Connecticut Attorney General Richard Blumenthal launched an investigation last month into the business ratings system employed by the Connecticut Better Business Bureau (CTBBB) because he harbored similar concerns as those brought up last week in a lawsuit filed against the bureau by TicketNetwork.
TicketNetwork, which the CTBBB gave a “C-” rating with 31 serious complaints, sued the organization on September 7, claiming the agency’s rating system is allegedly based on a deceptive “pay to play” scheme. Under the system, businesses that pay membership fees allegedly are given more favorable ratings. The agency “allows fee-paying ‘accredited businesses’ to earn additional points that may lead to higher grades and better ratings than those companies who do not pay fees to the BBB to become accredited,” TicketNetwork’s lawsuit contends. The CTBBB’s rating of TicketNetwork is listed under the name of the parent company, Ticket Software, LLC.
Prior to 2009, the BBB used “satisfactory/unsatisfactory” ratings but replaced it that year with the current letter grade system. Accredited businesses “routinely” receive increases in their grades as a result of accreditation, and within each letter grade is three to four points that can add to a company’s score, the TicketNetwork lawsuit states. So, an accredited business allegedly might receive an “A+” grade, while an unaccredited business can only go as high as an “A” grade.
In published reports, the CTBBB called the TicketNetwork lawsuit “without merit” and denied the allegation. “The letter grade system does not favor dues-paying accredited businesses, but instead rewards every business for high marketplace ethics,” Hartford’s Courant newspaper reported the CTBBB said in a statement. Fees for accreditation can range from just under $350 to nearly $1,500.
Blumenthal, however, decided to launch the investigation into the agency’s ratings practices prior to the lawsuit, though he did not disclose specifically what prompted the matter.
“I remain concerned about the Better Business Bureau’s rating system and my office’s investigation is continuing. We have reached no conclusions,” Blumenthal said in a statement. “My office last month wrote the Connecticut BBB requesting information regarding my concerns — especially the role of dues in determining ratings and potential harm to businesses that decline to join — and we await a response. My office is reaching out to BBB to help facilitate a response.”
Howard Schwartz, communications director for the CTBBB, declined to discuss the lawsuit, or shed any light on the attorney general’s investigation. “We’re working with our attorneys. I think it would be inappropriate to discuss it any further,” he said.
Blumenthal is no stranger to tangling with ratings-based organizations. In March of this year, he sued two of the nation’s leading financial ratings agencies, Moody’s and Standard & Poor’s, for allegedly misleading investors.
“These credit rating agencies gave the best ratings money could buy — catering to their powerful investment bank clients, rather than objectively rating risky bonds,” Blumenthal said in a statement at the time about the financial ratings agencies. “Countless investors and others — including individuals, banks, mutual funds, insurance companies, hedge funds and pension funds — were misled into believing that these credit ratings were independent and objective, and lost money on investments they might have avoided if told the truth.”
The CTBBB based its rating of TicketNetwork, in part, on 148 processed complaints against the company. “When considering complaint information, please take into account the company’s size and volume of transactions, and understand that the nature of complaints and a firm’s responses to them are often more important than the number of complaints. BBB processed a total of 148 complaints about Ticket Software, LLC in the last 36 months, our standard reporting period. Of the total of 148 complaints closed in 36 months, 38 were closed in the last year,” the agency said.
Of those 148 complaints, 99 were resolved by the company in some sort of satisfactory condition, while 47 were resolved administratively by the BBB, most to its general satisfaction. Two complaints remain unresolved. TicketNetwork has not paid any membership dues to the agency, and suggests in the lawsuit that the following language should be placed on the organization’s Web site:
Consumers should be aware that in order to become an Accredited Business, a business must pay the Better Business Bureau a fee of anywhere from a few hundred to thousands of dollars. All Accredited Businesses are entitled to receive additional ratings points from the BBB that may give them higher grades than similar businesses who simply have chosen not to pay the BBB the fees to become accredited. The mere fact that a business has declined to pay the BBB a fee to become accredited should not influence your judgment about the unaccredited business.
“BBB ratings should be based exclusively on performance, honesty and responsiveness. Rankings should not be affected by membership in the BBB. Any suggestion or appearance of ‘pay-to-play’ threatens to undermine the accuracy and credibility of the BBB’s ratings, potentially misleading consumers and unfairly tainting nonmember businesses,” Blumenthal said.
“Attorney General, and U.S. Senate candidate, Blumenthal and TicketNetwork have a similar point of view as it pertains to the membership fees and how they should not be a factor in how the Better Business Bureau rates companies,” said TicketNetwork spokesperson Viveca Woods. “It’s simply not an objective approach to evaluating businesses.”
On a national level, the BBB has been forced to fend off similar accusations about its ratings system.
For example, in May of this year, Incorp Services Inc. of Henderson, NV reportedly sued the Southern Nevada BBB chapter for the agency allegedly giving the company inconsistent ratings, including “F” ratings, after Incorp declined to pay membership fees.
“Defendants advertise themselves as an unbiased public-interest organization, designed to provide customers with honest and accurate information about businesses. Defendants’ advertisements are false, as their ratings of businesses are intentionally biased and inconsistent, and in particular, heavily favor businesses that have chosen to pay money to and participate in the defendants’ accreditation program,” the Incorp lawsuit states, according to the Las Vegas Sun.
And last month, Castle Rock Remodeling of Missouri sued the Greater St. Louis BBB for alleged bias in the ratings system.
“The new Better Business Bureau rating system appears to be attracting a plethora of criticism nationwide as a system that doesn’t fairly score businesses, especially those that are non-paying, accredited businesses,” Woods added.
TicketNetwork is the parent company of TicketNews.