COUNCIL OF BETTER BUSINESS BUREAUS

2018 ANNUAL REPORT

Advancing TRUST for a Better Marketplace

®

OUR MISSIONTo be the leader in advancing marketplace trust

OUR VISIONAn ethical marketplace where buyers and sellers trust each other

WE DO THIS BY

Setting standards for marketplace trust

Encouraging and supporting best practices by engaging with and educating consumers and businesses

Celebrating marketplace role models

Calling out and addressing substandard marketplace behavior

Creating a communityof trustworthy businesses and charities

®

Message from the CEOBusiness, technology, and consumer habits are changing at a rapid pace. Better Business Bureau (BBB) has set itself on a path to keep up with these rapidly changing times by building a stronger foundation for future growth. We have been on the forefront of positive marketplace change by partnering with leading companies committed to the best practices of business ethics, marketplace excellence, and eff ective industry self-regulation. I feel proud of the work we have done to engage with consumers and industry, and to create a network of businesses and charities that consumers trust.

In 2018, our partnership with the Society of Consumer Aff airs Professionals (SOCAP), lead us on a fi ve-city tour that sparked a conversation around the importance of trust in a fast-changing, disruptive, and innovative business environment. Our BBB EU Privacy Shield program partnered with data privacy experts from the U.S. Department of Commerce for a webinar to help guide attendees through impending changes in European Union privacy laws.

Our biggest strength is the number of local BBBs that off er services to both businesses and consumers. These 100+ local offi ces work to keep consumers safe through our scam alerts and media outreach and to create a community of ethical businesses. Through these local BBB representatives, we continue to be the face of trust in the local community.

Thank you for your support of this important work.

Beverly BaskinBeverly Baskin

Interim CEOCouncil of Better Business Bureaus, Inc.

Message from the ChairIt has been my honor to serve as Chair of the Council of Better Business Bureaus (CBBB) for the past two years and I am grateful for this opportunity to share 2018 accomplishments with you. Our National Programs champion industry self-regulation, ethical business practices, and truth and accuracy in advertising — critical elements to building a better marketplace that benefi t both businesses and consumers.

CBBB’s National Programs continue to grow and build marketplace trust. BBB EU Privacy Shield reached the milestone of over 1,000 participating businesses in 2018 and remains the largest independent recourse mechanism supporting the Privacy Shield program. BBB AUTO LINEworks e� ectively for both consumers and manufacturers and has the highest percentage of mediated claims for any automotive dispute mechanism.

I am pleased to report that our self-regulation programs are strong and are leading the way on the self-regulation front. The Children’s Food and Beverage Advertising Initiative participants have delivered 11 years of excellent compliance on their food advertising commitments. We remain the leader in protecting consumers from deceptive advertising methods and ensuring advertisers follow best practices and accepted industry standards. We are also working proactively to protect consumers’ privacy. The Digital Advertising Accountability Program (formerly the Online Interest-Based Advertising Accountability Program) which monitors web and mobile environments leads the way on this important work. In September 2018, CBBB introduced the Direct Selling Self-Regulatory Council, a new national advertising self-regulation program that was launched in January 2019. This program will encompass active monitoring of the entire direct selling marketplace.

To ensure that BBB remains at the forefront of developing innovative and e� ective programs that can and do change the lives of people everywhere, the Board must make prudent strategic decisions. In 2018, recognizing the need to adjust to a dynamic marketplace, it approved the exploration of plans to reorganize in a way that supports the BBB and its mission into the future. Those plans were presented to the Board at its December 2018 meeting and unanimously approved. They will be implemented in 2019 and beyond, ensuring a bright future for BBB and those we serve.

Thank you for your continuing support of BBB and its mission to advance marketplace trust.

Yours Sincerely,

W. David Hubbard Chairman of the BoardCouncil of Better Business Bureaus, Inc.

Here are some of our top downloaded and listened to episodes of 2018:#1 Consumer Moving Rights #2 Social Media Connecting Brands#3 Upside Thinking#4 Tax Reform Explained#5 College Is Over. What’s Next?

