Yelp faces lawsuit, accusations of extortion

February 25, 2010 12:00:00 AM PST
A fast-growing website, based in San Francisco, just hit a speed-bump. It is being accused of extortion. Yelp.com helps people find places to eat and shop, but some of those places to eat and shop are suing.

Yelp says it is a trusted source, which is why so many people use it every month, but a lawsuit is accusing the company of questionable business practices, that Yelp essentially bullies companies into buying ads.

Like most business owners these days, Joni Burton can find her San Francisco store reviewed on Yelp, but she is no fan of the site. About a year ago, a Yelp representative tried to get her to buy ads.

"When I declined, then all of a sudden strange reviews came up, negative reviews of things that couldn't possibly have been purchased here and nothing I could do about it," says Burton, the owner of the Bath and Beyond.

Burton is not the only business owner complaining. A class-action lawsuit on behalf of a Southern California animal hospital was filed on Thursday against Yelp.

It accuses the San Francisco-based company of extortion, promising to hide negative reviews or lower them on the listing page if a business agrees to buy ads. When Burton heard about the lawsuit, she could not have been happier and said she would want to join it.

"I can't comment on the allegations of a specific lawsuit, but I can say Yelp does not remove negative reviews for advertisers," says Vince Sollitto, Yelp's vice-president of corporate communications.

Sollitto says there is a reason why 29 million people used Yelp just last month. He says the company's so-called review filter is credible.

"Well we use a complex algorithm to weigh a number of factors including the votes of the community or the established credibility of the reviewer and a variety of other factors to help us show information and content that's valuable. Not just all information," says Sollitto.

But not everyone is buying that argument. Bob Salvo, the manager at Serramonte Auto Plaza Body Shop in Colma, says he will be following the lawsuit closely. He says a Yelp representative made the same promises of ad purchases in exchange for more favorable reviews.

"They can hurt a business pretty badly with this. They certainly deserve whatever they got coming to them, if they've been doing this," says Salvo.

7 On Your Side's Michael Finney first exposed these allegations a year-and-a-half ago. It is unclear what prompted the lawsuit now.

Yelp recently took $25 million in capital from Elevation Partners, an investment team co-founded by U2's Bono.


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