SAN FRANCISCO (CBS/AP) — A federal judge who dismissed a class-action lawsuit accusing consumer review website Yelp of extortion is giving plaintiffs a month to refile their complaint.

Judge Marilyn Hall Patel ruled last week that the original suit failed to back up small business owners’ claims that Yelp was manipulating user reviews to force them to advertise on the site.

Plaintiffs claimed that negative reviews reappeared after they refused to buy advertising. They alleged account executives with the San Francisco-based company said they could control which reviews appeared if businesses bought ads.

Yelp denied the claims and said the business owners misunderstood how the site works. The company says the site automatically filters reviews that appear untrustworthy, such as those from competitors or the businesses themselves.

“Plaintiffs do not appear to argue that Yelp ever explicitly threatened to harm their businesses, through manipulating user reviews, if they refused to purchase advertising,” Patel wrote in her order to dismiss. Instead, she writes that the plaintiffs alleged actions by Yelp that implied a threat.

“These theories of extortion … are insufficient to survive a motion to dismiss,” she wrote.

Plaintiffs have 30 days to refile. Messages left with the lead attorney for plaintiffs were not immediately returned.

Several lawsuits that were brought together in the class action were filed early last year. They followed on the heels of a lengthy 2009 expose in the East Bay Express, a San Francisco Bay area alternative weekly, that detailed gripes of local business owners who said they had come under pressure from the site’s ad sales representatives.

The first suit was filed by the owner of a Long Beach animal hospital who said he started getting calls from Yelp after users had left negative reviews. The owner said he was told that if he advertised Yelp would hide or lower negative reviews on his page and let him choose the order of the reviews.

In response, Yelp CEO Jeremy Stoppelman wrote on the website’s blog that advertisers don’t receive preferential treatment.

“The allegations are disappointing, not only because they are false, but because they ignore empirical evidence in favor of conspiracy theories,” he wrote.

Since the first lawsuit was filed in February 2010, Yelp’s monthly traffic has nearly doubled from 28 million monthly visitors to 50 million, the company said in a statement responding to the suit’s dismissal.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services may have contributed to this report.)

Comments (11)
  1. JaneQPublic says:

    FYI: Anyone using the Yelp site knows that you can choose what order to look at the reviews. You can look at them according to DATE, RATING, etc.

    Implied threat? Speculative ‘damages’? This ‘lawsuit’ sounds silly to me.

  2. Mike says:

    This is unfortunante. Sounds like the couldn’t ‘prove’ extortion was happening. It is. A few of my clients experienced Yelp saying they would remove negative reviews if they spent $200/year in advertising with Yelp.

  3. Mike says:

    This is unfortunate. Sounds like the couldn’t ‘prove’ extortion was happening. It is. A few of my clients experienced Yelp saying they would remove negative reviews if they spent $200/year in advertising with Yelp.

  4. Lis Golden Mckinley says:

    I am a new business owner based in the SF/Bay Area. I worked very hard to build my business over the past two years and when I received my first three reviews, all 5 stars, I was elated, that is until YELP removed them (they call it filtering). I contacted the Marketing Director, who I happened to have met two years ago at a technology conference, when I didn’t get any satisfaction from their “customer service” department. She more or less repeated the same excuse for why my reviews were no longer visible, basically, that YELP’s algorithm is set up to filter YELP users who are not a member of the YELP community – in other words people who don’t regularly review the site. She said this is done to “protect” consumers and the YELP community from gamers and spammers. She added that no one at YELP has any control over this which I find surprising considering it is programmers who create these algorithms in the first place. I was suspicious of YELP two years ago when I first started reading the bad press about them and now my suspicions (and worst fears as a business owner) are confirmed.

  5. Peter says:

    I agree with MIKE. It is unfortunate that this Judge has come to the conclusion she has. Just the number of complaints alone should be enough to prove the case. I too am a business owner who was told that If I purchased $300 per month of advertising that I could move my negative reviews to were they would not be scene. Maybe yelp has fixed this but they continue to remove good reviews and leave bad ones. I believe they need to re-think theri process and make in more fair to a business. The reality is a person is much more likely to write a negative review than post a positive one. If a company is doing such a good job that they are getting positive reviews, Yelp should leave them alone. They have done enough damage to my company that I will never advertise with them and anybody that does is crazy. Oh yeah YELP has enough money. I wondere if we look into the JUDGES bank records if we will find a pay off. Remember this is YELPS way of doing business (Dishonestly)