Yelp Hit With Class Action Lawsuit For Running An “Extortion Scheme”

http://techcrunch.com/2010/02/24/yelp-class-action-lawsuit/

by apowell • 16 years ago

90 52 16 years ago

aresant4• 16 years ago

Where there's smoke, there's fire - I think at this point Yelp is going to wind up paying out some bucks, but will likely refine their internal sales process.

jeff184• 16 years ago

"Where there's smoke, there's fire"

That's the mantra of conspiracy theorists, UFO forums, and Bigfoot communities. Let's give Yelp the benefit of the doubt before we assume that they are illegally extorting small businesses based on no public evidence.

andrewljohnson2• 16 years ago

There is a lot of smoke here, and by smoke I mean business owners saying this is true and multiple law firms circling. This is getting ugly for Yelp.

CoachRufus87• 16 years ago

zing! should've taken that acquisition when they had the chance. "what's done in the dark eventually comes to light"

jmtame2• 16 years ago

this is nothing new. google "yelp extortion".. has been going on for quite a while

dpifke2• 16 years ago

For all we know, the fact that this lawsuit was coming could have come out during the acquisition talks and could be some or all of the reason they were called off.

If the acquisition had gone through, this suit - regardless of merit - would have been a huge PR black eye for Google. Similar anger/distrust has been leveled at them by small businesses regarding search results placement and AdWords.

NEPatriot• 16 years ago

They have enough cash to beat out an animal hospital in a fight of attrition...

Worst case they blame the one sales rep (this is not yelp company policy blah blah), pay up, and promise to play nice in the future.

jonknee3• 16 years ago

Except the animal hospital isn't the only one who's made similar accusations. If lots of parties join the class action it could get expensive quickly.

vegashacker2• 16 years ago

The allegations are demonstrably false, since many businesses that advertise on Yelp have both negative and positive reviews.

I don't see how that demonstrates the allegations are false. It demonstrates that there must not have been an extortion scheme that every business paid into.

Update: see mustpax's comment. Yelp is making a statement about businesses which have paid them.

mustpax• 16 years ago

since many businesses that advertise on Yelp

They are talking about the business that have already "shelled out." They still have negative comments posted, so they can't be removing all of them by paying. Or, so claims Yelp.

vegashacker2• 16 years ago

Ah, I see. That makes a little more sense then.

ellyagg• 16 years ago

That, plus they obviously they wouldn't alter or remove all bad reviews. That would be brain-deadeningly obvious.

ryanhuff• 16 years ago

I personally know of somebody who had their review deleted on Citysearch. She felt violated. If Citysearch does it, I wouldn't be surprised if their competitors do the same.

drunkpotato• 16 years ago

I've heard they treat their reviewers pretty badly, as well. Warning: this is anecdotal and only one reviewer. He was pressured to stop writing anything negative at all about certain restaurants until he quit reviewing for them altogether. If that is how they treat volunteer reviewers, I imagine it's worse for paid staff.

In any case, I have enough bad feelings and stories about them to not trust anything Yelp publishes.

jeff184• 16 years ago

Everyone is a "volunteer reviewer" on Yelp. That's how the site works. If Yelp actually told this guy to stop writing reviews, he should post the email and it would be #1 on Hacker News, etc.

relme• 16 years ago

http://www.yelp.com/myths

fnid2• 16 years ago

Yes, that's a credible source.

jeff184• 16 years ago

Yelp does not need to extort people to be insanely successful. It would be a pretty bad move, given that if they did actually do this, someone could:

a) Simply print out the email where Yelp explicitly extorted them.

b) Record the phone call using Google Voice or whatever, where Yelp explicitly extorted them via the phone.

c) Save the hardcopy of the letter or fax where Yelp mailed them the extortion offer.

Those are the only ways Yelp communicates. It would be trivial for one of the millions of companies in Yelp's directory to blow the whistle with concrete evidence. Yelp, an extraordinarily valuable company, would be pretty much ruined overnight. Why would they run this risk to squeeze out a few extra bucks?

jonknee3• 16 years ago

> Why would they run this risk to squeeze out a few extra bucks?

