanbyPresidentPhoenix Telecommunications, Inc.

BBB CEO DIRECTORSTom BartholomyPresident/CEOBBB serving the Southern Piedmont

Sheryl BilbreyPresident/CEOBBB serving San Diego and Imperial Counties

Jane DriggsPresident/CEOBBB serving Utah

Janet J. RobbPresident/CEOBBB serving Arkansas

Matthew FehlingPresident/CEOBBB serving Central, Northern and Western Arizona

Edward J. Johnson, IIIPresident/CEOBBB serving Metro Washington, DC & Eastern Pennsylvania

OUTSIDE MEMBER DIRECTORSPaul RandPresident/CEOZocalo Group

Frank EliasonSenior Vice President of Social Media Citibank

Kamal NigamEngineering DirectorGoogle

PUBLIC MEMBER DIRECTORLydia ParnesPartnerWilson Sonsini Goodrich & Rosati

CANADIAN MEMBERSSteve PinkManaging DirectorNelligan O’Brien Payne LLP Law Offices

Chris LawrencePresident/CEOBBB serving Central & Northern Alberta

CBBB EX-OFFICIO DIRECTORSCarrie A. Hurt Interim President/CEOCouncil of Better Business Bureaus, Inc.

Richard WoodsVice President, General Counsel and Corporate SecretaryCouncil of Better Business Bureaus, Inc.

CBBB STAFF OFFICERSBeverly BaskinSenior Vice President and Chief Mission Officer

Genie BartonVice President and Director Online Interest-Based Advertising Accountability Program & Mobile Marketing Initiatives

Edward T. BrennerInterim Chief Operating Officer

Rodney L. DavisSenior Vice President, Enterprise Programs

Joseph E. DillonVice President and Chief Financial Officer

Victoria DoranVice President, Brand and Digital Media

Susan KearneySenior Vice President and Chief Marketing Officer

Wayne J. KeeleyVice President and DirectorChildren’s Advertising Review Unit (CARU)

Elaine D. KolishVice President and DirectorChildren’s Food and Beverage Advertising Initiative

Andrea C. LevineSenior Vice President and DirectorNational Advertising Division (NAD)

Peter MarinelloVice President and DirectorElectronic Retail Self-Regulation Program (ERSP)

C. Lee PeelerCBBB Executive Vice President and PresidentAdvertising Self Regulatory Council (ASRC)

Steven SalterVice President, Standards and Services

Anaise SchroederVice President, Human Resources

Ben SteinbergChief Information Officer

H. Art TaylorPresident/CEOBBB Wise Giving Alliance

Mary Lou WatkinsSenior Vice President and Chief of Staff

Bennett WeinerChief Operating OfficerBBB Wise Giving Alliance

CBBB 2012 BOARD OF DIRECTORS AND OFFICERS

1916

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1915

National Partners are leading North American organizations that demonstrate their support for ethical business practices by funding and participating in important CBBB self-regulatory programs and initiatives. CBBB gratefully acknowledges the generous support of the organizations that made this extraordinary commitment in 2012.

In 2012, CBBB successfully launched the BBB Experts Webinar Series and conducted a survey of all National Partners. The survey results will be used to develop additional programs and services important to National Partners. The newly-formed National Partner Leadership Circle, a top-level advisory committee to the Board of Directors, will work with CBBB to launch the initiatives in 2013.

CORPORATIONS3MAbbott Diabetes CareAbbott Nutrition

Products Division Alticor†American Express

CompanyAnheuser-Busch

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

Company†Capital OneCargill Health & Nutrition

and Salt Business Units*Chase Bank USA, N.A.Church & Dwight Co., Inc.ClearPoint Financial

SolutionsThe Clorox CompanyThe Coca-Cola Company†Colgate-Palmolive

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

Services*DNA Dreamfields

CompanyDr. Bronner’s Magic

Soaps*Dr Pepper Snapple

GroupDun & Bradstreet

Credibility Corp.E. I. du Pont de Nemours

and Company*

E. T. Browne Drug Company

EnergizerEric Mower + AssociatesEuro-Pro Operating LLCExpedia, Inc.The Ferrero GroupFord Motor Company†FTD.com, Inc.Fujifilm CorporationGeneral Mills†General Motors*Georgia-Pacific

ProfessionalGlaxoSmithKline

Consumer Healthcare, L.P.

