The Ninth U.S. Circuit Court of Appeals in San Francisco sided with Yelp against accusations that the company is manipulating the review ratings of businesses to be able to sell advertising.
Yelp has been accused that the company gives a higher rating to businesses that purchases advertising spots, which Yelp has adamantly denied. However, even if the accusations were proven to be true, the court ruled that Yelp is allowed to set the prices for its ads, and that Yelp is not legally bound to give certain businesses a high rating.
"As Yelp has the right to charge for legitimate advertising services, the (alleged) threat of economic harm ... is, at most, hard bargaining," and not an unfair business practice or extortion, said Judge Marsha Berzon.
The appeals court upheld the decision of a federal judge to dismiss a class-action damage lawsuit that was filed by owners of small businesses that alleged Yelp's sales representatives saying that the ratings of their businesses will depend on whether or not they buy advertisements on Yelp.
"I've got hundreds of people who have called me with this problem: When they stopped advertising with Yelp, their good reviews got stripped out," said Lawrence Murray, the lawyer of the business owners that filed the lawsuit.
"What does it take, to have a gun to their head? ... This is extortion in any other setting."
According to Yelp, the accusations are simply not true, as the software that the company uses to filter incoming reviews does not distinguish between businesses that advertise and those that don't.
According to Aaron Schur, Yelp's litigation director, the company has long been receiving false accusations of tampering with business ratings for monetary gains.
However, John Mercurio, one of the plaintiffs for the lawsuit, is still considering to continue with the legal battle despite filing for personal bankruptcy.
Mercurio said that after he declined an offer for $500 per month of advertising, Yelp took down 14 five-star ratings for his car repair shop in Santa Clara, California. In addition, a 1-star rating appeared on his business listing, which was a factor in the 30 percent decrease in sales for the business.
"I can't believe they got away with it," Mercurio said of regarding the decision of the appeals court. "It's mafia of the Internet. You're basically a hostage: pay up or die."
Yelp receives 138 million visitors monthly, with the company expecting revenue of as much as $375 million this year.
