A group of shareholders led by Joseph Curry have filed a federal class-action lawsuit against Yelp in San Francisco, the SFGate blog reports.
The suit alleges that Yelp management lied to shareholders about the widely suspected but never officially proven tactic of charging businesses money to suppress negative reviews, and that they promoted non-first-hand positive reviews (i.e., shills) in order to bump up paying customers' ratings.
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Of course, this being America, they're also suing because those in the know sold off their shares right before the fit hit the shan and left the rest of the shareholders holding the increasingly empty bag, to the tune of $81 million in shares and a 33% hit on their stock price.
Restaurant owners in Orange County have long complained about the high-pressure sales calls from Yelp, the most popular crowdsourced review site. Many have refused to pay, and they assume that their ratings will take a hit. Two years ago, a widely reported incident between a Yelper and Playground owner Jason Quinn caused a run of one-star reviews on Playground's Yelp rating, led by butt-hurt Yelpies who'd never set foot in the door. The same thing happened to Los Angeles' Red Medicine restaurant in 2010 after they “outed” Los Angeles Times food critic S. Irene Virbila.
Sounds like the shareholders are finally figuring this out for themselves. As they say back East, “Light dawns over Marblehead.”
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