Reviewing the Reviews

The online review company Yelp has recently faced a number of court cases over unfair business practices.

Photo by Michael Dorausch (Flickr)

The online service Yelp, a website that allows users to review virtually every public location in the United States, has been under review itself.  Multiple lawsuits have been filed against the company, accusing it of extorting business owners in order to increase advertising revenue.  Yelp has consistently denied the claims, and business owners have fought back.

Launched in 2004, Yelp has grown to become a publicly traded company with over 139 million unique website visits each month.  The company allows users to create an account to write reviews of restaurants, retail stores, parks, and even highways.  However, Yelp does not show every review that users write—some are filtered from the main page.

These hidden reviews have caused a significant amount of controversy between businesses and the website.  Most recently, in the 2014 case of Levitt v. Yelp! Inc., four businesses joined to file a lawsuit against Yelp alleging that it had committed numerous acts of extortion and wrote negative reviews in an attempt to force the business to advertise with it.  Furniture store owner Boris Levitt claimed that when he refused to advertise with Yelp, many positive reviews of his company were removed from the main page for his business.  Additionally, Cats and Dogs Animal Hospital and body shop Mercurio claimed that Yelp added false negative reviews of each company after the companies refused to purchase advertising.  Dentist Dr. Tracy Chan also claimed that she chose not to advertise with Yelp initially, and a few positive reviews of her practice were removed as a result.  When Chan ultimately did choose to advertise with Yelp, the reviews returned.  Subsequently, when Yelp asked her to purchase more advertising and she declined, positive reviews again seemed to disappear.

The United State Court of Appeals for the Ninth Circuit sided with Yelp, dismissing the case for failure to state a claim.  The court found that the appellees were unable to prove the elements of extortion, focusing on the word “wrongful.”  According to the court, the appellees were not able to show “that Yelp directly threatened economic harm if the businesses refused to purchase advertising packages from Yelp.”  Likewise, the court stated that Cats and Dogs Animal Hospital and Mercurio were not able to prove that the negative reviews that appeared on the site regarding their companies were fake.  The court concluded that Yelp did not extort the business owners when soliciting advertising revenue.

A restaurant owner asserted that Yelp’s filtering system was significantly flawed and did not accurately show reviews written by real people who had frequented the businesses.

This is not the first time that Yelp has been sued for allegedly doctoring reviews.  In July 2014, the Second District Court of Appeal in California heard Demetriades v. Yelp, Inc.   A restaurant owner asserted that Yelp’s filtering system was significantly flawed and did not accurately show reviews written by real people who had frequented the businesses.  Instead, the plaintiff claimed that the most entertaining reviews were displayed, which often included fake reviews from friends and foes.

Yelp’s filtering system, instituted in 2005, is supposed to hide any reviews that could possibly be fake.  Yelp concedes that the algorithm used is not perfect, and sometimes real reviews are hidden and fake reviews are displayed.  When a business signs an advertising contract with Yelp, the owner must acknowledge that the filtering system may not always be accurate.

Rather than taking issue with the filtering system itself, the plaintiff complained about Yelp’s advertising regarding the system.  He claimed that Yelp promised to provide “the most trusted reviews” but, due to flaws in the system, untrustworthy reviews often made it to the main business review page.  The plaintiff, who chose to advertise one of his restaurants on Yelp, pointed to one specific instance of flawed filtering: a particular user identified as “Travis I.” wrote a false review about the restaurant.  Yet, the review still showed on the business’s page while fifty other reviews—many positive—were filtered.  The plaintiff alleged that he suffered monetary loss due to legitimate positive reviews being hidden.  The court found that Yelp’s statements regarding the system were mere puffery rather than misleading statements of fact.  Therefore, the court’s ruling allowed Yelp to continue to advertise that the system was trustworthy.

In another action challenging Yelp’s algorithm, investor Joseph Curry filed a lawsuit in August 2014 alleging that businesses were forced to pay to hide negative reviews.  Curry filed the class action in the Northern District of California, claiming that Yelp’s stock prices are inflated beyond what they should be due to Yelp extorting businesses for money.  The suit, filed on behalf of Yelp stockholders, claims that the algorithm fails to filter fake reviews.  Stock prices fell drastically from $98.00 to $65.76 per share after the Federal Trade Commission publicly stated that it was aware of the complaints against Yelp.

Users who write false reviews could be liable for defamation.

The decision in Curry v. Yelp, Inc. cited Yelp, Inc. v. Hadeed Carpet Cleaning, a case heard in the Virginia Court of Appeals in January 2014.  Carpet cleaning business owner Joe Hadeed believed that many negative reviews posted of his business were fake, and therefore subpoenaed Yelp to disclose the true names of the people writing the reviews.  The court sided with Hadeed, stating that the reviews were not truly reviews if they were fake, but rather qualify as false statements, and thus are not entitled to First Amendment protection.

Yelp protects the identities of its users by only requiring a first name and last initial.  There is no verification system set up to ensure that those who register with the site are being truthful about their own names.  A user who went by “Besfort S.” and identified himself as “Besfort Shala” in the review, wrote an inflammatory review stating that he worked at Sparks steakhouse in New York City, and frequently spat into customer food.  A man named Besfort Shala, who had previously applied to Sparks but was not hired, heard about the review.  Shala denied writing the review and filed a police report claiming that an imposter wrote the review.

Sparks sought a judicial order in September 2014 demanding that Yelp release the identity of the person who went by “Besfort S.” on the website.  Although the case has not yet been resolved, the person who wrote the review could be liable for defamation.  Yelp would have to first release the true identity of the person, either willingly or by court order.  Either way, this suit paired with Hadeed could potentially open the door for business owners to force Yelp to hand over the identities of its users who write allegedly defamatory statements.  Although this may lead to more trustworthy reviews, it might also dissuade Yelp users from posting honest reviews in fear of legal action.

Businesses have developed other methods to fight back against the perceived unfair business practices.

Because businesses may not always succeed in court against Yelp, many have developed other methods to fight back against the perceived unfair business practices.  Fed up with the website, one business owner in San Francisco deliberately asked patrons to write negative reviews of his restaurant on Yelp as a publicity stunt.  Users who wrote negative reviews were given a twenty-five percent discount on pizza.  The stunt increased traffic so much that the owner had to hire five new employees to handle the extra business.

With lawsuits still pending against Yelp, the next year could create major changes for the website, or continue to maintain the status quo based on court decisions.  If it can be proved that Yelp does extort businesses for advertising revenue, stock will likely tumble.  However, if Yelp is again found to participate in ethical business practices, the site will continue to thrive.

Paige Miles Feldmann, Managing Editor
About Paige Miles Feldmann, Managing Editor (20 Articles)
Paige Miles Feldmann is a 2016 graduate and served as the Managing Editor of the Campbell Law Observer for the 2015-2016 academic year. Originally from Erie, Pennsylvania, she graduated from Penn State with a finance degree. Following her first year of law school, she interned with the Clerk of Superior Court for Chatham County, the Wake County Family Court, and the Wake County Public Defender. She also competed on a Campbell Law Trial Team in the Buffalo-Niagara Mock Trial Competition. Paige worked with the Wake County District Attorney as an intern in the misdemeanor section during her third year.
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