Advancing Trust – Building RelationshipsFuture of Business Insight and Engagement Series In 2018, CBBB, along with the Society of Consumer A� airs Professionals (SOCAP), embarked on a fi ve-city tour to discuss the importance of trust and the customer experience. The tour was part of CBBB’s Future of Insight and Engagement series and focused on the fi ndings of the 5 Gestures of Trust� research project. The conversations sparked insights around the importance of trust in a changing, disruptive, and innovative business environment. In keeping with the BBB’s mission to advance marketplace trust for all, the Future of Business Insights and Engagement Series served as an additional opportunity for business leaders to share their expertise, build actionable insights around the power of trust, and engage with peers in an informal and thought-provoking atmosphere.

ProactiveHonest Transparent Humble Equitable

Here are some of our top downloaded and listened to episodes of 2018:

#2 Social Media Connecting Brands

#5 College Is Over. What’s Next?

Podcast – Thinking Beyond Boundaries

BBB podcast channels are an invitation to join us in thinking beyond typical

boundaries, to discover what makes a better business and marketplace for

all. Better Business > Better podcast series creates a platform to talk through

the impacts, directions, and forward movement of our dynamic marketplace.

The Bistro podcast explores today’s hottest consumer trends and predictions

for the future with consumer experts. BBB podcast series continues to be the

catalyst for new dialogue, and we encourage business and consumer leaders

to take part. In 2018, 53 episodes of the podcast were shared with listeners.

BBB Serving the Community in New WaysBBB continues to serve local communities with direct services and in new ways:

The BBB Pacifi c Southwest has opened a co-working space that is being shared with local business accelerator groups, and is providing meeting rooms, green screen video capability, and other resources to businesses throughout its service area.

BBB Serving Southeast Florida has developed an online learning management system providing a variety of business skill training modules to the 5,000 BBB Accredited Businesses in their service area.

The BBB of Central Ohio launched the BBB Spark Award program to recognize startup businesses with high character, outstanding culture, and signifi cant community involvement. It partnered with the BBB Institute for Marketplace Trust to develop a full promotion and operations kit to enable all BBBs to implement the awards program.

The 100 BBBs with 160 o� ces across North America continued traditional services to the public, in 2018. People most often turn to the BBB for information on a business or charity before making purchases or donations:

The Year in Stats

BBB Scam Tracker is a newer tool allowing consumers to report attempts to deceive or defraud. The cumulative consumer reporting of almost 150,000 incidents of fraud was key to producing the 2018 BBB Scam Tracker Risk Report, which identifi ed job/employment scams as the top risk of the year.

Tech-Savvy Scammers Work to Con More Victims2018 BBB Scam Tracker Risk Report

BBB Media and Social OutreachEarned media continues to be a critical element in helping BBB spread the word about important marketplace issues. In 2018, several major research reports and a steady stream of BBB tips and alerts helped to garner more than 377,000 media mentions in both traditional and online news outlets, with a potential audience reach of 1.3 billion. This was a signifi cant jump from 2017, driven almost entirely by an increase in online mentions. We believe this may be due, in part, to artifi cial intelligence (AI)-generated “article spinning” that rewrites and republishes articles without human intervention.

173 MILLIONBBB BUSINESS

PROFILES INQUIRES

864,000COMPLAINTS

HANDLED

560,000 PUBLISHED

CUSTOMER REVIEWS

50,559 SCAMS REPORTED TO BBB SCAM TRACKER

397,600ACCREDITED BUSINESSES

4,000BUSINESS APPLICANTS

DENIED ACCREDITATION

1,307ACCREDITATION OF

BUSINESSES REVOKED

377,000MEDIA

MENTIONS

AUDIENCE REACH OF

1.3 BILLION

Signifi cant Media Pick-up in 2018:

CBS Evening News2017 Scam Tracker Risk Report

ABC Good Morning AmericaNumerous BBB Investigative Works

Wall Street JournalOnline Dating Scams

TOTAL IMPRESSIONS:

1M+ impressionsTOTAL FOLLOWERS:

64,254

Social Media Impressions

TOTAL IMPRESSIONS:

3M+ impressionsTOTAL FOLLOWERS:

36,794

TOTAL IMPRESSIONS:

361K+ impressionsTOTAL FOLLOWERS:

13.6K

National ProgramsCBBB is a recognized leader in developing and administering dispute resolution, industry

self-regulation, and online privacy programs. Each of these programs promotes trust and

consumer confi dence while encouraging sound industry self-regulation.

