Courtesy of gobblr.com

Wanna know a secret?  I’m Yelp Elite.  In fact, I’ve been so since 2006.  (Be jealous.)  I stumbled upon the website one day while trying to find some new restaurants and quickly learned that it’s not only a great reference point, but seriously amusing.   Since then, Yelp slowly became a fun hobby of mine – posting reviews and pictures of hotels, restaurants, spas, etc.  It’s almost therapeutic for me, in some way.  So, imagine my shock when I heard that my beloved website was served with a lawsuit, alleging *gasp* extortion.

Extortion, eh?  ”The crime of obtaining money or some other thing of value by the abuse of one’s office or authority.“  Whenever I hear that word, the mob and politicians come to mind — or, even the David Letterman story.  But, Yelp certainly does NOT come to mind.

So what’s the deal with the lawsuit?  Well, Cats and Dogs Animal Hospital in Long Beach is accusing Yelp employees of using high-pressure sales tactics to entice business owners to pay Yelp for an advertising contract.  According to TechCrunch, a “sales representatives [allegedly] repeatedly contacted the hospital demanding payments of roughly $300 per month in exchange for hiding or deleting the review.” When Cats and Dogs declined to pay the price, the hospital claims that a (potentially fraudulent) negative review popped up the next day, and Yelp refused to remove it.

If Yelp actually is calling businesses and offering to remove negative comments at a cost, then it’s safe to say that that would be considered an unethical business practice. In fact, there are other internet businesses out there, like Rip-Off Report, that claim to provide consumers with an honest forum to praise or vent about businesses, but apparently apart of their business model allows companies to “pay away” negative comments.

Since Yelp’s tag line is “Real People, Real Reviews” and the idea is to encourage users to submit realistic reviews about businesses, Cats and Dogs request to remove its negative reviews, in an effort to make it appear that there have never been any complaints, may seem suspicious to some. As an avid Yelp user that’s written my fair share of negative reviews, those critiques from consumers can be legitimate.  Example here. Most of the time reviewers are not trying to be malicious; instead, they are letting other potential customers know about their experience and what to expect.

In response, Yelp’s CEO, Jeremy Stoppleman, issued this statement, calling the allegations “false and easily refuted”.  Stoppleman also implied that since the lawsuit was conjured up by law firms, they just might be interested in claiming a portion of the huge funding that Yelp recently received.    He also points out here that a pretty good segregation of duties exists regarding Yelp’s Account Execs”

“We take the church/state separation thing seriously. Sales representatives (also known as Account Executives or “AEs”) cannot write reviews on Yelp. This is clearly communicated internally, and employees within the sales department are trained and re-trained that any deviation from these high standards would result in their termination.”

Additionally, Yelp’s business model is much like the business model of Facebook, in that it generates a large portion of its revenue based on the amount of ads/ad contracts sold.  Even though the majority of their revenue comes from advertisement on the site, it would seem to be both illegal and unethical for them to exert resources to devise a plan of internally creating negative business reviews to extort businesses for the removal of those reviews.

What’s your take on the lawsuit?  Does it seem like a legitimate extortion scheme at its finest?  Or, is the lawsuit merely a way for businesses to blame Yelp for all their negative reviews?

Posted by Melanie on March 11, 2010 at XYZ TIME.