You must not hang out with enough sales people. Companies do irrational things for short term gains all the time. See Wall Street for a recent example.

jeff184• 16 years ago

That's not exactly my point.

Yelp has many easy opportunities to be a shady company and raise its profit margins in ways that are 100% invisible. For example, they could claim that an ad impression got twice as many views as it actually did and there would be no way to call them on it other than a few internal potential whistleblowers.

However, running a blatant extortion scheme where there is inherently a huge paper trail is not one of those things. Any one of the millions of businesses could become a whistleblower simply by posting an email to Hacker News, and Yelp would go from a near billion dollar company to a fraction of that.

It saddens me that if someone accused my startup of doing something absolutely atrocious, illegal, and irrational, instead of giving me the benefit of the doubt, it looks like Hacker News would actually say "where there's smoke there's fire" and start to rationalize how I am likely guilty given zero evidence.

_delirium• 16 years ago

The business owners I've heard complaining don't usually allege that it was explicit extortion (or they would, as you point out, just record it and stick it online), but many feel like the unsolicited communications from Yelp asking if they'd like to pay have an extortiony feeling, sort of: nice Yelp ratings you've got there, I bet you'd love to keep them, eh?

The step that's of course hard to prove is whether it makes any difference if the owners pay or not. Many feel that it does--- that things like results ordering, review ordering, which reviews are highlighted, etc., depend in subtle ways on who's paying vs. not. Even if that isn't true, the fact that it's kind of hard to tell why Yelp is displaying things the way it does feeds that sort of perception.

dpifke2• 16 years ago

Yelp could do a itself a huge favor by becoming more transparent about its so-called "Review Filter." All it needs is a "show all" link somewhere on the page showing the supposedly suspicious reviews that were deleted by the filter, along with a list of reviews (maybe just the author name and/or first sentence) that were deleted by the author or by Yelp staff due to a TOS violation.

Yelp claims editorial is completely uninfluenced by the sales team, businesses claim otherwise. Put the data out there and let people decide for themselves.

dasil003• 16 years ago

I'm curious about the law here. What is the threshold for extortion? Seems to me that despite Yelp being pretty shady, modifying the appearance of UGC on their site seems like it might not rise to the level of extortion. After all they are not writing these reviews or encouraging them in any way. We don't even necessarily know if they are deleting them or just reordering or what.

jonbishop4• 16 years ago

I am a former Yelp Account Executive; I was one of the people that would call these businesses. I have both positive and negative feelings about Yelp. It was a short stint (November 07 to March 08) because I wasn't very good at the job as I hated the work (though the company itself is fantastic) and didn't believe in the product we were selling.

Account Executives (and pretty sure everyone in the sales division all the way up to the VP of Sales) had no direct way of removing reviews (and I strongly believe this has not changed). When I was there, the only way for an Account Executive to have a review removed was to email customer service and provide a solid explanation as to why it violated the review guidelines. And I can tell you that many times it wasn't easy; customer service had strict guidelines to follow and I (and my friends) had plenty of arguments that went nowhere. Theoretically, an Account executive could make friends with a customer service rep or someone on the development team and try to persuade them to remove a review, but this is highly unlikely because if found out, everyone involved would be fired (so there's a huge risk) and I can tell you from personal experience, removing a few reviews is not going to make or break a sale (so it's not worth the risk).

While it was a (sometimes extremely) frustrating process, I feel it speaks to how the executives of Yelp really do believe in the integrity of their review guidelines.

As for reviews being deleted, I can tell you that in many of those instances, the review has been put in a "purgatory" where the system waits until it receives a signal that the review is not actually spam to let it surface back up to users. This happens to both positive and negative reviews; there is no scam going on here to hide negative reviews for businesses that pay and positive reviews for businesses that don't.

Why isn't Yelp more transparent about this process and their algorithm? For the same reason Google isn't transparent about their algorithm - to prevent gaming the system.

With the frequently repeated story of business owners being told that their negative reviews will be removed, I believe it comes down to a misunderstanding of the sales pitch (the majority of the time). One of the key points of the sales pitch involved moving a positive review to the top of the review order where a positive review would stay for the duration of the contract. This was especially effective for completing a sale if there was a negative review on top ("the first review your customers see will always be a positive one"). So if a business became a Yelp advertiser, the review order would change, but only with that one review that was moved to the very top. No reviews were deleted or otherwise manipulated.