Grey Group*Hearst CorporationHenley Management

Realty, Inc. The Hershey CompanyHertz CorporationHewlett-Packard

CompanyHighlights for ChildrenHillshire Brands CompanyHormel Foods

CorporationHyundai Motor CompanyI L Long Construction

Company, Inc.Intersections, Inc.J.C. Penney Company,

Inc.†JelmarThe J.M. Smucker

CompanyJohns Manville CompanyJohnson & Johnson†Kao CorporationKellogg Company†Kimberly-Clark

CorporationKraft Foods Group†LEGO SystemsLeo Burnett Company†LG ElectronicsLifestyle Lifts

Long Term Care Insurance Planners

L’Oréal USALuxottica GroupMars, Inc.Mary Kay, Inc.Mazda Motors of AmericaMcDonald’s CorporationMead Johnson &

CompanyMerck & Co., Inc.Merisant USMichelin North America

Inc.Midas International

CorporationMission Pharmacal

CompanyMondelez International*The Nestlé GroupThe Nielsen CompanyNilfisk-Advance GroupNissan North America,

Inc.Novartis AGNu Skin Enterprises, Inc.Ocean Spray Cranberries,

Inc.*Ogilvy & MatherOld World Industries, LLCORC InternationalOreck CorporationOverstock.com, Inc.Pep BoysPepsiCo Inc.Pfizer Consumer

HealthcarePost Holdings, Inc.*Priceline.comProcter & Gamble

Company†Purdue Pharma LPReckitt Benckiser GroupRubin Postaer &

AssociatesSamsung ElectronicsS.C. Johnson & Son, Inc.†Schiff Nutrition GroupShaklee CorporationShell Oil Company

Shiseido AmericaSpecialty Fertilizer

Products Subway Franchisee

Advertising Fund TrustThe Sun Products

CorporationThe Talbots Inc.Target CorporationTempur-Pedic

International Inc. Tupperware Brands

CorporationUnilever United StatesVerizon CommunicationsVerizon Wireless Visa, Inc.Weight WatchersThe Western Union

Company*Weyerhaeuser CompanyWhirlpool Corporation†

LAW FIRMSArent Fox LLPArnold & Porter LLPCoblentz, Patch, Duffy &

Bass, LLPCovington & Burling LLPDavis & Gilbert LLPDavis Wright Tremaine

LLPDebevoise & Plimpton

LLPDorsey & Whitney LLPFaegre Baker & Daniels

LLPFaruqi & Faruqi LLPFoley & Lardner LLPFrankfurt, Kurnit, Klein

& SelzHeenan Blaikie*Hogan Lovells US LLPHusch Blackwell LLPK&L Gates, LLPKelley Drye & Warren LLPKilpatrick Townsend &

Stockton LLPKirkland & Ellis LLPKramer Levin Naftalis &

FrankelLoeb & Loeb LLPManatt, Phelps & Phillips

LLPMaune Raichle Hartley

French & Mudd, LLC* Morrison & Foerster LLPPatterson, Belknap,

Webb & Tyler LLPPaul Hastings LLPPillsbury Winthrop Shaw

Pittman LLPProskauer Rose LLPReed Smith LLPSidley 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

ASSOCIATIONSAmerican Advertising

FederationAmerican Association of

Advertising AgenciesAmerican Society of

Composers, Authors and Publishers†

Association of National Advertisers

Broadcast Music, Inc.Consumer Healthcare

Products AssociationCouncil for Responsible

NutritionDirect Selling AssociationGrocery Manufacturers AssociationToy Industry Association†

NATIONAL PARTNERS

†Founding Partner, 1971 *New Partner in 2012

1916

1921 1921National organization

incorporated in 1921 Headquartered in Cleveland, Ohio

Arthur F. Sheldon, founder of a well-known school of salesmanship, suggest the name “Better Business Bureau.”The Indianapolis, Kansas City and Louisville BBBs form.

BBBs evolved through several name changes:

National Better Business Commission, Inc. of the Associated Advertising

Clubs of the World AND

National Association of Better Business Bureaus, Inc.

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THE STRENGTH OF THE BBB SYSTEMIn 2012, BBB set new records across the board. Overall, BBB provided more than 180 million instances of service, a new historic high and more than four times the instances of service provided a decade ago (41.5 million in 2002). The number of complaints filed by consumers was up significantly and the number of inquiries (look-ups) of BBB Business Reviews skyrocketed more than 20 percent over 2011.

For 100 years, the strength of the BBB system has been the local, independent nonprofits that are licensed to serve as BBBs across the United States and Canada. With two mergers in 2012, the total number of BBBs now stands at 114. They cover every part of the United States, plus Puerto Rico and the Caribbean territories, and all of Canada except the French-speaking area of Quebec.

In order 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 our mission. BBBs undergo annual audits 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 our mission of trust in the marketplace. The number of BBB Accredited Businesses went up, from 370,000 in 2011 to 375,600 in 2012, as did the number of National Partners (see page 5).

BY THE NUMBERS…

194

6

1928

1930 194

5Association of BBBs develops TRUTH IN ADVERTISING STANDARDS

which underpin Federal Trade Commission advertising rules.

BBB GOES INTERNATIONAL

Opens a BBB location in MontrealNew ad slogan:“Before You Invest, Investigate,” BBBs warned of swindlers. National BBB dedicates a division to protect service members from con artists.

