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.
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