Why do I believe it's a misunderstanding on the business owner's part far more often than a mistaken or even purposeful effort by the Account Executive? For one, Yelp is pretty damn serious about their rep and will fire anyone caught doing this on purpose right away. Also, Yelp's training was good when I was there and has become phenomenal since I left so I don't see many mistakes happening. Finally, and I'm not going to butter this up, there are a LOT of business owners out there who don't understand the web and plenty who are just plain dumb (Just because you own a business, doesn't mean you should). the majority of businesses we called are one off restaurants/bars (just look at the majority of restaurant websites), little retail stores or one man service shops.

Yelp is about the customer first and businesses second; because of this, there are always going to be business owners who feel screwed. With all that said, though, I feel that this latest lawsuit speaks to a huge problem that is only going to get bigger for Yelp as it gets closer to an IPO unless they significantly change their business pitch.

jonbishop4• 16 years ago

I should add that while a lot could have changed since I left, I still speak to people there occasionally and strongly believe that not much has changed (especially with regard to Account Executives' ability to remove reviews and the spam algorithm).

ahi2• 16 years ago

"One of the key points of the sales pitch involved moving a positive review to the top of the review order where a positive review would stay for the duration of the contract. This was especially effective for completing a sale if there was a negative review on top ("the first review your customers see will always be a positive one"). So if a business became a Yelp advertiser, the review order would change, but only with that one review that was moved to the very top. No reviews were deleted or otherwise manipulated."

That's probably enough to give this case legs. IANAL but have been party to an unfair business practices lawsuit, and it's very easy to step in it.

aresant4• 16 years ago

In study-after-study of bite sized content and consumer behavior, the "above the fold" and top of the page receives more of the user's attention.

For instance rumor is 70%+ of clicks on google go to the top 5 results.

jonbishop4• 16 years ago

From the techcrunch article: "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."

Yelp doesn't remove reviews and reviews themselves aren't modified; simply one positive review is moved to the top. You could argue that by moving the positive review to the top, that in turn modifies the order of other reviews (positive and negative), but seems like very shaky ground for the case to stand on. Of course, I'm no lawyer, so take this all with a grain of salt.

Or are you pointing out the loose quote I posted ("the first review your customers see will always be a positive one") is what will give the case legs?

waxpancake• 16 years ago

The promoted review is clearly marked, with both messages that say "This business is a Yelp Sponsor" and "One of the Business' Favorite Reviews." If it was unmarked, this would be a problem, but there's absolutely nothing deceptive about it. Example: http://www.yelp.com/biz/addys-sandwich-bar-portland

tedunangst2• 16 years ago

Account Execs being unable to delete reviews does not mean that account execs are unable to tell customers that they can.

"Give us money or bad things will happen" is a shakedown, regardless of whether bad things can or will happen.

jonbishop4• 16 years ago

Not sure if you read the section below that where I talked about the part of the pitch that I feel is responsible for these issues. I don't rule out that a Account Exec wouldn't say something like that, but from my experience, Yelp is very serious about such instances and will most likely fire somebody who does that immediately. I say most likely because even with their exceptional training, people do make mistakes and that person might be able to convince Yelp it was unintentional - then again, I wouldn't be surprised if Yelp is at the point where they would fire somebody even if it were accidental.

There very easily could be an exception, especially with the number of Account execs they have right now, but it's clear from the very start of training to making actual calls that such actions will not be tolerated.

ilamont• 16 years ago

Sorry to have to ask this question, but can you show any proof that you worked at Yelp as an account executive or that these processes are in place?

grellas• 16 years ago

Based on your account, and a glance at the complaint, I look at this lawsuit with a skeptical eye (doesn't mean it isn't valid, but I wonder).

Why?

The complaint alleges one actual incident of alleged wrongdoing, most occurring within the past few weeks. The rest of the allegations are based entirely on complaints reported in news accounts, meaning that the plaintiff's lawyers basically pasted hearsay statements into their legal document. When this is coupled with the fact that their entire legal theory of the case consists of three paragraphs alleging violation of California's unfair competition law, Bus. & Prof. Code 17200, I think it is fair to say that this filing is pretty superficial.

