A Look at the Claims and ‘Facts’ in Yelp Case

On Twitter, Mike Blumenthal points to the complaint (.pdf) filed in the Yelp action. Here’s the plaintiff’s Yelp listing (a veterinary hospital) and below are relevant, verbatim excerpts from the complaint:

One method Yelp uses to control content (and thereby raise or lower a business’s rating), is to promise to remove a business’s negative reviews or relocate them to the bottom of a listing page where fewer searchers will read them if the business agrees to purchase a costly monthly advertising subscription from Yelp. Yelp thus capitalizes on the presumed integrity of the Yelp.com ratings system to extort business owners to purchase advertising.

The complaint  discusses and describes a couple of “defamatory reviews” that appeared amid the otherwise largely positive set of reviews for the business. It then goes on to discuss a sequence of alleged events that form the factual basis for the legal claims in the action:

Soon after the appearance of these negative reviews, Dr. Perrault and Mr. Vargas began receiving frequent, high-pressure calls from Yelp advertising employees, who promised to manipulate Cats and Dogs’ Yelp.com listing page in exchange for Cats and Dogs purchasing an advertising subscription.

For example, on or about January 5, 2010, Cats and Dogs received a Yelp sales call from “Kevin.” Kevin said that Cats and Dogs could advertise with Yelp for a minimum payment of $300 per month, with a minimum 12-month commitment. Kevin stated that if  Cats and Dogs purchased a one-year advertising subscription from Yelp:

a. Yelp would hide negative reviews on the Cats and Dogs Yelp.com listing page, or place them lower on the listing page so internet users “won’t see” them;

b. Yelp would ensure negative reviews will not appear in Google and other search engine results;

c. Yelp would allow Cats and Dogs to decide the order that its reviews appear in on its Yelp.com listing page; and

d. Cats and Dogs could choose its “tagline,” i.e., the first few lines of a single review shown on every search result page in which Cats and Dogs appears (for instance, “Veterinarian in Long Beach”).

Dr. Perrault declined the offer, saying that he wanted to track referrals from Yelp for three months without ads, but might thereafter be willing to test Yelp’s advertising potential. Within a week of denying Kevin’s advertising offer, the negative review from Chris R. reappeared on the Cats and Dogs Yelp.com listing page. Soon after, “Kay K.” posted a second negative review. This review was added on January 6, 2010, one day after Kevin’s sales call.

On or about January 12, 2010, Mr. Vargas contacted Yelp to protest the reappearance of the “Chris R.” review and the highly negative, inflammatory “Kay K.” reviews.

On January 13, 2010, Mr. Vargas received via email the following response from Yelp:

We wanted to let you know that we’ve taken a close look at the reviews by Chris R and Kay K, and after careful evaluation, we have decided to leave both intact. Because we don’t have first hand knowledge of a reviewer’s identity or personal experience, we are not in a position to verify your claims that these reviewers are the same person, or that they are connected to the recent vandalism at your hospital. If a review appears to reflect the personal opinion and experiences of the reviewer while adhering to our review guidelines [link], it is our policy to allow the reviewer to stand behind his or her review.

There’s a clear suggestion that Yelp retaliated by not removing the review(s) in question as a result of the vet’s decision not to advertise; the implication is that they would have been removed otherwise. There’s also a clear suggestion that Yelp may have fabricated the review that followed the decision, because of the alleged timing in the factual sequence above.

The complaint offers a single legal claim, violation of California Unfair Competition Law, Bus. & Prof. Code § 17200, which seeks to broadly prevent unfair or deceptive business practices. The complaint relies very heavily on the East Bay Express article published  last year and cites comments made in response to the article to argue that the alleged practices are widespread.

The complaint basically seeks to certify as a class all business owners on Yelp and/or all that have every been solicited for advertising by Yelp.

The factual issues are:

• Are bullets “a” – “c” above accurately reported? Bullet “d” if true doesn’t violate anything
• If so, how widespread is/was this behavior by Yelp salespeople?
• Is there any relationship between the decision not to advertise and: a) the appearance of subsequent negative reviews and/or b) the decision not to remove negative reviews? (Yelp would say “none” of course.)

There are quite a few small business owners who are frustrated with the lack of control they feel over the process at Yelp as well as Yelp’s power in the marketplace. There are also business owners who don’t understand why some reviews on Yelp are removed and others are not.

The allegations above must be proven with evidence. As I’ve said before I’m skeptical that there was any “quid pro quo” or pattern accordingly. But the depositions in this case — and there will have to be many — will start to establish whether there is any meat to these claims or whether it’s just frustration boiling over together with some opportunistic attorneys who may have solicited the action after reading the negative press coverage and wondering if there was a viable lawsuit in the making.

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Update: Here’s another post from Yelp CEO Jeremy Stoppelman responding to some of the allegations and describing the company’s local ads sales process.

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