DISPUTE RESOLUTION PROGRAMSBBB EU Privacy Shield (EUPS) helps companies of all sizes comply with Privacy Shield requirements for transfers of personal data from the EU and Switzerland to the United States.

EUPS 2018 HIGHLIGHTS• BBB EUPS partnered with data privacy experts from

the U.S. Department of Commerce for a webinar to help guide attendees through impending changes in European Union privacy laws and their implications for data transfers to the United States. Over 500 people joined us to talk about the new EU General Data Protection Regulation (GDPR).

• Launched its fi rst blog and newsletter.

• Published BBB EUPS 2018 Annual Procedure Report. This report details signifi cant program growth and compliance e� orts of EUPS for its second year of operations.

• BBB EUPS reached the milestone of over 1,000 participating businesses.

101 101001 010101 0100 0111010 10

0 00101 001 01000 1010 11000110100 11100 001 100 10010001010 100

EU ShieldPri acyP R O C E D U R E R E P O R T

Compliance activities and casework conducted by CBBB’s BBB EU Privacy Shield Program from August 1, 2017 through July 31, 2018

Frances J. Henderson, J.D., CIPP/U.S., Vice President and National Director, Privacy Initiatives

Bryant C. Fry, FIP Deputy Director, BBB EU Privacy Shield

Council of Better Business Bureaus

BBB AUTO LINE®BBB AUTO LINE, the longest running and largest dispute resolution program, celebrated its 37th anniversary in 2018, and has also served over two million consumers over that period. The program, an e£ ective system for both consumers and auto manufacturers, has the highest percentage of mediated claims for any automotive dispute mechanism. The e£ ective settlement process is only possible because both parties trust BBB. 

In 2018, 15,858 consumers fi led cases with the program and the emphasis continues to be on mediation. Over 20 auto manufacturing companies participated in the program and the system administered 1,518 arbitrations across the United States, and has a certifi ed arbitrator pool of 700 arbiters, mostly attorneys.

NATIONAL PROGRAMS

15,858FILED CASES

1,518ARBITRATIONS

700ARBITERS

Audi

Bentley

BMW/Mini Cooper

Ferrari

Ford

General Motors

Hyundai/Genesis

Infi niti

Nissan

Jaguar

Kia

Lamborghini

Land Rover

Lotus

Maserati

Mazda

Mercedes Benz

Subaru

Volvo

Volkswagen

Winnebago

National Participants in BBB AUTO LINE 2018

MEDIATIONDISPUTE RESOLUTION

NATIONAL PROGRAMS

ADVERTISING SELF-REGULATION

In 2018, CBBB continued to provide platforms for promoting strong, visible, and accountable self-regulation programs that set the standard for truthful and responsible advertising. These programs address concerns about food advertising to children, truth in advertising, responsible advertising to children, the collection of behavioral data online, and the application of self-regulatory standards to digital advertising.

CHILDREN’S FOOD AND BEVERAGE ADVERTISING INITIATIVE (CFBAI)

2018 CFBAI HIGHLIGHTS

• CFBAI participants have delivered 11 years of excellent compliance on their food advertising commitments. CFBAI published its Report on Compliance and Progress during 2017 in December. The 18 leading food and beverage companies and quick-serve restaurants that participate in CFBAI comprise most of the food advertising on children’s television programming.

• CFBAI’s 18 participants agreed to stricter nutrition criteria and to strengthen the Uniform Nutrition Criteria that apply to foods that they advertise to children. As a result, 40 percent of the foods on CFBAI’s product list will need to be reformulated if participants want to advertise them to children after January 1, 2020.

• CARU held its annual conference for the fi rst time in San Francisco. The Pokémon Company’s general counsel served as keynote speaker.