The complaint alleges that "negative reviews would be removed or relocated" for the benefit of advertisers but waters this down by saying "or those pages would otherwise be favorably manipulated, including through [the advertiser's] own input or control." This allegation would literally be true in light of Yelp's business practice (as you put it) of allowing an advertiser to move one favorable review to the top of the review order but, though true, may also be irrelevant unless it is first determined whether the particular business practice of moving one review up is in itself illegal. The remaining allegation that advertisers were threatened is also hedged with the qualifier "implicitly or expressly," which may mean that no overt threats were made and may (of more significance to the class action issue) involve scattered incidents as opposed to company-sanctioned policy.

This story has been out for about a year. Within the very recent past, Yelp just raised another $25M from sophisticated investors. Those investors certainly looked into these issues deeply in due diligence (including the legal issue whether moving one favorable review to top position violated unfair competition laws) and yet still felt comfortable investing. My guess is that this fact suggests that the practices engaged in here were not so systematic as to constitute company policy. Such practices, if they did exist at that systematic level, would be far too easy to expose, if nothing else simply by getting statements from former Yelp employees. Investors are not stupid and would almost certainly have not invested in that type of extreme situation.

This would suggest a flawed sales pitch, as you mention, rather than systematic malevolent company policy. If that guess is right, then Yelp will likely have to change that pitch and may even have to pay out nuisance money in time to settle this action. But it will likely not be more than that. And that is probably the calculus the investors took into account in deciding to plunk their $25M into Yelp in recent weeks.

A lawsuit, of course, must stand or fall on its own merits, but the surface indicators here suggest that this is a comparatively weak case and not a strong one.

jrockway• 16 years ago

Even when they stop doing this, businesses will still get mad. They are mad that one bad employee can mistreat one customer, and the Whole Internet will hear about it (because Yelp is actually popular). The extortion claim is the only way to get Yelp into court.

In the end, the local businesses will lose. And I think that's a good thing; they should hire good employees and provide good customer service! I'm glad that Yelp can make some money off their indifference.

dan_the_welder• 16 years ago

Well, on the other side of it. It only takes one bad customer having a bad day to shit all over your business. Some people are crazy and vindictive. Like the guy who reported me to the Consumer Product Safety Commission on fictitious grounds because I refused to be extorted.

martian• 16 years ago

As a general user, I love Yelp. But I also have friends who run retail stores, and they have reported feeling violated by the Yelp process, which suddenly has a very large say in the success or failure of the business. There is no "opt-in" option for retail stores, rather, those stores have to pay to "manage" their listing. If Yelp were opt-in rather than opt-out, I suspect they would have never had a lawsuit. (I know this would change a lot of Yelp's site, though, so not sure how feasible it'd be.)

willwagner• 16 years ago

Is there a way for a business to get themselves delisted from Yelp (either manually or in a robots.txt automated way)?

qeorge• 16 years ago

I doubt it, and honestly I don't think there should be. Businesses can't be allowed to censor what is said about them at will.

Yelp may be a flawed implementation, but the concept is sound.

mothaiba• 16 years ago

Yelp's doing a lot of us a favor by aggregating the conversation. Those conversations are happening elsewhere regardless. Is it all that different from what HN does?

gxs• 16 years ago

The article below was sumbitted to HN a while back- rather interesting.

Backstory: The East Bay Express published a story criticizing Yelp and accusing them of extortion. Yelp CEO responds, criticizing the article's use of anonymous sources and general accusations. The article below is a response to the CEO's using named sources along with very specific accusations of what yelp did wrong.

http://www.eastbayexpress.com/eastbay/yelp-extortion-allegat...

*this is not the same article linked to in the OPs post.

sidbatra• 16 years ago

Perhaps, we should wait for Yelp to give their side of the story before hanging them a-priori. Perhaps a runaway sales account exec couldn't meet his/her targets and got cheeky.

Yelp Hit With Class Action Lawsuit For Running An “Extortion Scheme”

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