Top 10 Most Common Complaints Top 10 Most Common Inquiries

Facts About the BBB System of North America

124,574,968 Inquiries of BBB Business Reviews

984,721 Consumer Complaints Processed

375,613 BBB Accredited Businesses

9,856 Advertising Review Cases

1,679 Accredited Businesses Revoked

1,491 Arbitration Hearings Held

0 5,000,00 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000

Heating and Air Conditioning

Construction & Remodeling Svc

0 10,000 20,000 30,000 40,000 50,000

Television – Cable and Satellite

Collection Agencies

Telephone Communications

Auto Dealers – Used Cars

Auto Dealers – New Cars

Cellular Telephone Service & Equipment

Telephone Companies

Internet Shopping

Auto Repair & Service

Furniture – Retail

Roofing Contractors

Contractors – General

Auto Dealers – Used Cars

Auto Repair and Service

Mortgage Brokers

Plumbers

Auto Dealers – New Cars

Collection Agencies

0 5,000,00 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000

Heating and Air Conditioning

Construction & Remodeling Svc

0 10,000 20,000 30,000 40,000 50,000

Television – Cable and Satellite

Collection Agencies

Telephone Communications

Auto Dealers – Used Cars

Auto Dealers – New Cars

Cellular Telephone Service & Equipment

Telephone Companies

Internet Shopping

Auto Repair & Service

Furniture – Retail

Roofing Contractors

Contractors – General

Auto Dealers – Used Cars

Auto Repair and Service

Mortgage Brokers

Plumbers

Auto Dealers – New Cars

Collection Agencies

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DISPUTE RESOLUTIONBBB AUTO LINE®

BBB AUTO LINE, started in 1981, is the longest running and largest automotive 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.

CODA Automotive, the maker of an all electronic vehicle currently sold in California, is BBB AUTO LINE’s newest participant. CODA joined BBB AUTO LINE in September 2012.

A leader in the industry, BBB incorporates the best practices for dispute resolution programs (e.g. transparency, accessibility, fairness and due process). In the most recent annual audit submitted to the Federal Trade Commission (FTC) for BBB AUTO LINE, 92 percent of consumers using the program would recommend BBB AUTO LINE to a friend or family member experiencing automotive

problems. The survey validates BBBs focus on best practices and helps bring parties together and restore trust. BBB AUTO LINE is a leader in reaching voluntary settlements for both consumers and customer focused companies – a preferred method for resolution over arbitration hearings.

BBBs panel of arbitrators, a cadre of over 1,000 BBB trained and certified neutrals, provide the final word for the relatively few cases not resolved through mediation. The panel, primarily attorneys or professionals with extensive dispute resolution experience, participate in ongoing refresher training seminars and receive routine updates about our programs and dispute resolution news via our newsletter.

BBB Specialty Dispute Resolution Programs Over the past few years, CBBB has administered court-approved class action settlements for a number of businesses, and continues to provide dispute resolution to national companies that have chosen to include BBB dispute resolution into their customer agreements.

NATIONAL PARTICIPANTS in

BBB AUTO LINE

2012 Acura/Honda

Audi/Volkswagen

Aston Martin

Bentley/Rolls Royce

BMW/Mini Cooper

BMW Motorcycles

CODA

Ferrari

Ford

General Motors

Hyundai

Indian Motorcycle

Jaguar

Kia

Lamborghini

Land Rover

Lotus

Maserati

Mazda

Mercedes-Benz

Nissan / Infiniti

Subaru

Volvo

Winnebago

194

6

1950

“Your Bureaus have not relied on propaganda extolling the virtues of business. They have gone to work to clean out the shady areas in the commercial world. They have set out to give meaning to their slogan: Private enterprise in the public interest.” — Harry S. Truman

NAME CHANGE: Association of

Better Business Bureaus, Inc.

195

1“Over a million people a year call upon Better Business Bureaus for help with many kinds of business problems, yet it’s a service I think we’ve all taken for granted.” — Eleanor Roosevelt19

45

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ADVERTISING SELF-REGULATIONCBBB continues its stewardship and development of national advertising self-regulation programs that deliver BBB’s historic commitment to truthful and responsible advertising. These include new programs addressing concerns about food advertising directed to children, the collection of “behavioral” data online, and the application of self- regulatory standards to digital advertising – which is expected to climb nearly 20 percent1 in 2013 to $32.6 billion, as consumers increasingly integrate use of mobile devices into all facets of their daily lives.

Children’s Food and Beverage Advertising Initiative

The Children’s Food and Beverage Advertising Initiative (CFBAI) is an advertising self-regulation program, with 16 leading consumer packaged goods companies and quick serve restaurant participants, that is significantly altering the children’s food advertising landscape. The participants advertise only healthier foods to children or do not engage in child-directed advertising.

During 2012, CFBAI continued its leadership role in the childhood obesity and children’s

food advertising conversation, participating in numerous dialogues with opinion leaders and regulators and speaking at many prestigious, high level conferences. Reporters frequently requested CFBAI’s views and CFBAI was mentioned in nearly 450 media reports.

