Yelp Inc.’s legal challenges continue to pile up, with business around the country weighing in on third class-action lawsuits.
According to press reports the pending class action lawsuits alleges that the San Francisco, CA based website of user reviews and recommendations of top restaurants, shopping, nightlife, extorts companies by manipulating ratings or visibility on the site based on whether or not the businesses pay to advertise.
Jeremy Stoppelman, Yelp’s chief executive, denies the charges—blaming them partly on businesses misunderstandings about Yelp’s rating system and lawyers’ desires to spur litigation.
But the disputes point up a sticky problem for many community-generated Web sites: How to manage user ratings—and build an advertising-supported business—while policing such schemes from abuse.
Yelp, which is five years old, relies on volunteers to review restaurants, stores and other businesses. The company claims more than 26 million visitors a month.
It generates revenue by selling advertising services to businesses, including the ability to add text links on the site and add additional information to the user-generated reviews page.
Since its early days, the company has employed a filtering system that is designed to prevent businesses from distorting ratings by, say, getting employees or friends to post glowing reviews. Mr. Stoppelman attributes the recent complaints to confusion over how that filtering system operates according to the report.