Online reviews are becoming more important and can directly affect a business’ bottom line. Yelp.com is the most influential review website at this time but their practices in soliciting ads have been criticized. Some businesses have said Yelp made negative reviews more prominent, removed positive ads, and placed negative ads after they declined to advertise with Yelp.
Some of these businesses filed a federal lawsuit, Levitt v. Yelp! Inc., against these practices but the federal district court dismissed the lawsuit for not specifying that Yelp did anything that was illegal. The 9th Circuit Court of Appeals recently confirmed this ruling (the 9th Circuit’s opinion is here).
The federal case contended Yelp extorted money from businesses who declined to advertise on Yelp. The legal definition of extortion is “the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” The federal court found Yelp did not commit extortion under this definition because other courts have ruled that threatening economic harm to induce a person to pay for a legitimate service (Yelp ads) is not extortion.
What is most interesting is the federal courts have ruled that manipulating ads for a company that does not advertise with Yelp is not wrongful, at least in relation to extortion laws. The court found a company has no pre-existing or contractual right to have positive reviews listed on Yelp. Therefore, Yelp can remove positive ads and move negative ads to the top and that would not be extortion. It should be noted the federal court found there was insufficient evidence to show that Yelp itself submitted negative reviews about companies that turned down its advertising.
Although Yelp may be off the hook for extortion, Yelp may still be liable under another legal theory. This New Yorker article states Yelp could have problems under consumer protection laws. In the meantime, knowing that Yelp can manipulate reviews does call into question the accuracy of their reviews.
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