Watch CBSN Live

Yelp Accused of Pressure Tactics

Yelp, one of the most popular Web sites that let people post opinions about restaurants, shops and local services, is being sued by several small businesses that claim they've been pressured to advertise on the site in exchange for getting negative reviews squashed.

Yelp denies the claims, but exactly what happened may never be clear. And regardless of what happens in court, the lawsuits could taint Yelp's reputation as a leader in online reviews.

Yelp has faced many complaints since it began letting consumers post reviews about local businesses ranging from all-you-can eat buffets to zip line operators six years ago. Often businesses have complained about how reviews on the site positive or negative can mysteriously disappear and reappear.
But since late February, at least three lawsuits seeking class action status have been filed against the site by a dozen companies, complaining that reviews are manipulated depending on which companies advertise on the site and which ones do not.

The first suit, which explicitly alleges Yelp engaged in extortion and attempted extortion, was filed Feb. 23 in U.S. District Court for the Central District of California by Cats & Dogs Animal Hospital in Long Beach, Calif.

That lawsuit was amended in March to add nine more companies some Yelp advertisers, some not. It alleges Yelp sales representatives indicated to businesses that they could alter site listings to help advertisers and harm non-advertisers, and that Yelp has actually done so.

The lawsuit began with Cats & Dogs owner Greg Perrault, who said in a court filing that after receiving negative reviews on the site he started getting calls from Yelp, informing him that if he advertised Yelp would hide or lower negative reviews on his page and let him choose the order of the reviews.

Perrault said he decided not to advertise, and a week later a negative review that had disappeared from his page reappeared. He also received a second negative review from someone who had previously written one, he said. Yelp refused his request that the reviews be removed, he said.

The lawsuit seeks an order barring Yelp from manipulating reviews and forcing the company to return money reaped"by means of its wrongful acts and practices," along with unspecified damages.

At least two similar lawsuits have been filed: One by Christine LaPuasky of D'ames Day Spa in Imperial Beach, Calif., on March 3 in the same district court, and one by Boris Levitt of Renaissance Furniture Restoration in San Francisco on March 12 in San Francisco Superior Court.

In an interview, Yelp co-founder and CEO Jeremy Stoppelman said that the businesses suing his company don't understand how Yelp works.
Yelp says some reviews might come and go because it relies on an automated program to weigh reviews and filter out ones that might be untrustworthy, such as a negative review a spa owner might write about a competitor. Yelp says it does nothing to manipulate reviews, aside from allowing advertisers to choose one review they would like to feature at the top of the page about their business.

Stoppelman said the automated filter has helped Yelp stay relevant to consumers, even though it frustrates some businesses.

Bob Gutgsell, whose San Carlos, Calif.-based Astro Appliance Service is one of the 10 businesses involved in the Cats & Dogs suit, said he does understand how Yelp works, and he doesn't like it.

Gutgsell said that after responding to a negative Yelp review from a customer, he got a call from a sales representative asking him to pay several hundred dollars a month to advertise. Gutgsell said the Yelp representative explained that if he did so Yelp would help him control his good and bad reviews.

"The attitude that was conveyed was, `You really need to do this for your business.' And I felt I really didn't need to do that for my business," Gutgsell said.

Soon after declining to advertise, he noticed some positive reviews had disappeared from his site profile, he said.
Stoppelman countered, however, that his sales reps have"absolutely no ability" to move reviews or remove them from Yelp. Once a sales representative closes an ad deal it is handed over to an account manager who, unlike representatives, is not paid in accordance with the number of deals he or she makes, Stoppelman said.

"We would immediately know from our account manager that something was going wrong, or their messaging was off-key, and we simply haven't found that," he said.

Stoppelman says the lawsuits are suspiciously timed, because Yelp recently got deeper pockets. Yelp got an infusion of venture capital in January, snagging $25 million from Elevation Partners. That values the company at about $475 million and brings its total financing to $56 million.
Some plaintiffs said they were unaware that Yelp had just gotten more financing. Ronald Marron, a lawyer for D'ames Day Spa, said he just wants money returned to people who were subject to Yelp's"unfair business practices and bought advertising as a result."

Yelp has tried to head off problems by making efforts to connect with businesses and educate them about the site. After a rash of complaints early last year, Yelp started allowing businesses to respond publicly to customers' critiques right on their Yelp pages. Previously businesses could contact reviewers only privately. Yelp also has hired an outreach manager who has met with business owners and business groups.

Given that more than 15 million small businesses are indexed on the site, including businesses that have not yet been reviewed by Yelp users, lawsuits from even a dozen businesses don't seem like very many, said Ray Valdes, a Gartner Inc. analyst.

"The question is," he said,"how many more will come out?"

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.