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Yelp Facing Class Action Lawsuit Over Review Policies

August 7, 2014 - Written By Jeremiah Nelson

Yelp has been under fire in the past about their review system. Some business owners claim that they let fake negative reviews stay on the site with the purpose of squeezing more advertising dollars from those businesses. Those business owners are so convinced of Yelp’s guilt that they have filed a class action lawsuit against the company. The lawsuit was filed in San Francisco today.

In the class action filing, Joseph Curry, speaking on behalf of Yelp’s shareholders, claims the company lied about their business practices to investors to try to increase Yelp’s stock prices. Yelp states that it uses algorithms to screen for fake postings and remove them, leaving only the “first hand reviews” that are reliable. The class action suit claims that Yelp actually left those fake reviews in place after they spotted them. “Algorithms purportedly designed to screen unreliable reviews did not comprehensively do so, and instead, the Company allowed such unreliable reviews to remain prominent while the Company tried to sell services designed to suppress negative reviews or make them go away.”

Business owners have long claimed that Yelp used negative reviews to try to get more money from them, but the company claims that they have never done that. If this lawsuit is proven to be true, it would confirm suspicions. The lawsuit doesn’t point to any conclusive evidence, however, only pointing out that business owners have complained about Yelp’s supposed tactics. The suit also claims that company executives sold their stock when it was at a high point in February. The stock price crashed right after their sale of it, based on some of the negative information the FTC received about the company. There are tons of complaints that have been sent to the FTC, but that doesn’t prove that Yelp has done anything wrong. Even so, if they settle this suit out of court, some will claim that they are admitting guilt.

The actually laws that the suit claims Yelp broke are securities laws put in place to prevent fraud in the marketplace. The allegations are serious. The class action suit has been posted on Scribd if you want to check it out. Do you trust Yelp?