In 2012, CFBAI participants continued to improve the foods they advertise to children by reducing calories, fats, sugars or sodium and increasing positive nutrients and components. CFBAI publicized this progress in various Fact Sheets (see Key 2012 Accomplishments), including one that showed, in participant foods advertised to children on television, a 50 percent increase since 2010 of advertisements containing fruits, vegetables, whole grains, or dairy.

The FTC acknowledged CFBAI’s contributions in its December 2012 report, A Review of Food Marketing to Children and Adolescents, stating that “[t]he Commission commends CFBAI and its member companies for their leadership in improving the nutritional profile of foods marketed to children.” Similarly, the Institute of Medicine report, Accelerating Progress in Obesity Prevention: Solving the Weight of the Nation (May 2012), acknowledged the progress made under self-regulation and urged more companies to join the CFBAI.

THE CHILDREN’S FOOD & BEVERAGE ADVERTISING INITIATIVE

A REPORT ON COMPLIANCE AND PROGRESS DURING 2011

ELAINE D. KOLISHVice President and Director

MAGDALENA HERNANDEZ Program Manager

Children’s Food & Beverage Advertising InitiativeDecember 2012

Council of Better Business Bureaus

1971

Henry Ford II solicits business support for the

Council of Better Business Bureaus

“TO RESTORE THE CONFIDENCE OF

THE PUBLIC IN THE MARKETPLACE.”

COUNCIL OF BETTER BUSINESS BUREAUS (CBBB) was formed by a merger of National Better Business Bureau &

Association of Better Business Bureaus

Incorporated on July 31, 1970

COUNCIL OF BETTER BUSINESS BUREAUS (CBBB)

MOVES INTO:National Charity Review

Children’s Advertising Review Unit

1970

1973

1978

http://www.unilever.com/

Found from website recreated PMS

Found from website

Key 2012 Accomplishments• CFBAI participated in a panel

with leading thought leaders at the Centers for Disease Control and Prevention’s Weight of the Nation Conference and appeared in HBO’s documentary on The Weight of the Nation.

• CFBAI participated in an Institute of Medicine Committee workshop on “New Challenges and Opportunities in Food Marketing to Children and Youth.”

• The CFBAI Program Director accepted an invitation to participate in the 2012 TEDMED Reducing Childhood Obesity Challenge Team.

• CFBAI issued a 2012 Snapshot of Food Ads on Children’s Programming (bbb.org/2012AdSnapshot), a 2012 Cereals Snapshot (bbborg/2012CerealsFacts) and a 2012 Whole Grains Fact Sheet (bbb.org/2012 WholeGrainsFacts).

• CFBAI issued “A Report on Compliance and Progress During 2011” (Dec. 2012), which is available at bbb.org/kids_food.

1 Zenith Optimedia forecast, December

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1973

NAD, chartered in 1971 to address issues of truth and accuracy in national advertising, is the flagship program of advertising industry self-regulation. NAD monitors national advertising for potentially deceptive or misleading claims made for goods and services as diverse and critical as telecommunications, infant nutrition, over-the-counter medications, dietary supplements and “green” products.

NAD also accepts complaints from Better Business Bureaus and individual consumers. NAD’s decisions represent the single largest body of decisions related to advertising truth and accuracy in the U.S.

In 2012, NAD also partnered with the Environmental Law Institute to help produce what will be a first-of-its kind legal conference on environmental marketing claims.

NAD earned recognition in 2012 for its work on evaluating advertising claims for home generators, latest-generation televisions, industrial data solutions, and the “sustainable” sourcing practices of a major restaurateur.

Key among the cases decided by NAD was one that focused on the testimonials that accompanied weight-loss advertising on Pinterest.com – a virtual bulletin board that received more than 10 million monthly visitors in 2012. NAD determined that “Pins” determined to be advertising are required to follow the rules that apply to traditional print and broadcast advertising, establishing new boundaries for advertisers.

National Advertising Division® (NAD®)

Polices and procedures for advertising industry self-regulation are set by the Advertising Self-Regulatory Council (ASRC), formerly the National Advertising Review Council.

Advertising industry self-regulation, founded in 1971, is a strategic alliance of the CBBB and six of the nation’s largest advertising and marketing trade associations. The CBBB CEO and CBBB Board Chair are members of the ASRC Board, which also includes the leadership of the American Association of Advertising Agencies (4As), 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, the advertising self-regulatory system has broadened to include advertising directed to children, direct-response advertising, and online interest-based advertising. The advertising self-regulatory system has issued thousands of decisions and it is a mark of the advertising industry’s

commitment to self-regulation that advertisers comply with program decisions more than 90 percent of the time.

In 2012, as part of Social Media Week NY, ASRC presented a panel discussion on social media – “How Advertising Self-Regulation Benefits Social Media & Marketing” – featuring NAD, CARU and ERSP staff. By using self-regulatory cases as a background, the panelists covered the “rules of the road” for companies that incorporate social platforms into their advertising campaigns and marketing strategies.