• NBC joined CARU as a Supporter and a Safe Harbor. The Pokémon Company joined as a Safe Harbor.

• CARU held two Supporter Council Meetings with CARU members, including Disney, Hasbro, LEGO, and Mattel to name a few.

• In an ongoing e� ort to educate parents on how to protect and empower their kids online, CARU authored an article for BBB’s TRUSTEDmagazine entitled Savvy Consumer: Trust for Our Children’s Digital Future

• CARU presented at numerous conferences including Brand Activation Association’s (BAA) Advertising Law Conference, PR Newswire Social Media Conference, and Social Media Week.

• CARU was featured on BBB’s Podcast “Connected Toys Safety Tips,” discussing child privacy and connected toys.

• The program co-hosted a Twitter Chat with the FTC to celebrate the 20th anniversary of the Children’s Online Privacy Protection Act (COPPA). CARU was the FTC’s fi rst accepted Safe Harbor program.

• CARU referred its Musical.ly case to the FTC in 2018, which resulted in the FTC’s largest COPPA-related settlement in history.

NATIONAL ADVERTISING DIVISION (NAD)NAD appreciates the strong support the FTC has shown for self-regulation in this new administration. Current FTC Director of the Bureau of Consumer Protection Andrew Smith, and keynote speaker at the 2018 NAD Conference, cautioned that

1 See https://www.ftc.gov/system/fi les/documents/public_state-ments/1413760/andrew_smith-nad_speech.pdf (“One thing that remains the same regardless of who is at the Commission, is the FTC’s support of self-regulation in advertising and the high regard given to the Council of Better Business Bureaus’ programs, like the NAD, as national advertising enforcement models.”)

NATIONAL PROGRAMS

“ Companies should take heed that Commission sta£ is committed to reviewing NAD referrals and recommending enforcement actions where appropriate.”1

In 2018, NAD worked consistently to make its process more e� cient and case decisions times are speeding up. The average time to decision decreased 20 percent in 2018.

CARU’s social media participation was enhanced in 2018, including a major push on Twitter leading up to its conference. The event was live-tweeted and a post-event wrap up was held.

CHILDREN’S ADVERTISING REVIEW UNIT (CARU)In 2018, CARU continued to grow in both size and infl uence. Its activities and results are clear evidence that CARU’s work has real-world signifi cance and impact.

2018 CARU HIGHLIGHTS

DIGITAL ADVERTISING ACCOUNTABILITY PROGRAM(formerly the Online Interest-Based Advertising Accountability Program)

The Accountability Program, a cutting-edge privacy program, enforces self-regulatory industry standards for web and mobile advertising. Its mission is to build trust in the digital marketplace by ensuring that businesses provide consumers with transparency and choice about the collection and use of their data for interest-based ads.

2018 ACCOUNTABILITY PROGRAM HIGHLIGHTS

• Processed a total of 95 formal actions to date

• Launched a new consumer complaint form

• Released an updated version of the Enforcement in Action casebook

• Processed approximately 3,400 new consumer complaints in 2018

• Virtually 100 percent voluntary compliance

• In 2018, the ERSP Review Program continued to provide valuable self-regulatory guidance to telemarketers and live seminar providers in the work-at-home industry. The program added two new participants in 2018, presented a successful and well attended ERSP Summit which included industry professionals and regulators, and facilitated meetings for program participants.

• After receiving unanimous approval from the Direct Selling Association’s (DSA) Board of Directors in September 2018, the Council introduced a new national advertising self-regulation program starting in January 2019 called the Direct Selling Self-Regulatory Council (DSSRC). The DSSRC will encompass active monitoring of the entire direct selling marketplace, including websites and social media of direct selling companies and their independent sales forces in the areas of income representations and product claims. DSSRC will be funded by the Direct Selling Association (DSA), the national

trade association for companies that o£ er entrepreneurial opportunities to independent sellers to market and sell products and services. The DSSRC is designed to ensure high standards of integrity and business ethics and is built on the same strong foundation as other Council-administered self-regulation programs: clear standards, independent administration, transparent decision making, and accountability for non-compliance. In addition to these components. DSSRC will be backed by robust online monitoring and will be applicable to DSA members as well as non-members.

