Yelp Faces Class Action Suits for Running “Extortion Scheme”

By Sarah Pierce

Is your business on Yelp?

The popular website, which helps connect people with local businesses through user-generated reviews and ratings, can make or break a business’s reputation. Getting a less-than-stellar review can frustrate business owners, but what’s really making them mad is how Yelp is allegedly handling these reviews.

Yelp has been hit with a series of class action lawsuits over unfair business practices. The suits claim the website is running an “extortion scheme” in which Yelp’s employees call businesses with low star ratings and offer to remove bad reviews if the business buys advertising. One suit also alleges Yelp removed positive reviews because the business declined to purchase ad space. (Interestingly, this business owner also admits that these positive reviews were solicited, which is in direct violation of Yelp’s rules.)

Yelp denies removing or hiding negative reviews in exchange for money and maintains it treats review content equally for advertisers and non-advertisers alike. Yelp CEO Jeremy Stoppelman suggested in a recent blog post that these lawsuits may be a “classic race to the courthouse” in order to get a piece of the $25 million in capital Yelp recently received from a private equity firm. Time will tell if these proposed class action settlements will be approved by a judge.

Updated March 10th, 2010

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