1. Better Business Bureau and the Role of Self- Regulation in the Marketplace Consumer Safety and Health Network Workshop Presenters: Rod Davis Juan Herrera

2. BBB Mission, Value and Vision Vision, Mission and Values Our Vision: An ethical marketplace where buyers and sellers can trust each other. Our Mission: BBB’s mission is to be the leader in advancing marketplace trust. BBB accomplishes this mission by: Creating a community of trustworthy businesses Setting standards for marketplace trust Encouraging and supporting best practices Celebrating marketplace role models, and; Denouncing substandard marketplace behavior

3. BBB Beginning Originally called “Vigilante Committees” 1 st BBB established in the early 1900’s Goal: to correct advertising abuses In response to marketplace demands, the BBB expanded to monitor business performance and provide consumers with vital information to enable consumers to direct spending to “quality” businesses and away from scams Presently: the 120+ Bureaus located in the US, Canada, and Puerto Rico exist as non-profit agencies providing various services and programs to assist consumers and businesses –BBB staff size range from 3 to over 100 in largest BBB offices

4. Core BBB Services Business reliability reports Membership Complaint handling and dispute resolution Marketplace protection Truth-in-advertising Business self-regulation Consumer and business education Charity review and reporting

5. Complaint Process BBB will not process anonymous complaints Complaints must include a company name and sufficient information to forward the complaint to the company The complaint must involve a consumer-to-business or business-to- business transaction that relates to the advertisement or sale of a product or service BBBs process over one million complaints annually Most complaints are resolved to the satisfaction of both parties while mediation and arbitration is used to resolve over 70,000 complaints annually BBB helps direct consumers to more appropriate forums/agencies if the complaint is beyond general marketplace issues (e.g. employment practices, discrimination, violation of statutory rights, health care issues, etc.) -

6. Self Regulation and Regulation BBB self regulation as a complement to regulatory initiatives: Develop marketplace standards (e.g. advertising guidelines for ethics and honesty) Help consumers and regulators differentiate between the good and bad practices and businesses Self regulation as a complement to regulation (e.g. BBB NAD and FTC, BBB AUTO LINE and Transportation Recall Enhancement, Accountability and Documentation [TREAD] Act, BBB Children’s Food and Beverage Initiative, etc.) BBB Focus –Build standards –Encourage adherence to standards (industry/individual reports) –Provide individual recourse (e.g. repurchase of vehicles) –Track trends to educate public and inform/business corrections –Engage regulatory authorities to “manage” non-compliance –Share data to enhance regulatory initiatives (e.g. TREAD Act and FTC Consumer Sentinel)

7. National Advertising Programs NAD – 1971: Developed in response to consumers’ concerns about truth and accuracy in advertising. CARU – 1974: Chartered to assure that advertisers would take special care in addressing advertising messages to a vulnerable audience. ERSP – 2004: Developed at the request of ERA to help combat a negative perception of direct-response marketing and monitor industry “outliers.” CFBAI – 2006: Formed to address broad public concern over advertising and childhood obesity. NAD/CRN – 2007: Created in cooperation with the Council for Responsible Nutrition to expand NAD’s review of dietary-supplement advertising and rein in outrageous claims.

8. Health and Safety Self-regulatory units review claims for products that include: Infant formula OTC drugs Dietary supplements Food and beverages Tires Low VOC paint Toys and outdoor play equipment

9. Public Decisions The self- regulatory process is transparent. All decisions are reported in a press release and published in the NAD/CARU/ERSP Case Reports.

10. How NAD Process Works Complaint or staff monitoring Request to advertiser for substantiation Review of evidence Goal: Complete case in 60 business days

11. Key Areas of Interest Product-performance claims Functional foods Dietary Supplements Green marketing Telecommunications

12. What Is CARU? The self-regulatory arm of the children’s advertising industry. Founded in 1974 to promote children’s advertising. Reviews & evaluates child-directed ads in all media & online privacy practices as they affect children. Ensures compliance with our Self-Regulatory Program for Children’s Advertising, (the Guidelines) Seeks changes to ads & websites through voluntary cooperation of advertisers & web operators.

13. CARU’s Guidelines The guidelines take into account children’s special vulnerabilities: Children may not understand that they are being subjected to advertising Limited cognitive skills Limited capacity to evaluate the credibility of advertising

14. CARU’s Mandate CARU reviews & evaluates advertising for: Truth & accuracy Appropriateness Online Privacy Safety CARU’s Scope includes: Advertising directed to children under 12 years of age for advertising; and, Online privacy practices on websites directed to children under 13 years of age.