ELECTRONIC RETAILING SELF-REGULATION PROGRAM (ERSP)2018 ERSP HIGHLIGHTS

NATIONAL PROGRAMS

In 2018, the National Partners Program added seven new partners:• Womble Bond Dickinson LLP• Paradigm Direct• FortuneBuilders• Blistex, Inc.• Porzio, Bromberg & Newman P.C.• Morgan, Lewis & Brockius, LLP• American Advertising Federation

The program retained 93 percent of National Partners, a three-percent increase

from last year and more than doubled the number of new partners added when compared to 2017. The National Partner team increased engagement of current partners and implemented an eff ective communication and retention plan that provided consistent updates about CBBB National programs. The National Partner Leadership Circle (NPLC) held several meetings throughout the year including an in-person meeting in conjunction with the NAD conference.

National Partners Program

COUNCIL OF BETTER BUSINESS BUREAUS, INC.

FINANCIALS

Year Ended December 31

ASSETS 2018 2017

Cash and cash equivalents $ 7,514,864 $ 8,586,846

Investments 4,434,798 492,727

Accounts receivable, net 1,012,447 1,118,160

Prepaid expenses & other assets 907,084 1,126,159

Property & equipment, net 277,596 1,486,678

Total Assets $ 14,146,789 $ 12,810,570

LIABILITIES AND NET ASSETS

Accounts payable and accrued expenses 1,459,549 1,621,922

Deferred revenue 2,725,244 2,478,191

Deferred rent and lease incentive - 976,794

Funds held for service awards for Bureau o�cers

- 29,174

Other liabilities 6,841 88,673

Total Liabilities $ 4,191,634 $ 5,194,754

NET ASSETS

Unrestricted 9,332,444 6,910,880

Temporarily restricted 622,711 704,936

Total Net Assets 9,955,155 7,615,816

TOTAL LIABILITIES AND NET ASSETS $ 14,146,789 $ 12,810,570

Consolidated operations Year Ended December 31,

UNRESTRICTED NET ASSETS 2018 2017Revenue

Dues $ 15,041,037 $ 14,429,498Contracts 5,439,125 5,657,613Subscriptions & License Fees 2,860,430 2,785,762Grants & Contributions 245,749 281,603Participation Fees 1,603,317 1,143,545Filing Fees 1,831,583 1,646,439 Events 731,757 695,408Other Program Revenue 61,426 112,969Investment & Other Revenue 1,902,286 149,055 In-kind Revenue 374,360 595,291Net Assets Released from Restrictions 2,080,022 1,996,359

Total Unrestricted Revenue $ 32,171,092 $ 29,493,542Expenses

Program ServicesBBB Programs $ 7,141,240 $ 6,503,619Self-Regulation 7,387,213 6,518,546Dispute Resolution 2,932,815 3,856,174Charity Reporting Activities 1,803,270 1,764,312Other Programs 27,271 134,239Marketplace Trust 936,802 1,130,653

Total Program Services $ 936,802 $ 19,907,543Supporting Services

Management & General $ 9,409,880 $ 9,816,918Fundraising 111,037 161,683

Total Supporting Services 9,520,917 9,978,601TOTAL EXPENSES $ 29,749,528 $ 29,886,144

CHANGE IN UNRESTRICTED NET ASSETS 2,421,564 (392,602)TEMPORARILY RESTRICTED NET ASSETS

Grants & Contributions $ 1,997,797 $ 2,003,018Net Assets Released from Restrictions (2,080,022) (1,996,359)

CHANGE IN TEMPORARILY RESTRICTED NET ASSETS

(82,225) 6,659

CHANGE IN NET ASSETS 2,339,339 (385,943)NET ASSETS

Beginning of year 7,615,816 8,001,759End of year $ 9,955,155 $ 7,615,816

Statements of Activities Consolidated Statements of Financial Position

COUNCIL OF BETTER BUSINESS BUREAUS, INC.

