The apparent demise of the 59-year-old Better Business Bureau of Los Angeles/Orange Counties was caused in large part by the defection of several thousand member businesses bitter about being charged last year for advertising in a bureau publication that achieved only about 20% of its promised circulation.
William Fritz, president of the two-county bureau, which this week laid off all its employees because it had exhausted its budget, said Wednesday that dues-paying membership dropped to 3,000 this year from 6,800 in 1986, and he blamed the controversy on the ill-fated BBB Consumer Guide & Directory for the steep decline.
BBB members were sold advertising space in the consumer guide--and some companies joined the bureau to avoid paying a premium to be included in the book, Fritz said.
The controversy began when the bureau insisted on billing advertisers the full cost of their ads even though the outside publisher folded after only 20% of the books had been delivered, several former BBB members said Wednesday. None would be identified.
The directory had been published annually since 1983 by San Francisco-based Better Books, but last year that company sought bankruptcy protection after delivering only about 50,000 of the 250,000 consumer guides that had been ordered, Fritz said.
He said the regional BBB tried to deliver the rest of the books but needed money to pay the costs and was told by the federal bankruptcy court that it could collect on Better Books advertising accounts to raise the necessary funds.
"We were prepared to deliver the book, but the advertisers let us down. They wouldn't pay," Fritz said. The BBB collected only $55,000 of the $610,000 that is still due from advertisers, Fritz said.
Meanwhile, advertisers that had paid demanded that the books be delivered so their ads would reach consumers. Fritz said the bureau borrowed $35,000 and distributed some of the books.
But many of the advertisers, he said, claimed that the 1986 directory was delivered too late, to the wrong people and was not promoted. A spate of refund requests poured in, and more bad blood was generated when the Better Business Bureau rejected them, saying it had no money available for refunds.
"I guess you could say we brought it on ourselves (by being involved in the directory), but how could we have known what we were getting into," Fritz said.
In 1983, the national Council of Better Business Bureaus, which oversees 178 bureaus across the country, adopted a policy prohibiting bureaus from sponsoring such directories. But the Los Angeles/Orange County publication was exempted because it had been announced before the policy was adopted, Fritz said.
Better Books had agreements with BBB offices across the state to distribute consumer guides, and the company's failure is having repercussions in other areas as well.
Hal Rosner, an attorney in San Diego, said he filed a suit on behalf of several advertisers against the national BBB.
Janet Atkinson, president of the San Diego BBB, said this year's membership list has declined to 2,000 firms from 2,800 last year. But the operation's budget is only slightly less, she said, and there are no plans to close.
And the Kern County District Attorney's consumer fraud division reached a $12,500 consent agreement with Better Books in 1984, after the division charged that Better Books did not carry through with promises to deliver a Better Business Bureaus consumer guide that year, according to Kern County Deputy Dist. Atty. Stephen Gildner. The Bakersfield BBB stopped sponsorship of the publication at that time.
The Better Business Bureau of Los Angeles/Orange Counties closed its doors early this week after exhausting its 1987 budget. The bureau, which receives almost all of its dues in the first part of the year, had collected $714,000 through last week, compared with $1.1 million for all of 1986.
Fritz has said it is unclear whether the operation will reopen.