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Class Action Lawsuit Filed Against Yelp Alleging “Extortion”

Greg Sterling on February 24, 2010 at 2:20 pm

It must be the season for litigation. Two class action law firms have filed suit in Los Angeles federal court claiming that Yelp has attempted to “extort” money from small businesses by offering to remove negative reviews in exchange for payment. The suit contends:

Yelp runs an extortion scheme in which the company’s employees call businesses demanding monthly payments, in the guise of “advertising contracts,” in exchange for removing or modifying negative reviews appearing on the website. The plaintiff, a veterinary hospital in Long Beach, California, asked that Yelp remove a false and defamatory review from the website. In response, as set forth in the lawsuit, Yelp refused to take down the review. Instead, the company’s sales representatives repeatedly contacted the hospital and demanded a roughly $300 per-month payment in exchange for hiding or removing the negative review.

This kind of allegation has been out in the media in the past. Most notably in an article that appeared in weekly publication the East Bay Express almost exactly a year ago. The article was called Yelp and the Business of Extortion 2.0:

During interviews with dozens of business owners over a span of several months, six people told this newspaper that Yelp sales representatives promised to move or remove negative reviews if their business would advertise. In another six instances, positive reviews disappeared — or negative ones appeared — after owners declined to advertise.
Because they were often asked to advertise soon after receiving negative reviews, many of these business owners believe Yelp employees use such reviews as sales leads. Several, including John, even suspect Yelp employees of writing them. Indeed, Yelp does pay some employees to write reviews of businesses that are solicited for advertising. And in at least one documented instance, a business owner who refused to advertise subsequently received a negative review from a Yelp employee.

At the time of publication Yelp CEO Jeremy Stoppelman responded to the article.

These claims about extortion and other allegations of manipulation of reviews or wrongdoing are generally based on misunderstandings by the businesses themselves about how Yelp’s algorithm works (which causes some positive and negative reviews to be flagged and removed). And although I’ve never been on a sales call with Yelp reps I’m extremely skeptical of the contention that there’s a pattern of extortion or other, alleged strong-arm tactics.

Like Google, Yelp is now a target because of its success and visibility. Some business owners are frustrated with Yelp because, again like Google, positive or negative reviews can materially impact a business. The rampant proliferation of user-generated content and reviews is viewed by many SMBs as a positive thing but by others as a nuisance or even destructive.

It must also be said that there’s also a very distinct marketing angle here for the involved attorneys who are likely to grab national publicity from this action. This is a “sexy” case for them and the PR may be worth the effort even if there’s no money in the end. However, ethically attorneys are bound to not file frivolous lawsuits and can suffer penalties and potential civil damages if they do (i.e., “malicious prosecution”).

There must be some testimony or facts here to at least form the basis for the claims alleged in the action. The question is, beyond the perception of the individual plaintiff, is there objective evidence that Yelp offered to remove the negative review in exchange for payment and that there was a larger pattern of doing so to justify the class action.

Yelp does allow advertisers to highlight a (presumably favorable) review but that’s quite a different matter. Here’s an example for “Dentist, Berkeley CA”

The truth will out of course but I would be stunned if these claims were based in truth rather than the frustrations and misunderstandings of the plaintiff in this case.

About The Author

Greg Sterling

Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog, Screenwerk, about connecting the dots between digital media and real-world consumer behavior. He is also VP of Strategy and Insights for the Local Search Association. Follow him on Twitter or find him at Google+.