9th Circuit Tosses Claim Yelp Extorted Businesses
(CN) - California business owners failed to show that Yelp attempted to extort advertising money from them by manipulating online reviews, the 9th Circuit ruled.
Boris Levitt, Cats and Dogs Animal Hospital Inc., John Mercurio and Dr. Tracy Chan alleged in a class action that the popular online review site fiddled with user-generated reviews and even wrote its own negative third-party reviews to convince them to buy advertising for their business.
The business owners charged Yelp with civil extortion, attempted civil extortion, and violations of California's Unfair Competition Law in San Francisco federal court.
Levitt, owner of Renaissance Restoration, claimed, among other things, that two days after he refused to purchase advertising from Yelp, several five-star reviews disappeared from his business' page on the site.
He argued that Yelp removed the positive reviews as a "threat to induce him to purchase advertising," according to the ruling.
Santa Barbara-based Cats and Dogs Animal Hospital said that it started to get "high-pressure" sales calls from Yelp shortly after it had received two negative reviews on the site. The company claims that Yelp offered to "hide" the negative reviews if the hospital purchased advertising. Yelp allegedly re-posted the negative reviews to "instill fear" and induce Cats and Dogs to advertise when it declined.
Mercurio, the owner of an auto-body shop called Wheel Techniques, said that Yelp posted "false reviews" to get him to advertise, and Chan, a dentist, claimed that "Yelp removed nine 5-star reviews" from her page after she refused to advertise, the ruling states. After Chan gave in and signed an advertising contract with Yelp, her overall rating increased to four stars and several five-stars reviews were re-posted, she said.
Yelp denied the allegations, and U.S. District Judge Edward Chen dismissed the case in San Francisco for failure to state a proper claim.
A unanimous appellate panel affirmed on Tuesday.
Yelp's alleged conduct cannot be called extortion because its "manipulation of user reviews, assuming it occurred, was not wrongful use of economic fear, and, second, ... business owners pled insufficient facts to make out a plausible claim that Yelp authored negative reviews of their businesses," the three-judge panel found.
"In sum, to state a claim of economic extortion under both federal and California law, a litigant must demonstrate either that he had a pre-existing right to be free from the threatened harm, or that the defendant had no right to seek payment for the service offered," wrote Judge Marsha Berzon for the three-judge appellate panel. "Any less stringent standard would transform a wide variety of legally acceptable business dealings into extortion."
"Given these stringent requirements, the business owners in this case failed sufficiently to allege that Yelp wrongfully threatened economic loss by manipulating user reviews," Berzon added. (Emphasis in original.)
Vince Sollitto, Yelp's VP of corporate communications and government affairs, said Tuesday that the company is pleased with the ruling.
"We have always said the claims were without merit and we are pleased the courts continue to agree," he said.
Lawrence Murray, of Murray & Associates in San Francisco, represented the businesses. He did not immediately return a request for comment.