Legal background
In ''Levitt v. Yelp! Inc.'' (2011), Judge Edward Chen, found that removal of positive reviews, or re-ordering of reviews, fell within the Section 230 of the Communications Decency Act's "traditional editorial functions." Additionally, the firm's motive and ethical underpinnings are irrelevant under Section 230's editorializing allowance. Judge Chen concluded: "The Ninth Circuit has made it clear that the need to defend against a proliferation of lawsuits, regardless of whether the provider ultimately prevails, undermines the purpose of section 230."
This judgment was appealed, and in 2014 the Ninth Circuit Court of Appeals found that businesses do not have a pre-existing right to have positive reviews, and that "threatening economic harm to induce a person to pay" therefore was not extortion under California law. In its primary ruling, the court held that, "We conclude, first, that Yelp’s manipulation of user reviews was not wrongful use of economic fear, and, second, that the business owners pled insufficient facts to make out a plausible claim that Yelp authored negative reviews of their businesses. Accordingly, we agree with the district court that these allegations do not support a claim for extortion."(p. 12) Secondarily, "In sum, to state a claim of economic extortion under both federal and California law, 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. Any less stringent standard would transform a wide variety of legally acceptable business dealings into extortion."[7](p. 18)
Eric Goldman, writing for Forbes Magazine, explains that extortion by economic threat is a narrow construct and that this ruling only addresses extortion.[8] Other 2014 pending cases against Yelp included false advertisement,[9] and securities fraud.[10]
After the Federal Trade Commission revealed a number of complaints, shareholders are taking Yelp to court, claiming Yelp artificially inflated the price of stock for its executive's benefit.
The Class Action lawsuit,[11] being led by investor Joseph Curry, focuses on Yelp's "first-hand" reviews. The suit says Yelp required businesses "to pay to suppress negative reviews," and then lied about the practice.
