It’s Strictly Business: Yelp Allowed to Manipulate Reviews to Push Services

Screen Shot 2014-09-22 at 9.00.40 AMBy Alex Boguniewicz

Sticks and stones may break bones, but a bad review will surely generate a lawsuit. At least that seems to be the case with Yelp, which can breathe a sigh of relief after the latest litigation regarding its reviews. We have previously covered issues revolving around the online business review site, such as fake reviewers and identity disclosure of negative reviewers. In the most recent controversy, Levitt v. Yelp! Inc., the Ninth Circuit addressed the question of whether Yelp could be held liable for extorting or attempting to extort advertising payments from businesses by hiding positive reviews or manipulating negative reviews. The court unanimously held that even if the plaintiffs’ claims were true—which the court was far willing to concede—the plaintiffs had no cause of action because they failed to meet the narrow test for a civil extortion claim. This case presents the issue of whether this is merely an instance of savvy business tactics or an online “wise guy” scheme.

The case arose in 2010 when a car repair shop, a furniture restoration store, an animal hospital, and a dentist, all filed suit against Yelp in the Northern District of California, alleging civil extortion, attempted civil extortion, and violation of California’s Business and Professions Code. The plaintiffs alleged that Yelp offered business-advertising opportunities on its site for a monthly fee, and that any business that did not purchase the service faced retribution. Such alleged retribution included Yelp removing the business’s positive reviews, making the business’s negative reviews more prominent, and falsely authoring negative reviews. These actions were supposedly done as a way for Yelp to strong arm the plaintiffs into purchasing the advertising package. The district court ultimately dismissed the case for failure to state a claim.

The Ninth Circuit affirmed the district court’s decision, noting that the plaintiffs failed to meet the stringent standard to state a claim of economic extortion. Under federal and California law, the plaintiffs had to demonstrate either that they had “a pre-existing right to be free from the threatened harm, or that the defendant had no right to seek payment for the service offered.” The court held that the plaintiffs had no pre-existing right to positive reviews and Yelp was under no obligation to publish the reviews. Though the plaintiffs claimed to have suffered economic harm, they could not point to any unlawful practice by Yelp. The court thus suggested that Yelp’s practices were no more than “hard bargaining.”

Although the court thoroughly dismissed the plaintiffs’ extortion claim, it concluded its opinion by suggesting that other causes of action, if adequately pled, could be used against Yelp or sites engaging in similar tactics. However, the court did not fully clarify what these causes of action might be. At one point, the court alluded to potential state-law contractual claims that could be raised, and pointed to the fact that one of the plaintiffs had indeed purchased the advertising package at one point, thus forming a contractual relationship. This would be particularly relevant in relation to any reputational harm that could have occurred.

Aside from businesses, Vauhini Vara of the New Yorker speculates that consumers could take recourse against these sites under consumer protection laws. Vara specifically points to the Federal Trade Commission’s guidance letter to search engine companies, which advised them to distinguish between natural search results and advertising. Though the extortion claim may have been dead on arrival, the narrow scope of the holding ultimately suggests that this victory for Yelp may be short-lived and online review sites may not be able to leverage reviews for dollars in the future.

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