Yelp Accused of Extortion

Yelp, the online review site, is being accused of extortion in a class-action lawsuit filed in Los Angeles this week.

The suit alleges that the site tried to get a Long Beach veterinary hospital named Cats and Dogs Animal Hospital to pay $300 a month -- for a minimum 12-month commitment -- to suppress or delete reviews that disparaged the hospital.

The popular San Francisco–based site Yelp is one of the leading sites for consumers to post reviews and comments about their local businesses and services. It touts its integrity with the slogan: "Real people. Real reviews." The company was founded in 2004 and has spread throughout the Unitd States. It launched in the United Kingdom and Ireland last year.

But according to the complaint filed in U.S. District Court (.pdf) for the Central District of California, the site manipulates the reviews, and therefore a business' ratings, through an extortion scheme that offers to remove a business' negative reviews or relocate them to the bottom of a listing page where fewer visitors will see them, if the business purchases a monthly advertising subscription.

"Yelp thus capitalizes on the presumed integrity of the Yelp.com ratings system to extort business owners to purchase advertising," says the complaint. "As a result, business listings on Yelp.com, contrary to the website’s 'Real people. Real reviews.' mantra, are in fact biased in favor of businesses that buy Yelp advertising."

The suit alleges that last September, Cats and Dogs owner Dr. Gregory Perrault became aware of a negative review posted on Yelp by a user named Chris R. Perrault viewed it as defamatory and possibly false.

He researched the information in the review and discovered that it referred to a hospital visit that occurred more than 18 months prior to its posting. (Yelp's policy allows reviews to be posted within 12 months of an experience with the business.) The hospital asked Yelp to remove the review for violating Yelp’s review guidelines, and the site complied. But a second negative review appeared five days later from a user identified as Kay K.

That review read in part:

Dr. Perrault is the rudest vet I’ve ever been to ... probably one of the rudest people I’ve had the displeasure of meeting. I agree with the previous reviews about making you feel like an unfit mom. My pup had been sick and I had a theory on what the problem may have been and he wouldn’t even entertain the idea, but instead, made me feel bad because my dog got sick. And, my poor dog was terrified of him! He made me feel like I was 2 inches tall and repeatedly looked down his nose at me. Oh, and OVER PRICED! OMG! Who does he think he is??? I did not feel welcomed by him nor his staff. I paid you for a service! No need to treat me so bad!

The plaintiff claims that Yelp sales staff then began calling the hospital frequently with "high-pressure" tactics promising to move or delete negative reviews in exchange for purchasing a one-year advertising contract. The site also allegedly promised to ensure that negative reviews wouldn't appear in Google or other search engine results. When the hospital declined, the negative review from "Chris R." re-appeared on the site, followed by a second negative review from Kay K.

The latter review referred to Dr. Perrault as "an @$$" and "a jerk, a D-Bag, And so arrogant."

I ran in to him in a neighborhood store right after he saw my poor sick dog at his clinic and he looked right at me, recognized me, rolled his eyes and looked away!!!! Seriously, someone needs to knock this guy down to the size he really is. He needs to drop his Napolean complex and be a professional. After my horrible experience with him, I took my sick dog to Bixby Animal Clinic and I have never had a more pleasant vet experience! Go there instead! My dog loved everyone there!

When the hospital complained to Yelp, the site sent a letter to the hospital saying it would be leaving the reviews in place.

"Because we don't have firsthand 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," the letter read. "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."

The suit's claims seemed to be backed up by an East Bay Express article published last year that also accused the site of running an extortion racket. In that piece, numerous business owners described similar scenarios to the one alleged by the plaintiff. The Oakland, California–based newspaper later reported that after its first story published, many more businesses from around the country contacted it to complain of similar experiences.

“Yelp’s sales tactics amount to high-tech extortion,” said plaintiff attorney Jared Beck in a press release. “The victims tend to be small businesses, such as our client, who often have no choice but to pay Yelp exorbitant sums in order to prevent further harm to their livelihoods.”

Yelp recently received a $25 million investment from Elevation Partners through the purchase of preferred stock with a plan to invest an additional $75 million through purchases of employee and shareholder stock. The site earns revenue from search and display ads.

The company claims that its site had more than 26 million unique visitors in December 2009 and that it has published more than 9 million reviews.

Yelp recently walked away from discussions with Google to buy the company for about $550 million.

Yelp released a written statement in response to the lawsuit.

"The allegations are demonstrably false, since many businesses that advertise on Yelp have both negative and positive reviews," the statement read. "These businesses realize that both kinds of feedback provide authenticity and value. Running a good business is hard; filing a lawsuit is easy. While we haven't seen the suit in question, we will dispute it aggressively."