Legal News

Real People. Real Reviews. Real Extortion Scheme?

By Ashby Jones

Companies, of course, get sued all the time. They get accused of fixing prices, of workplace discrimination, of inflating revenue figures. They sue each other for ripping off their intellectual property, and pay billions to the public when their products misfire.

But a recent suit filed against San Francisco-based Yelp makes an allegation that, in some ways, seems fundamentally more far-reaching than the above types of suits. The suit alleges that the services provided by Yelp, consumer-driven reviews of restaurants, retailers, products, (and other stuff) are, at their essence, fraudulent.

The allegations, embodied in a lawsuit filed in Los Angeles federal court on Wednesday (click here for the complaint), go like this: In some occasions, if someone posts a negative review of, say, a restaurant, Yelp workers will call the restaurant and offer an advertising package whereby for, say, $300, the restaurant will get some advertising on the site as well as the bad review removed.

The complaint is chock full of alleged examples, like this one:

Mary Seaton, the owner of a furniture store in San Mateo, took Yelp up on an offer to remove her negative reviews if she advertised at a cost of $350 per month for six months. During that time, her negative reviews were removed and old positive ones showed up. After her contract was up, a negative review appeared, which Seaton said contained lies.

Furthermore, according to the complaint, Yelp employees have, on occasion, written negative reviews of businesses. Click here for an NYT blog post on the lawsuit; here for a story from TechCrunch, which first reported the suit.

Yelp has yet to respond to the suit in court, but issued this statement to TechCrunch, claiming it will defend the suit “aggressively.”

Yelp provides a valuable service to millions of consumers and businesses based on our trusted content. The allegations are demonstrably false, since many businesses that advertise on Yelp have both negative and positive reviews. These businesses realize that both kinds of feedback provide authenticity and value. Running a good business is hard; filing a lawsuit is easy. While we haven't seen the suit in question, we will dispute it aggressively.

It should be an interesting suit to play out. We wouldn’t necessarily say Yelp’s existence is on the line, but there’s a lot more at stake here for the company, it seems, than money. We’re talking, of course, about the company’s credibility, which it of course has to have in order to continue being a thriving business and influential player on the Web.

Full post as published by Law Blog - WSJ.com on February 26, 2010 (boomark / email).