2018 CBBB BOARD OF DIRECTORS and OFFICERS

NATIONAL PARTNER DIRECTORS

David Hubbard, ChairVice President and Deputy General CounselVerizon

Ken K. Patel, Vice ChairVice President and General CounselThe Procter & Gamble Company

Krenda FrushourInternational DirectorBlistex

Josephine MillsShaklee Corporation

Svetlana WalkerSenior Corporate CounselThe Clorox Company

LOCAL BBB DIRECTORS

Tom EastmanPresidentSummit Security Company

Shaila KapurPrincipalMergence Consulting

Adam KafkaPresidentUniversal Links Inc.

Peter C. WoolfolkPresident & CEOCommunications Strategies, LLC

Tom WalshVice President and CIODrury Hotels Company, LLC

BBB CEO DIRECTORS

Jay NewmanPresident & CEOBBB Serving North Central Texas

Christy Page, TreasurerPresident & CEOBBB of Akron

Kip Morse, SecretaryPresident & CEOBBB of Central Ohio

Kim StatesPresident & CEOBBB Serving Denver/Boulder

Rod DavisPresident & CEOBBB Serving Southeast Florida and the Caribbean

Carrie HurtPresident & CEOBBB Serving the Heart of Texas

CBBB ENTITIES

George K.H. SchellRepresenting Advertising Self-Regulatory Council(ASRC)

Michael WarburtonRepresenting BBB Institute for Marketplace TrustDirector, Parkwide CommunicationsBalboa Park Cultural Partnership

Mark ShamleyRepresenting BBB Wise Giving AllianceVice President Global Social ImpactTupperware Brands Corporation

EXTERNAL MEMBER DIRECTORS

Andrew PoonVice President, Product ManagementYahoo

Colleen P. RudioFounder/OwnerCascadia Business Development

Ken BonhamPartnerLucid Agency

Public Director

C. Steven BakerRetired Former Director of the Midwest Region, Federal Trade Commission

CBBB EX-OFFICIO DIRECTORS

Beverly BaskinPresident & CEOCouncil of Better Business Bureaus, Inc.

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

CBBB STAFF OFFICERS

Laura BrettDirectorNational Advertising Division (NAD)

Maureen EnrightVice President and Director Children’s Food and Beverage Advertising Initiative

Dona FraserDirectorChildren’s Advertising Review Unit (CARU)

Frances HendersonVice President and National DirectorPrivacy Initiatives

Juan HerreraNational DirectorDispute Resolution Programs

Bennie F. JohnsonChief Strategy O� cer

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

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

Steve SalterSenior Vice PresidentBBB Services Division

H. Art TaylorPresident and CEOBBB Wise Giving Alliance

Melissa TrumpowerExecutive DirectorBBB Institute for Marketplace Trust

Bennett WeinerChief Operating O� cerBBB Wise Giving Alliance

Council of Better Business Bureaus, Inc.3033 Wilson Boulevard, Suite 600 Arlington, VA 22201

This is the final annual report produced by the Council of Better Business Bureaus (CBBB).

In 2018, CBBB decided to restructure around specific stakeholder groups to enhance services and support to consumers and businesses, donors and charities. CBBB long operated under distinct lines of business to meet the needs of the diverse marketplace. Effective June 1, 2019, each line of business will now operate separately, each with its own independent board of directors and staff:

International Association of BBBs, Inc. (IABBB) (www.BBB.org) will serve the 100 local Better Business Bureaus and their 160+ offices across the United States, Canada, and Mexico.

BBB National Programs, Inc. (BBB NP) (www.BBBNP.org) will be the home of BBB’s industry self-regulatory and dispute resolution programs.

BBB Wise Giving Alliance (BBB WGA) (www.Give.org) will continue to monitor and report on national charities, as well as assist the local BBBs in monitoring and reporting on local and regional charities.

The programs that earned the trust of the organization’s stakeholders and the public under the Council of Better Business Bureau will not change. They will, in fact, be strengthened through the increased focus and strategic management of these independent organizations. After ensuring a smooth transition, the Council of Better Business Bureaus will cease to exist.