San Francisco based Yelp has changed the way that small businesses can get noticed…for better or for worse. The website has essentially become a platform for consumers of products and services can express their experiences. Those who love a retailer or restaurant can sing their praises and give glowing reviews. Those who had less than stellar experiences would be able to do the same.
Yelp reviews have been seen as powerful motivators for consumer choice, which is likely why advertising fees on Yelp can be so pricey. These costs became the subject of a lawsuit when a group of businesses accused Yelp of extorting them for additional fees. The group claims that Yelp threatened to post negative reviews higher on a business’ profile if they did not purchase higher priced packages.
Yelp steadfastly denied these accusations, as well as the ability to manipulate the positions of negative reviews. It moved to dismiss the claims under Rule 12b(6) and federal district court judge agreed. The businesses took its argument to the U.S. Court of Appeals for the Ninth Circuit. However, a three-judge panel upheld the district court’s findings. It reasoned that Yelp’s actions did not fit the court’s stringent definition of extortion under federal law. It further explained that any less stringent standard would make illegal a number of acceptable business practices.
While this set of lawsuits does away, Yelp is not resting on its laurels. It now faces two other lawsuits based on artificial stock prices and workers who have not been paid.