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Bad Rating: Yelp Faces Lawsuit Over Poor Reviews

Anonymous people often post unfavorable opinion about businesses at online sites hosted in the United States. Those businesses have at times tried to sue the corporations that host the web sites, but generally to no avail, because of federal law. Rating service Yelp, which refused a takeover bid by Google (GOOG) last fall, is currently facing a class action suit because it allegedly asked companies for payments to remove bad ratings. And that may be different enough to put Yelp into legal jeopardy.

What usually protects site owners is that they can claim they do not exert editorial control over comments on their sites -- the sites are simply places where individuals post opinions. According to Jonathan M. Gordon, a partner with law firm Alston & Bird, there are also significant First Amendment issues that can come into play. "The extent to which anything is an opinion and not pretending to be a statement of act, [there will likely be] a giant battle to get any limitations on the individuals or the sites [rights] to express opinions."

I spoke with Gordon last month about whether a site's algorithms -- we were discussing Yelp in particular -- could be seen as providing enough editorial control and selection to put the site owner into legal jeapordy. He said that "if you can demonstrate convincingly some unfair way a site provides rankings," that might open a door to a lawsuit.

But in this case, the allegation, according to a web site the plaintiff lawyers set up, is that Yelp stepped beyond unfair algorithms and into an "extortion scheme:"

The plaintiff, a veterinary hospital in Long Beach, California, asked that Yelp remove a false and defamatory review from the website. In response, as set forth in the lawsuit, Yelp refused to take down the review. Instead, the company's sales representatives repeatedly contacted the hospital and demanded a roughly $300 per-month payment in exchange for hiding or removing the negative review.
Review sites have increasingly been able to exert influence on those their users rate. Perhaps it was only a matter of time before businesses looked for ways to return the favor.

Gavel image via Flickr user Thomas Roche, CC 2.0.