Advertising Self-Regulatory Council (ASRC)

1978

1981 198

7General Motors extends GM/BBB Arbitration Program

to cover all of its customers in the U.S.A.

BBB AUTO LINE® ESTABLISHED to resolve auto manufacturer

warranty disputes. Largest consumer arbitration

program in U.S. history.

“Down through the years the Better Business Bureaus have resolutely stayed the course, showing themselves to be the best friends American consumers have ever had.” — Ronald Reagan

Lee Peeler, President, ASRC attend NAD Conference

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1989

199

4“Over the years, Better Business Bureaus have effectively promoted truth and fairness in the marketplace and, in so doing, have earned the confidence and gratitude of the American public.” — George Bush 1990

ACROSS THE COUNTRY

BBB EXPANDS ITS ARBITRATION PROGRAM

to resolve disputes between businesses and their customers. www

BBB SETS STANDARDS FOR TRUST:

BBB WEB PRIVACY PROGRAMS LAUNCHED

National Advertising Review Board® (NARB®)

NARB is the appellate body for NAD and CARU decisions. It is composed of 70 volunteers, drawn from the ranks of the nation’s largest advertisers and most prestigious advertising agencies. In addition, NARB is served by public members – most often academics who are experts in advertising or advertising law. In cases where NAD or CARU decisions are appealed by the advertiser, NARB will convene a five-person panel to review the advertising claims at issue and make a determination. The structure of NARB helps ensure broad industry support for self-regulation.

Children’s Advertising Review Unit® (CARU®)

CARU, founded in 1974, focuses exclusively on advertising primarily directed to children under 12. Recognizing the special vulnerability of young children, CARU holds advertisers to a high standard of truth and appropriateness when they direct advertising to a child audience.

Through its “Self-Regulatory Program for Children’s Advertising,” CARU provides detailed guidance to all children’s advertisers on how to deal honestly and sensitively with children.

CARU examines advertising in all media, including electronic media, and monitors websites to assure the sites comply with CARU’s guidelines and with the federal Children’s Online Privacy Protection Act (COPPA). When CARU finds advertising inconsistent with its high standards, CARU works with advertisers to bring their advertising into compliance.

CARU serves the children’s advertising industry through its Safe Harbor program. COPPA contains a unique provision establishing a “safe harbor” for participants in self-regulatory programs, insulating them from FTC enforcement as long as they remain in compliance. The provisions are intended to encourage participation in such self-regulatory programs. CARU was the first safe harbor program approved under COPPA.

In 2012, CARU participated in the FTC’s review of its COPPA regulations designed to update privacy protections for children in light of rapidly developing technology. CARU also pre-screens all forms of advertising including concepts, rough cuts, storyboards, and finished advertisements; a preventative service noted by Advertising Age in the magazine’s annual regulatory edition.

To avoid expensive mistakes and reprimands, more marketers are turning to the CARU for assistance ahead of time. It is called ‘prescreening’ in industry parlance, and CARU is now doing it in 200 campaigns annually, compared with just a handful a few years ago, as it oversees procedures established by the Advertising Self-Regulatory Council.

Electronic Retailing Self-Regulation Program® (ERSP®)

ERSP has expanded its review of direct-response advertising to include advertising claims made for lead-generation businesses, as well as the review of telesales calls and scripts used by telemarketing companies.

Founded in 2004, ERSP has earned the respect of the direct-response industry through its fair and even-handed review of core truth-and-accuracy advertising claims made by electronic retailers.

In 2011, companies in the lead-generation and coaching and mentoring industries approached ERSP to develop a self-regulatory mechanism to assure that consumers considering an investment in a lead-generation product or program received accurate information about the benefits of such an investment, particularly the financial investment. Over the past year, ERSP developed a pilot program for the review of advertising in the lead-generation and coaching and mentoring industries.

In 2012, ERSP joined NAD and CARU in producing the first of what is expected to become the ERSP annual conference. The conference, which provided participants with significant information about the new lead-generation and telemarketing review program, drew a sold-out audience, including many advertisers.

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199

4

Online Interest-Based Advertising Accountability Program (The Accountability Program)

ONLINE PRIVACY & SECURITY

BBB EU Safe HarborThe European Data Privacy Directive prohibits transfers of personal data from European Union (EU) countries and Switzerland to destinations, including the United States, that do not meet the European “adequacy” standard for privacy protection. Created in 2000 and 2009, the Safe Harbor Privacy Frameworks allow U.S. businesses to self-certify their compliance with strict U.S. businesses to self-certify their compliance with strict European privacy standards, enabling them to continue receiving personal data from Europe.

Companies participating in the Safe Harbor Privacy Frameworks must self-certify their adherence to seven Safe Harbor Privacy Principles for personal data they receive from the EU and Switzerland. They must also provide an independent dispute resolution option to EU and Swiss citizens whose personal data they collect.

