Does Yelp penalize businesses that refuse to advertise with them? Though a number of businesses claim this is the case, Yelp has vehemently denied these allegations. A recent ruling by the 9th U.S. Circuit Court of Appeals has brought this issue to the forefront once again, and their written decision provides fascinating food for thought.
Yelp is a crowd-sourced business review site, where consumers rate everything from restaurants to nail salons. It has been the center of controversy for years, for a variety of reasons. In the case at hand, several businesses filed a class-action lawsuit against Yelp for civil extortion, as well as violations of California’s Unfair Competition Law (“UCL”) and the California Business & Professions Code. There were four primary plaintiffs, from a dentist to an animal hospital.
The U.S. District Court for the Northern District of California dismissed their lawsuit, and that dismissal was appealed to the U.S. Circuit Court of Appeals for the Ninth Circuit. A three-judge panel affirmed the district court's dismissal, and the opinion was written by Judge Marsha S. Berzon. With any such court opinion, we need to understand that their decision is based only on the evidence before them, and that their decision may be narrowly applicable in a number of aspects. Reading the actual decision will help you better understand what occurred.
Contrary to some headlines, the Circuit Court did not state that Yelp has never engaged in extortion. Its ruling was far narrower, concluding only that extortion did not occur in the case of the four primary plaintiffs. However, based on the court ruling, it would be extremely difficult for any other business to successfully bring a suit for civil extortion against Yelp.
The court stated that the legal requirements to prove extortion were stringent, and that the plaintiffs failed to meet that burden. The plaintiffs didn't possess a pre-existing right to have positive reviews appear on Yelp, and this would likely apply to almost any business on Yelp. In addition, Yelp possesses the right to post, or not post, any review it chooses, whether positive or negative, and also can post them in any order it desires. This too would apply to almost any business, and not just the four primary plaintiffs.
In essence, this gives Yelp great power to manipulate user reviews, if they so desire. For example, Yelp could post only the negative reviews of a business, and choose not to publish any of the positive ones. This would not be unique to Yelp but would be applicable to any similar review site. If you check out the user reviews for a business, there is no guarantee that you are seeing all of its reviews. That is a disturbing thought, raising the issue of trust.
Based on these rulings, it would be extremely difficult for any business to bring a suit for extortion against Yelp though the court added it was still possible, "if adequately pled." However, there might be other causes of action to cover these allegations and they might possess a greater chance of success. If a business has a contract with Yelp, then there is the potential that such allegations might constitute a breach of Yelp's contractual duties. That would be dependent on the specific terms of the contract, and would vary from business to business.
Another issue raised by this suit was that two plaintiffs alleged that Yelp penned negative reviews of their businesses but the court didn't find sufficient evidence to prove these allegations. And even if Yelp had authored reviews on their own site before, that would be insufficient to prove that Yelp did so with these specific plaintiffs. Mere speculation is insufficient. Hard evidence is necessary and neither plaintiff was able to provide such.
The District Court addressed a significant issue, immunity under Section 230 of the Communications Decency Act of 1996 (“CDA”), that the Court of Appeals chose not to address, finding it unnecessary to do so. The District Court felt that even if Yelp manipulated user reviews, they were immune under the CDA from any lawsuit. Section 230 says that "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." Such immunity may be even more important that the stringent requirements to bring an extortion suit. This immunity is not absolute, but it is powerful. As an aside, it also can provide immunity to bloggers from being sued because of comments from other people made on that blog.
It seems that plaintiffs have not yet decided to appeal this decision. Based on what I have read in the decision, it doesn't seem it would be worthwhile for the plaintiffs to appeal. They seem to possess a lack of necessary evidence to prove some of the key points of their suit, and the legal requirements appear stringent enough that they are unlikely to prevail. Proving your allegations is an important aspect of any lawsuit.
Yelp may or may not manipulate reviews based on whether a business advertises with them or not. They deny doing so while others claim that they do. In the case at hand, none of the four plaintiffs proved such manipulation. However, the courts ruled Yelp could engage in such manipulation and it would not constitute extortion. Such manipulation may be legally protected, but it raises the issue of the trustworthiness of such reviews. However, more proof, beyond anecdotal assertions, is needed to indicate that such manipulation occurs. And all crowd-sourced user review sites are susceptible to this potential problem.