Judge Tosses Extortion Lawsuit Against Yelp

SAN FRANCISCO -- A federal judge who dismissed a class-action lawsuit accusing consumer review website Yelp of extortion is giving plaintiffs a month to refile their complaint.

Judge Marilyn Hall Patel ruled last week that the original suit failed to back up small business owners' claims that Yelp was manipulating user reviews to force them to advertise on the site.

Plaintiffs claimed that negative reviews reappeared after they refused to buy advertising. They alleged account executives with the San Francisco-based company said they could control which reviews appeared if businesses bought ads.

Yelp denied the claims and said the business owners misunderstood how the site works. The company says the site automatically filters reviews that appear untrustworthy, such as those from competitors or the businesses themselves.

"Plaintiffs do not appear to argue that Yelp ever explicitly threatened to harm their businesses, through manipulating user reviews, if they refused to purchase advertising," Patel wrote in her order to dismiss. Instead, she writes that the plaintiffs alleged actions by Yelp that implied a threat.

"These theories of extortion ... are insufficient to survive a motion to dismiss," she wrote.

Plaintiffs have 30 days to refile. Messages left with the lead attorney for plaintiffs were not immediately returned.

Several lawsuits that were brought together in the class action were filed early last year. They followed on the heels of a lengthy 2009 expose in the East Bay Express, a San Francisco Bay area alternative weekly, that detailed gripes of local business owners who said they had come under pressure from the site's ad sales representatives.

The first suit was filed by the owner of a Long Beach animal hospital who said he started getting calls from Yelp after users had left negative reviews. The owner said he was told that if he advertised Yelp would hide or lower negative reviews on his page and let him choose the order of the reviews.

In response, Yelp CEO Jeremy Stoppelman wrote on the website's blog that advertisers don't receive preferential treatment.

"The allegations are disappointing, not only because they are false, but because they ignore empirical evidence in favor of conspiracy theories," he wrote.

Since the first lawsuit was filed in February 2010, Yelp's monthly traffic has nearly doubled from 28 million monthly visitors to 50 million, the company said in a statement responding to the suit's dismissal.

Comments

[kuamua]

01:33 AM on 04/11/2011

I highly doubt that Yelp is doing anything nefarious.

However, if you need someone to install an air conditioning system, give you a liver transplant, or teach your daughter how to play the violin, user reviews give you only half the story. Users can only give you insightful feedback about the provider's customer service and bedside manner.

But what about craft?

How will you know the installation, transplant, or pedagogy you're paying for is top notch? If you depend on user reviews from Yelp, you wont.

Try us instead: http://www.kuamua.com

[Katie DePaola]

08:11 AM on 05/20/2011

Kuamua, Do you have any advice? On our page, one of our reviewers stated she and her husband are sick and dying from our products. I believe this review is from an angry past employee, but Yelp says she is real. We've tried to contact her through Yelp's messaging, as we have no other information on her identity but no one responds back. If our past customer is sick and dying and Yelp refuses to provide any more information, how can we get in contact with her to make sure she's okay? Please help.

[HuffingtonFan47]

05:00 PM on 04/04/2011

The case is a load of BS. Besides, do people even care about Yelp anymore? Yelp is not even profitable. I use to love this site, but all they seem to be doing these days is ripping ideas off of every other site. Yelp Deals (Groupon), Check-in's (Foursquare), and their entire advertising/ review idea (Citysearch). They were so dumb to not sell to Google. I bet they regret not jumping on that train. I wish they would come up with something original and reinvent themselves. They have the user base.

[xtiangodloki]

10:47 PM on 04/03/2011

I have stopped using yelp for a while now. The problem is that some of the recommended restaurants on yelp are not all that good, and some of my fav restaurants do not get rated all that high. Of course, it just could mean that my taste is different than most yelp users but reading articles like this one doesn't help.

[tingalingme]

04:21 PM on 04/03/2011

As a small business owner I can say first hand that the CEO is lying, lying, lying - on that note WHO CARES - yelp is so 2009 - I once thought about suing them for their BS but knew it would go something like this - I'm too busy as a business owner to waist the time and money to listen to their lies.

[Visionary Excellence]

03:06 PM on 04/03/2011

yelp is a quasi extortion racket... they are monitizing reputation dynamics. good and bad.

At the same time the underlying data is valuable because the transparency of reputation (customer reviews good and bad) is valuable.

even the bad reviews offered by competing businesses are transparent - typically these reputation attacks are done in private.

[conservicide]

12:01 PM on 04/03/2011

"Patel" eh?
Everyone knows yelp is an extortion racket,
Ask any business that has gotten a call from them.
Even the weasly founder knows this.

[David Bilyeu]

11:15 PM on 04/03/2011

What the hell does the race of the judge have ANYTHING to do with the case? Rude.

[conservicide]

07:53 PM on 04/04/2011

Guess

[moremo]

11:15 PM on 05/15/2011

married to Patel--

[BeautyAmerican]

05:50 AM on 04/03/2011

I went way out of my way to a bay area tire store because there was a yelp ad stating the store was offering a 25% discount if you mentioned the Yelp ad. I should have called the store first, but the way my dad always taught me to benefit from a discount sale is get the cost first, and then show them the ad. That way they won't jack the price up to start with, just to bring it down to some measly 2 - 5% discount. After giving me the "out the door" price, I mentioned the yelp ad. The clerk said he had never heard of the ad, so I asked to speak to the manager. When I showed him the ad he said he had never placed the ad. At that point it was nearly the end of the business day, and I had invested gasoline in the trip. The manager generously gave me a little bit of a discount when there was clearly NO sale and not even a yelp flier in the store to indicate it was true. I didn't contact Yelp because at that point, I was done with the transaction but would NEVER trust a yelp ad ever again. I have no idea if the ad was an honest mistake, but it can't be coercion because it's not the seller of the ads who benefits from that, it's only the customer -- the retailer gets screwed, if they honor an ad they

[Hunter Robbins]

01:58 AM on 04/03/2011

I too have tried to reach the attorney since I'm part of the group involved with the litigation against Yelp. It would be nice to have MY calls returned, since I'm one of the plaintiffs.

I don't anticipate success on our effort against Yelp, but they are in fact very punitive for non-advertisers. In negotiations with them to advertise, I declined at the last minute because I found the advertising dollars were better spent using other social media outlets for free for far less expensive rates.

Suddenly, almost all of my positive reviews - be they from new or frequent Yelp users - were "hidden" as "suspicious." It's a mystery to me how reviews from users who post several hundred reviews or even just five can be flagged as "suspicious."

Yelp's advertising rates are antiquated at the old time print rates that newspapers used in the last century. They have very little flexibility of better options such as offered by Facebook or Google.

I also suspect that they have staff members that click the "pay per click" ads just to make sure you are charged a high rate.

[conservicide]

12:03 PM on 04/03/2011

Looks to me like someone got some pocket money

[spkninglsh]

10:41 PM on 04/02/2011

People still use yelp?

[shthar]

08:11 PM on 04/02/2011

I'd say they need a younger judge. Maybe one with an AOL account.