Yelp Hit with Class Action for ‘Extortion’

I’ve written up the details of the litigation over at Search Engine Land . . .

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 . . .

It was all I could do to keep myself from saying the action was total bullshit. You’ve got a frustrated plaintiff who may have had an anomalous experience or misunderstood what was going on and a couple of opportunistic attorneys seeking national PR.

Evidence could prove me wrong but I just don’t believe it.

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27 Responses to “Yelp Hit with Class Action for ‘Extortion’”

  1. troy Says:

    Sound like the Mafia finally figured out a way to get a piece of the Social Media action. The simple shake down is so yesterday.

  2. Mike Stewart Says:

    Based on my experience with Yelp, I believe it. Call me a negative Ned but considering Yelp “pays” or compensates folks for reviews, I wouldn’t doubt that it is what they are doing. Buy an ad, clean up the negative reputation.

    Is it extortion? Not really.

    Couldn’t we argue that the Better Business Bureau (BBB) has been doing this for years? It is not a government or public non profit entity. It is a private company who is in business for a profit. The Better Business Bureau is not a government department yet business owners and consumers alike are mislead by this form of marketing. Predatory practices in the credit collections industry such as the government protection focused bankruptcy and consumer credit counseling ads that are rampant on the radio. Merchant Circle offers the ability for claimed accounts to refresh reviews. I have personally seen fraudulent negative reviews by competitors.

    Black hat techniques not only exist in local search, they also still exist in the local advertising (sales) industry beyond Print Yellow Page fraud.

    But hey…. to me many companies have become “YellowCrooks” when they put profits and investors before clients and consumers. It is what it is. Yelp, Craigslist, Facebook, Twitter, etc all started as non profit ideas….. not for profit first but the idea…… Profit is what ruins perfectly good ideas. Just ask Seth Godin!

    Cheers,
    Mike Stewart

  3. genedaly Says:

    It’ll be interesting to see if the companies bringing this lawsuit have any type of quid pro quo in writing around dropping negative reviews in exchange for paid advertising. That might make things interesting.

  4. Ben Saren Says:

    Greg on a totally unrelated topic: I think today is a day we should all mark on our calendars as (I believe) the first time you’ve cursed on your blog. It’s a big day! I, for one, am a supporter and practitioner of cursing especially when applied gracefully, like a dash of pepper on the pizza – not too much, juuuust enough. Kudos good sir!

  5. Mike Stewart Says:

    Ben, not sure that bullshit is a curse word. It really is a product and many of us think it is not worth much, unless you are growing mushrooms or attempting to fertilize crops. lol

  6. DC Says:

    How much effect will these revelations (or non-revelations) have on the Yelp brand? Will services like Yelp ultimately destroy review “equity” as consumers become jaded to the shennanigans those services pull as to what they post, and what they do not in the name of revenue?

    Who will step up and create a better “closed loop” rating system consumers can have confidence in again? Most of what is out there being aggregated right now is complete garbage, how does a consumer fiilter out the “fake” reviews, to get to the real ones?

  7. Jason Says:

    Finally! I couldn’t be more pleased to hear this. Regardless of the outcome of this lawsuit, I hope they will clean up their act. Extortion Scheme? Well put! Their advertising-focused business model compromises the integrity of legitimate reviews, both positive and negative. When allegations continue to made to the point where Journalists at both a local and national level are covering the story, I think it’s safe to say that this is not BS.

  8. Yelp Hit with Class Action for 'Extortion' « Screenwerk | Local Marketing Today Says:

    [...] Continue reading here: Yelp Hit with Class Action for 'Extortion' « Screenwerk [...]

  9. Andrew Shotland Says:

    I’m with Saren. Break out the f-ing champagne.

  10. coldbrew Says:

    1) Why is anyone discussing the order of reviews? You can sort by 4 categories, ascending/ descending.

    2) Where are the screenshots? When claiming something about a web site’s display of info, it only makes sense to grab a screen shot for proof.

    I believe this is another case of less-than-tech-savvy small businesses misunderstanding what is going on. If the accusations were completely true, I wouldn’t have to ask questions 1 or 2 above.

    I also believe that because local is hot on the web right now, there are a ton of competitors looking to capitalize on Yelp’s demise. Looking at the web sites of Andrew Shotland and Mike Stewart above (they specialize in local SEO) my suspicions are further cemented.

