Yelp accused of extortion (UPDATED)

Class action lawsuit claims the site demands payments in exchange for removing negative reviews

The line between extortion and aggressive sales tactics can get pretty fuzzy for a startup on the verge of making or breaking it. A new lawsuit alleges that Yelp crossed the line. The suit, filed in a Los Angeles Federal Court, states that the popular local business review site “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, says it requested that Yelp remove negative comments about the business from its site. Yelp refused, then repeatedly contacted the hospital soliciting monthly payments of about $300 in exchange for hiding or deleting the review. A Yelp representative told TechCrunch “The allegations are demonstrably false, since many businesses that advertise on Yelp have both negative and positive reviews.” That argument isn’t air tight, but the burden of proof is certainly on the hospital. (*See update below with more comments from Yelp.)

The “Yelp Class Action Website” refers repeatedly to an article published last year in the East Bay Express that suggest Yelp also manipulates the placement of reviews prior to sales calls and after the termination of advertising contracts to further pressure businesses to pay up. Yelp vehemently denied the accusations, providing their own analysis of the story's sources.

The suit comes just weeks after Yelp announced a $25 million series E round from private equity firm Elevation Partners, which planned to invest as much as $100 million over time.

We've reached out to Yelp and will update this post if we hear back.

Update 10:53 am 11/25: Yelp's vice president of communications Vince Sollitto called us back. Regarding the suit he said, "Yelp provides a valuable service to millions of consumers and business precisely because of its trusted content. Yelp does not allow advertisers control over reviews on their page or to remove negative reviews and the allegations in the suit are demonstrably false. As a quick look at any of our thousands of advertisers will show." 

Sollitto did say advertisers can purchase an ad to place at the top of the page, highlighting a positive review, and that such an ad is clearly marked as an advertisment. As for advertisers who complain about bad reviews, he said, "Yelp treats the request for review of a review equally for advertisers and non advertisers alike."

With regards to the insinuation in the East Bay Express article that Yelp manipulates the placement of reviews prior to sales calls and after the termination of advertising contracts to further pressure businesses to pay up, Sollito insists, "Not true. Completely not true. The placement, display and order of reviews on a business webpage is completely automated by an algorithm that weighs a multitude of factors, including recency, credibility of the review and also votes of the community. [...] that process is entirely automated, it's not done manually in any way and it certainly isn’t modified or changed based on a businesses willingness to pay for advertising or not."

He also said that the use of a dynamic algorithm to keep the reviews on a page fresh could lead to the misperception on the part of some businesses that those reviews would be manipulated rather than automated.