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Yelp Can Change Business Ratings for Money, But Businesses Can’t

The mid-market platform built on user reviews just got the law on its side.

If user reviews were turned loose on Yelp, the platform that has long been touted as the last honest discussion site on the Web might be averaging one star. Yelp’s been taken to task for pushing businesses to pay for placement and sweeping bad reviews aside for those willing to pony up ad fees for a number of years. The FTC reported over 2,000 of such complaints. The midmarket company, which raked in $233 million in net revenue in 2013, maintains it’s doing no such thing because of its automated processes.

But even if it was manipulating user-generated content, according to the law, Yelp’s practices are all perfectly legal. The Ninth U.S. Circuit Court of Appeals in San Francisco ruled that Yelp is entitled to set a price for its ads.

The SFGate reported: “As Yelp has the right to charge for legitimate advertising services, the (alleged) threat of economic harm … is, at most, hard bargaining,” and not extortion or unfair business practices, according to Judge Marsha Berzon during Tuesday’s 3-0 ruling.

The court also upheld a federal judge’s dismissal of a proposed class action suit which small business owners filed in response to being told by Yelp representatives that ratings were dependent on ad buys. Tuesday’s ruling also stipulated that businesses reviewed on the platform have no legal right to a high rating.

And no legal recourse if they get bad ratings — no matter what the reason. Just about a month ago, Yelp made headlines because a New York hotel on its platform attempted to fine a group of people who’d stayed there during a wedding $500 for each negative review they posted. The hotel said they would refund the money if the bad reviews were deleted. In response, the hotel’s Yelp page was inundated with one star reviews. One reviewer summed it up well: “Unprofessional. Not hospitable. Disaster for an Inn.”

As Slate reported, Scott Michelman, an attorney with Public Citizen, said, “Nobody enters into a consumer contract expecting that they’re going to be paying a fine if another consumer doesn’t like the business.”

That said, caveat emptor, or the closest Latin phrase that translates to “let the browser beware.” Yelp has posted steady revenue increases since the first complaints started rolling in to the FTC in 2008. Yelp’s local advertising makes up 75% of its stock value and is its biggest revenue stream.

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