  11. Greg Sterling Says:

    Jason:

    If Yelp were doing some version of what the plaintiff suggests/argues on a systemic level it would amount to fraud — there’s probably a fraud claim in the suit — and there would be exposure to all kinds of liability. The Yelp folks are not ignorant of the law.

    There’s probably some gray/ambiguity in the pitch, which combined with other misunderstandings allows the plaintiff to make some of the claims he’s making. But I really would be shocked if this is a pattern at the corporate level.

    If the case has any merit it will come out in discovery.

  12. Greg Sterling Says:

    Gene:

    I have actually heard (hearsay) that others in the local space have made this type of pitch to advertisers or were allowing advertisers to remove negative reviews. Though I’ve never heard this about Yelp. If it were in writing that’s really a “slam dunk” for the plaintiff then isn’t it?

  13. genedaly Says:

    I would think it would be a slam dunk, yes. I’m not a lawyer, but I would think there would need to be proof that the quid pro quo was allowed at a corporate level, vs. a salesperson or two freelancing outside of the corporate boundaries. And I agree with your point on Yelp management… Jeremy and company are probably smarter than that.

  14. Greg Sterling Says:

    Yes . . . when we get to the concrete evidence part of the litigation (discovery) it’ll be time to offer up the goods. If there are a couple of disgruntled businesses that offer vague deposition testimony supporting the claims it’ll be pretty weak and likely die.

    But if they have dozens of businesses around the country making the same claims independently or some agreement (as you say) that offers this quid pro quo it’ll be a different matter and the case will probably settle or go to trial.

    There’s also going to be a major procedural obstacle the plaintiffs face in certifying this as a class action.

  15. When It Comes To iPhone Games, What Sells Is Action, Adventure, and Arcade | Startup Websites Says:

    [...] Yelp Hit with Class Action for 'Extortion' « Screenwerk [...]

  16. Marcus | ADMAX Says:

    We predict that Angie’s List will be NEXT in line for litigation on this particular M.O. – a few minutes googling reveals similar tactics. m

  17. Jason Says:

    @Greg
    I do believe it is being done at a systemic level, hence why you can find so many cases of this happening. And yes, I believe that there a number of business owners that misunderstand what is happening. However, at the same time, I know that there are a number of smart, tech-savvy business owners/users who can see that there is a true problem in the system. They see that something is truly wrong and unjust, and that’s why so many of them are crying foul.
    The more I read about this issue, the more I think that the algorithm is the source of the problem. I really don’t think that salespeople are messing with reviews, rather the Yelp algorithm (formulated at a corporate level; implemented by developers). I am very interested to see where this goes, and I will definitely be looking to your blog to keep me updated.
    Thanks for the insight. Looking forward to the discovery.

  18. Mike Stewart Says:

    I agree with Jason.

    But as I said, based on AngiesList and others in the space, the pitch is the same across the board: Spend money with our local digital directory…. clean up your negative reputation

    So you don’t all agree? The BBB has been doing this same thing for years!

  19. Greg Sterling Says:

    Mike:

    Depends on how aggressive that pitch is.

  20. Mike Stewart Says:

    Good point.

    I see the challenge in monitoring the discussions between prospects and sales consultants.

    What can be said is that it is subject to interpretation. My interpretation is that is it more “sales ethics” vs extortion. Although the law likely states otherwise.

    We all know it is a common practice. I worked for Superpages.com and witnessed rampant abuse of reviews by sales consultants.

    The entire rating and review concept wreaks havoc with abuse.

    My .02

    How pushy do you think commissioned sales reps become and what do you honestly think many will say to “make the close?”

    Seriously!?

    Cheers,
    Mike Stewart
    Webformance Inc

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    [...] Yelp CEO Jeremy Stoppelman, another suit, “virtually identical” to the earlier “class action,” has been filed against the company: These misconceptions are also fueled by lawyers, who [...]

  22. Mike Stewart Says:

    The latest article on Yelp…. Take a look:

    http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=124594

  23. Is Reputation Management Pointless? Response to Techcrunch » Nodal Bits Says:

    [...] say that the current class action lawsuit against Yelp further highlights just how sensitive individuals and businesses are to their [...]

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  25. Warning: Beware New Breed Of Extortion In Google Maps » talkdigitalmarketing.co.uk Says:

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  26. Mihmorandum | Q1 2010 in Local Search (Developments of Interest) | Links of Local Interest Says:

    [...] been a rather lame attempt at a segue, but I did want to highlight the most recent in a string of allegations of extortion and other shenanigans, again, allegedly perpetrated by Yelp sales [...]

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