People Keep Suing Yelp Over Its Reviews—And Keep Losing
Yelp dodged another legal bullet last week when a federal judge in San Francisco threw out the latest lawsuit against the company. This time around, shareholders claimed that Yelp had artificially inflated its share values by exaggerating the reliability of its reviews.
Judge Jon Tigar dismissed the case, saying that reasonable investors would understand that not all of Yelp’s reviews are authentic, Reuters reports. In particular, the judge pointed to Yelp’s admission that its screening technology is imperfect. Judge Tigar had already dismissed a previous version of the case in April.
Many small business owners have claimed that they’ve been plagued by negative reviews after declining to advertise on Yelp. The allegations have haunted Yelp for years, but so far, none of them has resulted in a successful lawsuit against the company. Yelp has always maintained that it does not manipulate reviews based on advertising relationships or any other financial arrangement, But the company used to allow advertisers to highlight a “favorite review” atop its listing, which could effectively push negative reviews further down the page.
A group of small businesses filed a suit against Yelp in 2010, claiming that the company’s ad sales practices amounted to extortion. But an appeals court threw the case out last year, arguing that the plaintiffs had failed to prove that Yelp had fabricated negative reviews and that the company’s strategy of allowing advertisers to re-prioritize reviews is “hard bargaining” but not extortion. Yelp stopped offering the “favorite review” option to advertisers after the lawsuit was filed.
The latest suit was prompted by a Wall Street Journal story published in April 2014 that revealed the Federal Trade Commission had received 2,046 complaints about Yelp. The FTC ultimately closed its investigation without taking any action, according to a company blog post last January. After the Wall Street Journal story ran, Yelp’s stock dropped 18 percent.