Will Yelp Make You An Offer You Can’t Refuse?

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Don’t look now, small business owner, but the courts have just issued Yelp a license to shake you down.

Not that Yelp ever has, or ever would, at least according to Yelp. But San Francisco’s 9th U.S. Circuit Court of Appeals recently signaled in Levitt v. Yelp that if in soliciting you, businessman, Yelp made it clear that maintaining your admirable star rating and positive reviews depended on how you answered the question, “Would you like to buy advertising with us?” well, the court would consider that sound business practice.

Our sister site  has covered Yelp and how one should respond to negative reviews, regarding nutty insertions that businesses insert in small print that your “liking” them on Yelp inoculates you from ever suing them for damages.

But this is the first time I can recall a court formally giving its blessing to a company’s marketing department soliciting clients with what sounds suspiciously like “an offer you can’t refuse.”

The case before the appeals course was a class-action suit comprised of small business owners who claimed that Yelp sales reps implied or stated outright that their ratings would suffer if they declined to purchase advertising, and that some favorable reviews would be removed. There were additional claims of Yelp authoring false reviews and other related practices.

Yelp has always maintained that its ratings and order of listings reviews is driven by its sophisticated algorithms formula and is totally independent from the marketing division, and that may indeed be the case. When you’re dealing with millions of businesses, a certain number of coincidental refusals to buy advertising corresponding with a drop in star rating is inevitable.

The court ruled 3-0 that the plaintiffs didn’t prove their case, which is one thing, but what made this ruling significant – and perplexing, to say the least – is Judge Marsha Berzon’s opinion that even if Yelp had overtly employed this strong-arm tactic, threatening to bury reviews and lower ratings, there was nothing wrong with doing so.

“”As Yelp has the right to charge for legitimate advertising services, the (alleged) threat of economic harm that Yelp leveraged is, at most, hard bargaining,” the judge wrote.

“Reviews” aren’t a part of Yelp’s business model. It’s ALL IT DOES. People overwhelmingly flock to Yelp for one reason only, to read reviews of businesses in order to decide who to patronize.

Yelp itself acknowledges this power, on its official blog two days before the court ruling. Ironically, it was to announce a heightened consumer alert program to insure consumers that Yelp’s reviews are almost tamper-proof.

“ A Nielson survey revealed that 82% of Yelp users visit the site when preparing to spend money at a local business, and a Harvard Study found that a 1-star increase in Yelp rating can lead to a 5 – 9% increase in revenue for a restaurant. That’s why, although the temptation may be there to cheat, it’s even more important for everyone to play by the rules.”

If the public believes Yelp reviews are “objective,” but, in fact, Yelp IS (or, given encouragement from Judge Berzon, decides to begin) threatening to “bury” businesses that don’t advertise with it, that seems to go far beyond “hard bargaining.”

As Lawrence Murray, an attorney for the plaintiffs put it, “The Mafia wishes it had this ruling,” adding, “I’ve got hundreds of people who have called me…When they stopped advertising with Yelp, their good reviews got stripped out….What does it take, to have a gun to their head? … This is extortion in any other setting.”

Let’s imagine for a minute that this was all part of Yelp’s master plan: build up a following to become the overwhelming Number 1 authoritative online site shoppers search for peer guidance, and then, after attaining that extremely influential position, use that leverage as a cudgel, threatening to take down businesses that didn’t agree to its price. It’s hard to imagine the court sanctioning such a practice. But for all we know, that could have been Yelp’s intent from the get-go.

To ward off Yelp’s perceived retribution, there are companies that are writing Yelp checks even though they’re not interested in advertising with them, This is as close to a classic definition of a “pay-off” as you can get. It also means that, while adamantly denying that it engages in such behavior, it’s actually advantageous to Yelp’s bottom line to keep that speculation alive.

Again, the court cited a lack of evidence in exonerating Yelp in this case, and Yelp denies manipulating reviews in the strongest possible terms. But if Judge Berzon’s ruling stands, next time a businessman could come into court with a recording of a gravelly voiced Yelp rep ominously grunting, “Pay up. We wouldn’t anything bad to happen to your business,” and Berzon will dismiss the case and compliment Yelp on its “hard bargaining.”

 

About Stan Sinberg

Stan is an award-winning newspaper columnist, radio commentator, and features writer whose humor has appeared in everything from the NY Times to WSJ and MAD Magazine. Stan is a native New Yorker living on the west coast. His website is www.stansinberg.com and you can email him at stan@stansinberg.com or follow him on Twitter @ssinberg1
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