CBBB has been helping US businesses meet the Safe Harbor Privacy requirements since 2000. Today, the BBB EU Safe Harbor dispute resolution program assists companies with Safe Harbor self-certification, reviews privacy policies, and provides a secure, easy-to-use online complaints system for consumer privacy complaints.

BBB EU Safe Harbor admitted over 100 new participating companies and processed more than 100 consumer privacy complaints in 2012. The program published its first Procedure Report in February.

The Online Interest-Based Accountability Program (The Accountability Program) expanded its compliance mission, broadened its geographic footprint and issued a number of high-profile decisions in 2012. It is supported by leading brands, advertising agencies, ad networks and publishers, achieving 100 percent compliance with its recommendations.

The Accountability Program was created by ASRC and CBBB at the request of the Digital Advertising Alliance (DAA) to provide an independent, third-party enforcement mechanism for the Self-Regulatory Principles for Online Behavioral Advertising (OBA Principles). The mission of The Accountability Program is to build consumer trust online by ensuring that companies engaged in OBA comply with the OBA Principles.

The Accountability Program enforces the DAA principles, works closely with the DAA’s European partners, and has been invited to partner with the Advertising Standards Canada to advise on monitoring and investigations of Canadian advertisers when the Canadian DAA is launched.

The Accountability Program director serves on the mobile subcommittee of the DAA, which is developing principles for the mobile advertising eco-system. The Accountability Program will provide compliance for mobile advertising, just as it does for online advertising.

Since its launch, the decisions issued by The Accountability Program have become increasingly sophisticated in scope. The program is now monitoring technologies – such as device identification over multiple platforms – that didn’t exist when the DAA principles were initially crafted.

The program’s goal is to provide solid guidance on best practices and ethical standards. The objective, as noted in an interview with Advertising Age, is “not to single out any one player in the ecosystem but to bring the whole ecosystem into compliance.”

The Accountability Program has, in its short tenure, earned the respect of many legislators and policymakers.

The Accountability Program 2012 Highlights

• More than doubled the number of cases from 2011, its first year of operation

• 100 percent business implementation of recommendations

• Won FTC praise as enforcement “with teeth to address non-compliance”

• Program Director spoke at over 20 events in US and Europe, including EU Commission Meeting

• Advised in creation of EU and Canadian OBA self-regulatory programs and mobile self-regulatory principles

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199

4

1996

WITH BROAD BUSINESS SUPPORT

BBB LAUNCHES ITS FLAGSHIP TRUSTMARK PROGRAM

to promote trust and on the internet.

“The strength of your organization today exemplifies the ongoing commitment to integrity and service that inspired your founders.” — Bill Clinton

BBB goes to the Web One of the first non-profits there.

Today BBB websites receive more than

eight million visitors a month.

POLICY AND INFLUENCECBBB participated in a range of legal and policy activities internationally in 2012. It continued to participate in developing the Asia-Pacific Economic Cooperation (APEC) Cross Border Privacy Rules System, a self-regulatory initiative designed to facilitate transfers of commercial data across the APEC region while enhancing consumer privacy protections. CBBB also strengthened its relationships with foreign regulators, affirming the value of self-regulatory models in promoting trust among consumers and businesses in the borderless marketplace.

In January, CBBB and the Japan Consumer Affairs Agency launched a pilot program for cross border consumer complaints arising from ecommerce between the U.S. and Japan.

In October, CBBB was invited by PROFECO, the governmental organization overseeing consumer interests in Mexico, to address an international consumer protection conference in Mexico City about BBB’s experience in using self-regulation to promote corporate transparency and marketplace trust.

In November, CBBB welcomed senior leaders from the Israeli Consumer Protection and Fair Trade Authority for a discussion of BBB’s self-regulatory programs in advertising and Internet privacy.

Some highlights from 2012 where BBB programs were featured:

Japan Consumer Affairs Agency representatives meet with CBBB Staff

National Director of Privacy Initiatives Frances Henderson addresses PROFECO conference attendees

• White House Privacy Summit• U.S. House of Representatives’

Energy and Commerce Committee• Federal Trade Commission• U.S. Department of Defense• Centers for Disease Control

and Prevention• National Association of State

Attorneys General• Canadian Competition Bureau

• Asia-Pacific Economic Cooperation summit on advertising self-regulation

• Israeli Consumer Protection and Fair Trade Authority

• Japan Consumer Affairs Agency• PROFECO (Mexican Federal

Consumer Protection Agency)• Organization of American States

• American Conference Institute• Children’s Advertising & Online

Privacy Conference• Federal Communications Bar

Association• Food and Drug Law Institute

Conference• Institute of Medicine• International Association of

Culinary Professionals• National Academy of Sciences• TEDMED• Washington Legal Foundation

Governmental International Private Sector

The Federal Trade Commission reported that, in 2012, BBB was the biggest data contributor to its Consumer Sentinel Network other than the agency itself. BBBs contributed 21% of the fraud data collected by the FTC, more than the rest of the private sector put together. BBB values its partnership with FTC to protect the public from fraud and scams. More information is available at ftc.gov/sentinel.

