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Yelp Just Won Another Huge Legal Battle

Disgruntled shareholders were alleging to have been swindled into paying an inflated price for equity in a company that they said intimidates restaurant owners into paying for ads.
Photo via Flickr user Patent and the Pantry

Yelp, and its legions of self-appointed food critics, have been the target of scrutiny from a pretty impressive range of detractors.

Chefs, restaurants, the Federal Trade Commission, and even South Park have had the controversial review site, and its sometimes questionable reviews, in their crosshairs for some time now, but the company continues to avoid any repercussions in the legal gray-zone of user-generated websites and mobile apps.

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READ: As a Chef, I Wish Yelp Didn't Exist

The most recent attack on Yelp has come from within, with some shareholders claiming that they were "fraudulently misled" by the company, according to a recent report by Reuters.

The disgruntled shareholders alleged to have been swindled into paying an inflated price for equity in a company that was "touting the reliability of its reviews" as part of a large scheme to "extort businesses into buying ads or making payments in exchange for removing bad or fake reviews."

Yelp responded by acknowledging the shortcomings of its site, in particular with how it screens reviewers but denied any intention of defrauding investors. This admission went a long way for US District Judge Jon Tigar who ultimately found that the shareholders' allegations were founded on "inferences of misconduct" rather than "concrete examples of Yelp's behavior" or intention to defraud.

"[M]any of the customer complaints relied on by Plaintiffs hinged on the customers' inferences of misconduct, rather than concrete examples of Yelp's behavior," Tigar wrote in his decision. "The Court concluded that these complaints failed to establish any significant pattern of misconduct tending to prove that Yelp's denials of manipulation were false."

READ: A Food Blogger Was Fined €11,000 For Writing a Fake Restaurant Review

This case is actually the second time that shareholders have brought up the issue of fraud, and the second time that the case was thrown out by Judge Tigar.

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While this isn't the first lawsuit alleging that Yelp reviewers are particularly hard on restaurants that refuse to pay for advertising, so far, no legal challenge against the company has been successful, and this most recent case falls in line with that trend.

A Yelp spokeswoman told Reuters that they are relieved by the decision. "[Yelp] has repeatedly stated that it does not manipulate reviews in favor of advertisers or against non-advertisers, and the court saw through plaintiffs' attempts to cast these statements as false."

Last year, the Wall Street Journal revealed that Yelp had been subject to 2,046 complaints, mostly from small businesses who claimed to have received "unfair or fraudulent reviews, often after turning down a pitch to advertise on the site."

Some of those complaints included testimonials like: "I was contacted by a Yelp salesperson to advertise, which I declined, and since have only had negative posts on their site." Still, the FTC ended up closing their investigation and took no action.

All of which kind of makes Yelp the John "Teflon Don" Gotti of mobile apps—despite legal challenges from all sides, nothing seems to stick.