Yelp Needs to Make Its "Extortion" Lawsuit Problem Go Away
In the past month, the number of companies accusing customer-review Web site Yelp of trying to blackmail them into paying for ads grew to nine. Yelp should settle these lawsuits quickly, before the problem mushrooms into an attention-getting class-action lawsuit that convinces the American public the site is unreliable.
The businesses allege that Yelp's ad-sales reps pressured them to buy ads. In particular, they say Yelp told them it would remove negative reviews -- in some cases, reviews that mysteriously appeared shortly before the sales calls began -- if they became paid advertisers.
More allegations continue to come out and more companies will likely join the growing lawsuit against Yelp if comments to current news stories from business owners are any indication. The story is gaining steam and calling into question the authenticity of Yelp's reviews.
This kind of publicity could easily send Yelp down the tubes. Yelp needs to get negative chatter about how the site does business out of the public eye, and fast.
Yelp CEO Jeremy Stoppelman has called the charges "bunk" on his blog, saying this isn't the first time Yelp has been accused and vowing to "vigorously" fight the suit, which he describes as "without merit." Even if that's true, sometimes it's smart business to make a minor legal problem go away before it becomes a major one. Settling might not even be terrifically costly -- the businesses will have to prove any damage to their sales or reputation, which will be difficult.
Internet visitors are notoriously fickle -- just ask MySpace. Yelp could pledge to better police its ad-sales practices to prevent any possible ethical problems and settle the suit without admitting wrongdoing -- and it should, while it still has an audience.
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