Wednesday, March 17, 2010

Bay Area Businesses Join Yelp Lawsuit

By Kathleen Richards
Wed, Mar 17, 2010 at 11:06 AM

Eight businesses have joined a class-action lawsuit against Yelp, including three Bay Area-based companies — Sofa Outlet of San Mateo, Astro Appliance Serviceof San Carlos, and Mermaids Cruise of San Francisco. As we previously reported, the San Francisco-based online user-review site has become the target of two recent lawsuits for alleged extortion.

In an amended complaint of the initial class-action lawsuit filed yesterday, businesses claim that positive reviews disappeared or negative ones appeared after they declined or stopped advertising with Yelp. The allegations are similar to the ones we printed in two stories about Yelp last year, and which are also quoted extensively in the lawsuit filing.

One of the most compelling cases is put forth by Mermaids Cruise. The San Francisco-based business alleges that three negative reviews were posted on the business’ Yelp page in April 2009 by members of the Yelp Elite Squad (those who have written a large number of reviews). Mermaids Cruise keeps track of all people who contact the company, regardless of whether they book a cruise. According to the owner John Lewis, at least two of the negative reviews by Yelp Elite Squad members were written by individuals who had never contacted or patronized Mermaids Cruise. When Lewis contacted Yelp to ask that the reviews be taken down since they violated Yelp’s Terms of Service (because they were not first-hand experiences), Yelp refused. Meanwhile, positive reviews of Mermaids Cruise regularly disappeared while the negative reviews continued to remain at the top of the Mermaids Cruise listing page. Shortly thereafter, Lewis received a call from a Yelp sales representative who told him that if Mermaids Cruise became a Yelp sponsor, Yelp could adjust the reviews so that the negative reviews were not so prominent.

In another case, Sofa Outlet owner Mary Seaton agreed to advertise with Yelp in January 2008 after a Yelp sales representative told her that her positive reviews would be made more prominent while negative reviews would be less prominent and eventually removed altogether. After canceling its advertising contract in June 2008, Seaton said many positive reviews disappeared, while negative reviews that had been previously removed reappeared. (We reported Seaton’s story last year.)

Finally, Astro Appliance Serviceowner Bob Gutgsell said he was contacted by a Yelp sales rep to advertise, but within two days of declining, positive reviews disappeared from his business’ Yelp page, leaving only a single negative review. When Gutgsell contacted Yelp as to why the reviews were removed, he was told that Yelp could “control” that and that the positive reviews could be restored.

Meanwhile, Yelp CEO Jeremy Stoppelman has called the claims “meritless” — arguing that “thousands of businesses that advertise on Yelp have both negative and positive reviews” and that these businesses simply lack an understanding of how Yelp works, or worse, are perpetuating a conspiracy theory.

The PDF of the amended complaint can be found here.

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