California Court Rules That Yelp Can Add And Remove Reviews Based On Ad Purchases

In a controversial move, the U.S. 9th Circuit Court of Appeals ruled that Yelp has the legal right to offer businesses the incentive of having their negative reviews lowered in exchange for purchasing ad space on its website. As we reported previously, Â this ruling comes as the result of a lawsuit issued by the Santa Barbara, California-based Cats and Dogs animal hospital along with a few other businesses, who claimed that Yelp’s business practices were both unfair and unlawful.

In her ruling, Judge Marsha Berzon wrote that Yelp’s business model is to charge for advertising space, and that threatening to push negative reviews if a company refuses to purchase ad space may be hard bargaining, but that this practice is not illegal. “It is not unlawful for Yelp to post and sequence reviews,” wrote Berzon, who added that the plaintiffs are still free to contend harm. The court believes that Yelp is not sowing any permanent economic harm and that the owners of these businesses failed to provide sufficient evidence that tampering was occurring. While Yelp is pleased with this ruling, it’s certain that the plaintiffs and many other businesses feel that their rights are being violated and that the company is forcing their hand to purchase ads to avoid being penalized by which reviews are included on Yelp. According to Nielson and Yelp’s own reporting, 98 percent of consumers who visit businesses they find on Yelp make a purchase, illustrating the immense effect that positive and negative Yelp reviews can have on the success of a business.

This news comes as a shock to a great number of California businesses, after many complaints and concerns over Yelp’s decisions in adding and removing reviews based on ad purchases. The effect of this ruling on California-based businesses may be greatly detrimental, but legal writer Eric Goldman thinks that there is still hope for businesses who feel that their rights have been trampled by Yelp. “Plaintiffs can still chase Yelp using other claims, such as false advertising or securities fraud,” said Goldman. He continued by explaining that this ruling only deals with Yelp and extortion claims. Extortion specifically refers to the practice of obtaining something through force or threats. He thinks that it’s possible for Yelp to still find itself in a lawsuit over false advertising, fraud and anything else related to the manner in which the company handles user reviews. “Consumer review websites often try to sell services to businesses that are reviewed on their websites, which creates an implicit conflict of interest that can make businesses feel like they are being extorted,” Goldman explained.

Many industry insiders feel that this ruling gives Yelp far too much control over businesses by being able to decide which reviews are viewed by customers based on purchases of ad space, but at least for now, the California ruling stands. It’ll be very interesting to watch the situation over the coming period to see if any businesses decide to legally challenge Yelp in an alternate manner, such as claiming false advertising practices or securities fraud.