Local reviews site Yelp is facing some unflattering reviews of its own service.
In a class action lawsuit filed in Los Angeles federal court, the red-hot startup is accused of unfair competition and what amounts to extorting small businesses.
The plaintiff in the suit, an animal hospital in Los Angeles, alleges that after negative reviews about its business appeared on Yelp, sales representatives from the company called and said that for $300 per month, they could make the ads disappear.
Don’t be surprised if this sounds familiar. In a lengthy article last year, the East Bay Express leveled similar charges against the company. But in an interview with the FT, Yelp chief executive Jeremy Stoppelman flatly denied the claims.
At the core of the suit is the accusation that Yelp manually adjusts the reviews of its advertisers, promoting favourable ones and demoting negative ones. And while only the animal hospital is named as a plaintiff, the suit cites the numerous examples from the East Bay Express articles as other examples of similar misconduct by Yelp.
It was relatively easy for Yelp to brush off these criticisims last year. It has enjoyed a spectacular run, attracting millions of users and terrific buzz. But now it may have to defend itself in court.
At a moment like this, one can’t help but wonder if the executives at Yelp wish they had sealed that deal with Google. (After reportedly walking away from a half-billion dollars, Yelp took a substantial investment from Elevation Partners.)
Instead, Yelp will be on its own as it finds itself in a bit of a role reversal — trying to convince the authorities that the reviews about its service are not true, and that it shouldn’t have to pay to make the problem go away.
