Ninth Circuit Affirms That Yelp! Can Use Hardball Sales Tactics To Sell Advertising To Businesses

Author: Scripta Ad Astra Staff

On Tuesday, the Ninth Circuit affirmed a district court ruling in Levitt v. Yelp! Inc. dismissing an action by a group of small businesses that Yelp! extorted, or used extortionate sales tactics, to induce small businesses to purchase advertising with Yelp! in violation of the federal Hobbs Act (civil extortion) and the California Unfair Competition Law. The plaintiffs generally claimed that Yelp! sales people contacted them about purchasing advertising services in connection with their Yelp! pages. When the plaintiffs declined to purchase the advertising, the plaintiffs alleged that Yelp! manipulated its service to lead to a downgrade in the businesses ratings. The plaintiffs alleged that such tactics included removing positive reviews, re-posting negative reviews that had previously been taken down, allowing more negative reviews to appear first, and even authored negative reviews.

Judge Marsha S. Berzon, writing for the Court, found that Yelp!’s tactics, while certainly could be considered “hard-bargaining,” did not amount to civil extortion because “a litigant must demonstrate either that he had a pre-existing right to be free from the threatened harm, or that the defendant had no right to seek payment for the service offered.” In short, the plaintiffs had to show that Yelp! had no right to manipulate its own ratings algorithms to plaintiff’s detriment or that Yelp! had no right to seek payment for its advertising services.

The Court stated that the businesses had no pre-existing right to be on Yelp! or to have positive reviews. Moreover, because the website and review service belongs to Yelp!, it has not obligation to provide all, or even any, reviews of the businesses as “Yelp [would be] withholding a benefit that Yelp makes possible and maintains.” In short, the review service that Yelp! provides is its own service; it can do what it wants with it, even manipulate the review process. Asking businesses to pay Yelp! for more favorable treatment is not extortion because Yelp! had a right to control its own processes.

With respect to the allegation that Yelp! purposefully authored negative reviews, the Court found that the plaintiffs were unable to point to any evidence suggesting that Yelp! engaged in those practices as the posts a generally anonymous due to the use of screen names.

What does this opinion mean? It means that Yelp! is a business and the fact that it is on the Internet changes nothing. While many see the Internet as a public good, the services that are provided on the Internet most certainly are not. You are not entitled to use Yelp! or any other online service and that can be swiftly taken away because you are always using those products under their terms.

With that in mind, businesses should be wary about their actions on the Internet and to be cautious about the level of trust they place in Internet companies. In addition to being cognizant of a product’s terms of service think about ways that use of the service could go awry. The Internet feels like a public domain, but it is full of for-profit businesses, just like the real world and you should be as wary of a for-profit website as you would be of a brick-and-mortar business.
Ad Astra Law Group, LLP

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