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Yelp's Class Action Lawsuit
For Yelp, Extortion Has a Starring Role
Yelp, the San Francisco based tech giant that has grown into a $3.4 billion company on the strength of its business review service, has a little problem. The customers for Yelp’s advertising services are the businesses getting reviewed on Yelp. Yet more and more small business owners loathe Yelp, and consider it a technologically advanced version of the time tested protection racket. “Nice little business ya got here, be a shame if something happened to it.”
According to many small businesses, they are being extorted. Either they use Yelp’s advertising services, or face reputation ruin that will force their businesses to close. The accusations are not new. Yelp has been under investigation by the Federal Trade Commission.
Two law firms, Beck & Lee from Miami and The Weston Firm in San Diego, have filed a class action lawsuit in Los Angeles federal court alleging unfair business practices by local business review and rating website operator Yelp.
The plaintiff in the suit, a veterinary hospital in Long Beach, CA, is said to have requested that Yelp remove a negative review from the website, which was allegedly refused by the San Francisco startup, after which its sales representatives repeatedly contacted the hospital demanding payments of roughly $300 per month in exchange for hiding or deleting the review. Sounds familiar, you say?
You may be thinking of last year, when East Bay Express ran an explosive story, basically accusing Yelp of being in the ‘Business of Extortion", which covered similar ground. Shortly after reporter Kathleen Richards published the article, Yelp vehemently denied everything and called her piece inaccurate. Now, the company will have to defend itself in court rather than on its company blog.
The lawsuit essentially alleges that the heavily funded startup runs an “extortion scheme” and has “unscrupulous sales practices” in place to generate revenue, in which the company’s employees call businesses demanding monthly payments in the guise of advertising contracts, in exchange for removing or modifying negative reviews.
The case, which is styled Cats and Dogs Animal Hospital Inc. v. Yelp Inc., was filed on February 23, 2010, and is pending in the U.S. District Court for the Central District of California. We have an e-mail in with Yelp and are awaiting a response.