Yelp Hit With Class Action Lawsuit For Running An "Extortion Scheme"

Two law firms, Beck & Lee from Miami and The Weston Firm in San Diego, have filed a class action lawsuit in Los Angeles federal court alleging unfair business practices by local business review and rating website operator Yelp.

The plaintiff in the suit, a veterinary hospital in Long Beach, CA, is said to have requested that Yelp remove a negative review from the website, which was allegedly refused by the San Francisco startup, after which its sales representatives repeatedly contacted the hospital demanding payments of roughly $300 per month in exchange for hiding or deleting the review.

Sounds familiar, you say?

You may be thinking of last year, when East Bay Express ran an explosive story, basically accusing Yelp of being in the ‘Business of Extortion 2.0’, which covered similar ground. Shortly after reporter Kathleen Richards published the article, Yelp vehemently denied everything and called her piece inaccurate.

Now, the company will have to defend itself in court rather than on its company blog.

The lawsuit essentially alleges that the heavily funded startup runs an “extortion scheme” and has “unscrupulous sales practices” in place to generate revenue, in which the company‚Äôs employees call businesses demanding monthly payments in the guise of advertising contracts, in exchange for removing or modifying negative reviews.

The case, which is styled Cats and Dogs Animal Hospital Inc. v. Yelp Inc., was filed on February 23, 2010, and is pending in the U.S. District Court for the Central District of California. We have an e-mail in with Yelp and are awaiting a response.

Update: a Yelp representative commented as follows:

Yelp provides a valuable service to millions of consumers and businesses based on our trusted content. The allegations are demonstrably false, since many businesses that advertise on Yelp have both negative and positive reviews. These businesses realize that both kinds of feedback provide authenticity and value. Running a good business is hard; filing a lawsuit is easy. While we haven’t seen the suit in question, we will dispute it aggressively.

The class action lawsuit comes mere weeks after Yelp took a large investment from Elevation Partners, and months after we reported the company walked away from a $550 million Google acquisition deal.

(Image via Gawker)