15. CARU Decisions Depict proper safety equipment CARU recommended that Street Surfing modify broadcast advertising for the company’s “Whiplash Scooter” to depict the use of appropriate safety gear. The company agreed to do so. Don’t advertise to kids products labeled “Keep out of reach of children” CARU recommended that the Johnson & Johnson Healthcare Products Division of McNeil-PPC, Inc. discontinue advertising Listerine Smart Rinse during child-directed programming. The product, manufactured in colors and flavors that may attractive to children, is labeled “Keep out of reach of children. If more than used for rinsing is accidentally swallowed, get medical help or contact a Poison Control Center right away.” Avoid Disparaging Healthy Foods CARU determined that Tyson Foods Inc. should modify television advertising to avoid discouraging or disparaging healthy lifestyles and to better depict foods in the context of a balanced meal. The advertising at issue featured vignettes of children who were avoiding consumption of balanced meals that included meatloaf, spinach fettuccine, veal chops, salmon or tuna casserole. CARU determined that the advertising at issue was directed to children under the age of 12 and that the advertising discouraged and disparaged healthy lifestyle choices and recommended the advertiser discontinue the advertising at issue.

16. “Part II: Guidelines on Online Privacy Protection”

17. CARU examines Websites directed to children to assure that privacy practices conform to CARU’s guidelines and to the federal Children’s Online Privacy Protection Act (COPPA). More than 60 Website privacy cases since 2008. Emmy-nominated public service announcement: “Do you know where your children are … on the Internet?” Website Safety, Privacy

18. BBB Self Regulation and Food Marketing Two distinct but complementary BBB kids self-regulation programs CARU addresses “how” foods are advertised –Has “Guidelines” that apply to all children’s advertisers CFBAI addresses “what” foods are advertised –Membership program: participants make “pledges”

19. The New Yorker 2003

20. CFBAI’s Goals Respond to Institute of Medicine and FTC calls to action for self regulation to do more to address childhood obesity Shift the mix of products advertised primarily to kids under 12 (“child-directed”) –Fewer calories, and lower in fats, sodium, sugars –More nutrient dense Bring transparency and accountability to industry member commitments Help industry be part of the solution –Support efforts of parents, schools

21. The Landscape of Children’s Advertising Is Changing Before (Pre-CFBAI) — Almost anything went regarding what was advertised –CARU Guidelines for how to advertise, but not what to advertise Few companies had nutrition standards for child- directed advertising No third party accountability on what was advertised Now — Science-based nutrition standards govern participants’ child-directed ads –BBB oversight provides transparency and accountability

22. CFBAI Requirements as of January 2010 100% advertising of only healthier products, or no advertising commitment required Advertising coverage –Traditional measured media: TV, radio, print, Internet- both 3d party and company-owned –Digital & mobile media: ads on cell phones, video games rated “EC” or labeled as child-directed, DVDs of child- directed G rated movies and similar content –Word of mouth advertising that is primarily child directed No product placement in child-directed content No advertising to kids in schools (pre-K through 6 th grade)

23. CFBAI’s 17 Participants

24. CFBAI = Change & Improvement Self regulation is moving the needle –Compliance is virtually 100% 12 participants changed or created > 100 products to meet meaningful nutrition standards 5 participants: No child-directed advertising or no candy advertising

25. Self Regulation is Critical and Beneficial Self regulation via an independent third party is a credible alternative to government regulation CFBAI provides leadership & oversight for industry-led program –Rigorous, meaningful standards –Dynamic and forward looking –Provides an important non-company insider POV

26. Wait! Wait! (There really is more) Electronic Retailing Self-Regulation Program (ERSP)

27. ERSP ERSP examines advertising claims made in direct response advertising, including claims made in blog postings, twitter feeds, infomercials and home shopping channels. Key issues: Disease treatment and prevention claims. Weight-loss claims. Product-safety claims.

28. NARC Online Archives The NARC Online Archive is an electronic database of NAD/CARU/ERSP decisions, as well as the decisions of the NARB, the systems appellate unit. The archive is the single largest repository of advertising law decisions and it is available to universities and law enforcement and regulatory agencies at no charge. For more information about the archive, please contact Rey Persaud, rpersaud@narc.bbb.org,rpersaud@narc.bbb.org

29. Thank you For more information please visit www.bbb.org www.bbb.org rdavis@council.bbb.org eherrera@council.bbb.org