• by Richard Berman , January 13, 2009

The Better Business Bureau's (BBB) stamp of approval has historically provided a high comfort level for consumers.

In the past, the bureau labeled businesses "satisfactory" or "unsatisfactory" for resolving consumer complaints. In 2009, the business watchdog is employing a new rating system.

Starting this month, businesses will be rated based on 16 weighted categories with a scale from AAA to F. The BBB Reliability Report's algorithm calculating a company's ranking revolves around a set of subjective characteristics, including the nature of business, length of time since opening, whether the business is "problematic in the industry," and BBB accreditation, i.e., are they a paying member.

Certainly, the "years in business" category yields information. But a new high-end restaurant could get a lower grade than a 10-year-old hole in the wall. Using the new grading system for six "cookie cutter" chain Taco Bells we checked, three received B's, one got a CCC, and two received CC's. Yet all reports from these Santa Barbara, Calif., locations show no consumer complaints.

Beyond fast food, world-famous chef Wolfgang Puck's week-in-advance booked restaurant, Spago in Beverly Hills, only earns a subpar B under the new system.

Comparing consumer reviews on Tripadvisor.com, Joe's Café ranks 101st out of 288 Santa Barbara restaurants. Conversely, Spago matched expectations scoring 4th out of 182 Beverly Hills establishments. So how is the BBB's score possible?

Businesses with Bureau accreditation, such as Joe's Café, receive AAA scores. Just like Spago's, the restaurant's customers have no complaints. The only difference is that Joe's Café is older and a paying member of the BBB. (Without the expensive "Pay for OK" accreditation, there is apparently no way to achieve the AAA ranking.)

Reaching beyond L.A.'s restaurant industry, many area retailers, including Gucci, Ferrari, and Cartier, are also now sporting the weak B grade.

If you are a non-paying BBB member, a single complaint can plummet scores. With just one complaint each, Ferrari Maserati of Beverly Hills, Porsche of Downtown L.A., Dolce & Gabbana, and Prada were downgraded to CC's and D's. At the same time, SavePlus, a wholesale retailer of discount clothes (which also has one complaint on record), enjoys the AAA rating. (Coincidently, SavePlus is a paying BBB member).

And there is more. If the entire industry product or service is "bad" in the eyes of the BBB, it may be extremely difficult to get above a C. You start at a depressed level and can only go down. The 90-point calculation determining the total grade subtracts as many as 41 points just for "type of business."

We conducted a survey of several BBB offices around the country to discover who these unfavorable industries were. Adding greater confusion, there was no general consensus from office to office. The BBB claims negatively assessed "types of businesses" are based on levels of complaints. But none of the offices we contacted named construction firms, banks or car dealers, the largest complaint industries, according to the Bureau's own published list.

Some of the named targets from our calls include movers, credit and loan companies, and psychics (how do you judge their reliability?). Other criticized businesses could soon join the list such as taverns, cigar stores, ice cream shops (think "obesity"), and gun retailers. Even the best of companies in these industries will not rise up to the "B" level or "A" stratosphere once their industry has fallen into the BBB crosshairs.

What's the solution? Every business should stop paying the BBB to support their bogus rating system. At least that will level the playing field.