Ninth Circuit Knocks Down Unfair Competition Case against Yelp!

YelpFor those few of you who don’t know already, Yelp! (“Yelp”) is a wildly popular website where people can share their reviews, opinions, experiences, and ratings of businesses across the country.  This service is invaluable when investigating new restaurants, dog walkers, dry cleaners, etc.  However, it is important to take the reviews with a grain of salt because, no matter how great a store is, there will always be a few disgruntled customers, and, reportedly, it is becoming more and more common for competitors to post fake negative reviews and for employees to post fake positive reviews.

Recently, in Levitt v. Yelp!, Inc., a group of small business owners took the issue of online review manipulation one step further and alleged that Yelp itself was manipulating the reviews in an attempt to extort the businesses into purchasing ads. According to the plaintiffs, Yelp offered advertising services to the plaintiffs and, when the plaintiffs failed to purchase those services, suddenly the positive reviews of their businesses disappeared and the negative reviews received much higher prominence. The businesses brought a class action against Yelp in the Northern District of California, claiming that that Yelp had engaged in extortionate behavior in violation of California’s unfair competition law.  The district court dismissed the complaint for failure to state a claim and, last month, the Ninth Circuit affirmed.

According to the Ninth Circuit, in order to show that Yelp’s alleged extortionate acts were an “unlawful or unfair business practice” under the California unfair competition law, the businesses must show that Yelp “wrongfully threatened economic loss by manipulating user reviews.” This would require that the plaintiffs either “had a pre-existing right to be free from the threatened harm, or that [Yelp] had no right to seek payment for the service offered.”  However, according to the Ninth Circuit, businesses have “no pre-existing right to have positive reviews appear on Yelp’s website” and Yelp can “post and arrange actual user reviews on its website as it sees fit.”  Since Yelp is free to select and order user reviews as it pleases and, since it also “has the right to charge for legitimate advertising services, the threat of economic harm that Yelp leveraged is, at most, hard bargaining.”

The Ninth Circuit’s decision sets a high bar for businesses to recover when they feel they have been cheated or manipulated by user review sites.  However, the court did note that it was not saying that “no cause of action exists that would cover [Yelp’s alleged] conduct,” just that the extortion-based theory the plaintiffs pursued in this case failed.

Thus, the court left open the possibility that, with some creative lawyering, a similar case could succeed. We have previously written about a case that may fit this profile, brought by a Massachusetts attorney against the “Ripoff Report.” In that case, Goren v. Xcentric Ventures LLC, the District of Massachusetts held that the Ripoff Report’s refusal to remove a defamatory review, while simultaneously promoting services that the defamed party could use to restore the damage caused by the review, could be a violation of the Massachusetts Consumer Protection Act.  Summary judgment motions in that case are under advisement.

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