Yelp gets relief as US court dismisses lawsuit over authenticity of its reviews

The Yelp Inc. logo is seen in their offices in Chicago, Illinois, March 5, 2015. REUTERS/Jim Young/Files

Yelp Inc won the dismissal of a lawsuit by shareholders who claimed they were fraudulently misled about the authenticity and quality of its reviews, and whether Yelp manipulated those reviews to favour paying advertisers.

In a Nov. 24 decision, U.S. District Judge Jon Tigar in San Francisco said reasonable investors would understand that not all Yelp reviews are real, particularly given the company’s admission that its technology to screen user-generated content for its website is not foolproof.

The judge also found no showing of an intent to defraud, including over sales by Chief Executive Jeremy Stoppelman and other insiders of tens of millions of dollars in Yelp stock at allegedly inflated prices.

Tigar had in April dismissed an earlier version of the complaint, which sought class-action status. He said the plaintiffs cannot sue again because any amendment would be “futile.”

Yelp lets users rate restaurants and other businesses on a five-star scale. Positive reviews can aid sales and negative reviews can harm sales, especially if viewers perceive the reviews as unbiased.

Shareholders led by Joseph Curry accused Yelp of inflating its share price by falsely touting the reliability of its reviews, as part of a calculated strategy to extort businesses into buying ads or making payments in exchange for removing bad or fake reviews.

Yelp‘s share price fell 18 percent over three days in April 2014, when the Federal Trade Commission revealed 2,046 complaints over five years against the San Francisco-based company,

But the judge said only 11 of the complaints accused Yelp of offering to manipulate reviews in exchange for fees, a small number “especially when compared to the tens of millions of reviews hosted by Yelp.”

He also said Yelp‘s use of “community managers, scouts, and ambassadors” to supplement its automated screening “does not indicate that Yelp‘s directors and officers knew that any significant number of reviews were not authentic or firsthand, beyond what defendants represented to the public.”

Shawn Williams, a lawyer for the plaintiffs, did not immediately respond on Friday to requests for comment.

A Yelp spokeswoman said the company “has repeatedly stated that it does not manipulate reviews in favour of advertisers or against non-advertisers, and the court saw through plaintiffs’ attempts to cast these statements as false.”

The case is Curry et al v. Yelp Inc et al, U.S. District Court, Northern District of California, No. 14-03547.

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(Editing by Andrew Hay and Dan Grebler)

Reuters

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.