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200

4

2007 2010

BBB updates its brand BBB gets a facelift and combines its business practice codes to clarify the standards BBB users to accredit more than 400,000 businesses

®

4 MILLION BUSINESS REVIEWS

1 MILLION CONSUMER COMPLAINTS RESOLVED

Total instances of service in 2010:

88,594,720

BBB supports the Armed Forces

WITH BBB Military Line®

2012 Media Coverage• ABC’s “20/20” on holiday scams• The Wall Street Journal on BBB’s growing online

consumer review presence, BBB Wise Giving Alliance’s partnership with the Mobile Giving Foundation

• U.S. News and World Report on investment scams, “storm chaser” scams after Hurricane Sandy, shopping online safely

• Forbes on choosing a tax preparer, finding a home contractor, BBB’s review on Mass Effect 3, car buying, debt collection, holiday donations

• FOX Business Network on BBB’s 100 year anniversary and the ringing of the NYSE closing bell, mortgage relief scams, “storm chaser” scams after Hurricane Sandy, home insurance, home contractors

• National Public Radio on the utility bill scam, credit card breaches

• Consumer Reports on finding a home contractor after a storm, top scams after Hurricane Sandy

• USA Today on finding a tax preparer, BBB’s Top Scams of 2011, BBB’s review on Mass Effect 3, timeshare scams, the utility bill scam

• The New York Times on the BBB phishing scam, holiday package theft

• “CBS This Morning” on senior citizen scams, hiring a home contractor

• Associated Press on finding a tax preparer • Los Angeles Times on home contractor scams,

auto repairs, online renter scams, credit card identity protection, buying and selling timeshares, Memorial Day scams, hiring a mover

• ABC’s Good Morning America on “storm chaser” scams after Hurricane Sandy

• NBC’s “Today Show” on vacation home rentals, BBB Military Line investigations, online purchases

MEDIA RELATIONS AND SOCIAL MEDIABBBs’ websites are among the most visited in North America, with more than ten million visitors a month in 2012 (nearly a third of them returning).

The Council launched two microsites in 2012 – BBB Scam Stopper in partnership with Western Union (bbb.org/scamstopper) and BBB Smart Investing in partnership with the FINRA Investor Education Foundation (bbb.org/smartinvesting).

One of the most popular features of the website is the Council’s blog (bbb.org/blog), with more than 70,000 readers every month. Also added were two new guest bloggers from our content partners: personal finance writer Erica Sandberg for BBB Scam Stopper and Gerri Walsh of FINRA for BBB Smart Investing.

You can also find CBBB on Facebook (facebook.com/betterbusinessbureau), Twitter (twitter.com/bbb_us), Linked In (linkedin.com/groups/BBB-US-1917928), and Pinterest (pinterest.com/BBBConsumerNews) with lots of tips for consumers and businesses.

Alexa Ranking(Alexa crawls more than 16 million websites worldwide and creates rankings based on a three-month average. The site with the highest combination of visitors and pageviews is ranked #1.)US Ranking – 402 Global Ranking – 1480

Domain Authority(Domain Authority is a critical metric to understanding how well a site performs with respect to Search Engine Optimization (SEO)).Domain Authority ranking for the BBBs core domain “bbb.org” is a 96 out 100.

BBB.ORG

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2011

2011 2012Celebrating

100 years ofAdvancing Trust Together

116 BBBS ON THE GROUND

IN NORTH AMERICABBB SCAM SOURCE

bbb.org/scam

BBB APP

Released

BBB INTERNATIONAL TORCH AWARDS

The BBB International Torch Awards have honored hundreds of businesses that exemplify BBB’s mission to advance marketplace trust. Each year the Torch Awards attracts more than a thousand entries at the national and local levels.

2012 Program Celebrates BBB 100th Anniversary

In 2012, the Torch Awards celebrated BBB’s 100th Anniversary and recognized 109 national corporations selected for the BBB Centennial Honor Roll. The Centennial Honor Roll corporations are publicly traded companies that are 100+ years old and that support the mission of BBB to foster marketplace trust, either as a BBB National Partner, a BBB Accredited Business or both.

