In Yelp Extortion Lawsuit, Calif. Business Owners Lose - Free Enterprise
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In Yelp Extortion Lawsuit, Calif. Business Owners Lose

A handful of California business owners were dealt a legal loss in federal court this week on their class-action Yelp extortion lawsuit.

A veterinary hospital, a dentist, an auto-body shop owner, and a furniture restoration store owner had joined in a class action suit against Yelp, claiming the online service had violated California's unfair business practices law and had extorted them, reports Courthouse News Service. The business owners claimed that Yelp manipulated the appearance of positive or negative reviews in order to pressure the employers into purchasing advertising through its site.

Why did their Yelp extortion suit flop in federal court?

Manipulating Reviews Not Extortion

This Yelp extortion case had initially been heard in San Francisco federal court and had been dismissed for failure to state a proper claim. The business owners appealed their extortion and California law claims to the 9th U.S. Circuit Court of Appeals, which unanimously agreed that the case was properly dismissed.

In its opinion in Levitt v. Yelp! Inc., the 9th Circuit determined that although Yelp denied allegations that it had removed positive ratings to strong-arm the business owners into buying ads, it wouldn't have been illegal even if they had. While threatening to pull reviews may be sleazy, "threatening economic harm to induce a person to pay for a legitimate service is not extortion," the court explained. In fact, Yelp retains the right to decide whether any particular review or even reviewer will appear on the site, regardless of ad opportunities.

California's Unfair Competition Law prevents "any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." These California businesses claimed that Yelp violated this law by acting unlawfully by extorting their businesses for ad revenue.

But extortion requires a wrongful threat of harm, and the 9th Circuit didn't buy that Yelp was in the wrong when it manipulated user reviews. It's also good to remember that these businesses had no contractual or pre-existing right to have good reviews on Yelp.

Bad Move to Sue Yelp?

With this case dismissed, it would seem that suing Yelp over reviews may not be a smart move. However, the court left open the idea that business owners could sue if they could prove that Yelp actually authored fake negative reviews. And authoring fake Yelp reviews has definitely been a killing stroke in other civil cases.

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