2012 BBB International Torch Awards Honorees

CONSUMER LEADERSHIP AWARD

Stephen BrobeckExecutive Director

Consumer Federation of AmericaWashington, DC

____

MARKETPLACE EXCELLENCE AWARD

Fairytale BrowniesPhoenix, AZ

Barney and Barney, LLCSan Diego, CA

Rockwell Automation, Inc.Milwaukee, WI

____

PRESIDENT’S AWARD

Ford Motor CompanyDetroit, MI

2012 BBB International Torch Award Honorees L to R: Curt Magleby, Ford Motor Company; Stephen Brobeck, Consumer Federation of America; Keith Nosbusch, Rockwell Automation; Eileen Spitalny and David Kravitz, Fairytale Brownies; Giselle Ferguson, DSD Systems (Award Finalist); and Terry Moore, Barney & Barney

The Hershey Company Staff A BBB Centennial Honor Roll corporation

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MANAGEMENT RESPONSIBILITIES

Financial StatementsThe Consolidated Statements of Financial Position of the Council of Better Business Bureaus, Inc. the BBB Wise Giving Alliance and the BBB Institute (the Council) and the related Consolidated Statements of Activities and Statements of Cash Flows, and all representations contained within, are prepared by and are the responsibility of the Council’s management. Several integral parts of the statements, which are necessary for a complete understanding of the financial position and activities of the Council, 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 SystemThe Council’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.

Results of OperationsThe Council’s consolidated operations (CBBB, BBB Wise Giving Alliance, and the BBB Institute) increased its consolidated net assets in 2012 by $903,643 (this includes restricted revenue from BBBs of $551,120 for certain IT activities). The 2012 annual budget was a breakeven budget based on revenues and expenses of $19,870,400, resulting in a favorable variance of $903,643. Consolidated expenses were unfavorable to budget in 2012 by $669,387 while consolidated revenues were favorable to budget by $1,573,030.

The Council continued in 2012 to find ways to reduce costs, streamline its operations, and increase revenues. In 2012, Council overcame various financial challenges such as: phishing scam monitoring expense, cyber security audit and implementation expense, IT system architectural project expense, change in the CIO position, interim CIO expense, change in the CEO position, and office relocations for both the Virginia and New York offices. Rent expense savings from 2011 to 2012 was $384,000, or 30 percent. The Virginia Office moved into its new office space on February 1, 2012, while the New York office moved September 1, 2012. We continue to work towards our financial goals of increasing both net assets and cash reserves. New and increased revenue sources were generated from the National Advertising Division, EU Safe Harbor Program, BBB dues, National Partners, Online Behavioral Advertising, WGA Seal Charity program, and the BBB Institute (formerly BBB Center). DR – BBB AUTO LINE’s revenue of $4,338,973 decreased slightly from 2011 revenue of $4,375,591. National Partner revenue of $2,622,090 finished the year $72,090 favorable to budget. Restricted revenue in the amount of $551,120 was pledged by BBBs in 2012 to fund certain Information Technology activities and will be released as the expenditures are incurred.

Expenses in 2012 were unfavorable to budget mainly due to additional grant activity and the timing of revenue and expenses associated with the grants in the BBB Institute.

Council’s consolidated December 31, 2012 cash balance is $3,114,783, representing 58 days of cash reserve. The average daily cash balance throughout 2012 was $2,582,043, or 48 days of reserve. Total net assets as of December 31, 2012 equal $2,845,750.

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

Consolidated operations Year Ended December 31,

ASSETS 2012 2011

Cash and cash equivalents $ 3,114,783 $ 1,582,224

Accounts receivable 661,491 627,894

Contribution receivable 154,400 -

Prepaid expenses 219,707 686,901

Furniture, equip., software and leasehold improvements, net 2,280,806 761,037

Funds held for service awards for Bureau officers 276,686 313,654

Total assets 6,707,873 3,971,710

LIABILITIES AND NET ASSETS

Accounts payable and accrued expenses 914,893 755,429

Deferred revenue 1,021,319 960,520

Deferred rent and lease incentive 1,649,225 -

Funds held for service awards for Bureau officers 276,686 313,654

Total liabilities 3,862,123 2,029,603

Net assets

Unrestricted 1,957,029 1,427,225

Temporarily restricted 888,721 514,882

Total net assets 2,845,750 1,942,107

Total liabilities and net assets $ 6,707,873 $ 3,971,710

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

Consolidated operations Year Ended December 31,

CHANGE IN NET ASSETS 2012 2011

Revenue

Seals and self regulation $ 6,594,340 $ 5,421,671

BBB dues 4,951,068 4,349,530

Dispute resolution - BBB AUTO LINE 4,338,974 4,375,590

National partner dues 2,982,491 2,645,793

Contributions and sponsorships 980,300 686,436

Dispute resolution - other 741,310 596,500

BBB programs 423,854 397,675

Interest and other 231,094 269,507

Total revenues 21,243,431 18,742,702

Expenses

Seals and self-regulation 6,542,124 6,314,046

BBB programs 5,282,677 4,773,855

General and administration 3,885,773 3,730,090

Dispute resolution - BBB AUTO LINE 3,479,726 3,658,482

BBB Institute / Military Line 645,537 130,955

National partner development 118,693 282,473

Fundraising 75,376 141,537

Total expenses 20,029,906 19,031,438

Changes in net assets before other items 1,213,525 (288,736)

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

Increase (decrease) in net assets 903,643 (598,618)

Net assets

Beginning of year 1,942,107 2,540,725

End of year $ 2,845,750 $ 1,942,107

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Council of Better Business Bureaus, Inc.

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