Online Business Rankings and the Communications Decency Act

After finding that the plaintiff had failed to plausibly articulate an extortionate threat, the U.S. District Court for the Northern District of California dismissed a suit against Yelp on March 24, 2011 (Levitt v. Yelp Inc., N.D. Cal., No. 10-1321, 3/22/11).  The case involved allegations that a Yelp! removed positive user reviews to coerce businesses to purchase advertising  and, as a result, no immunity existed under the  Communications Decency Act (“CDA”).

Specifically, the case concerned a number of plaintiffs that alleged that Yelp Inc. had manipulated their online rankings by either posting negative reviews or removing positive user feedback.  The plaintiff’s claimed that Yelp’s alleged manipulation was in response to the businesses refusal to purchase advertising from the website.   As plaintiff’s represented, by posting negative reviews and by removing positive reviews, Yelp could cause a business’s online rankings to nose-dive.

Specifically, the plaintiffs alleged that Yelp removed positive user reviews following plaintiffs’ refused to purchase advertising from the website.  Allegations included that Yelp violated its own terms of use by failing to remove negative reviews that did not comply with the website’s policies, Yelp posted its own negative reviews, and that Yelp employees represented that if advertisements were purchased the business would benefit from an increase in its ranking because the website “tweaks” the rankings and “manually adds and removes reviews in its own discretion.”

The Communications Decency Act immunizes interactive computer services from claims that seek to treat them as the “publisher or speaker” of content posted by third parties.  The court cited Fair Housing Council of San Fernando Valley v. Roommates.com LLC, 521 F.3d 1157 (9th Cir. 2008) and held that Yelp could not be liable for failing to remove negative reviews that it did not post.

However, the court said that “The CDA does not … preclude liability stemming from Yelp’s own alleged postings, from statements made by its advertising sales persons, or from Yelp’s deliberate manipulation of customer reviews.”  As clearly recognized in Roommates.com, a website will lose its liability under the CDA if it is “responsible, in whole or in part” for the creation of the content that appears on the website. Therefore, any reviews posted by Yelp would not be protected by the CDA.  However, the court noted that there was no evidence that Yelp actually posted any reviews.  The court ultimately thus dismissed these allegations as being “entirely speculative” in nature.

The court said CDA immunity for Yelp’s alleged retaliatory removal of positive reviews was a “close question.”  The court cited Barnes v. Yahoo! Inc.,  570 F.3d 1096 (9th Cir., 2009), noting that “Section 230(c)(1) immunity protects service providers from lawsuit for ‘its exercise of a publisher’s traditional editorial functions.’ ”  Determining what third party reviews should remain, much like determining which posts should be removed, is an editorial function, the court said.

On the other hand, the court said that if Yelp was choosing which posts to remove because it was trying to coerce a business into purchasing ads then such actions would not fall within the realm of traditional editorial functions.  The court further pointed out that the CDA only extends protections to “good faith” actions.  The plaintiffs’ extortion theory painted a picture that decidedly demonstrated bad faith.  As a result, the court said that the CDA did not exempt these allegations.

Ultimately, however, the court held that the plaintiffs had failed to adequately allege that Yelp’s removal of positive reviews was tied to a deliberate scheme to penalize businesses that refused to purchase advertising.  The alleged statements made by sales staff were, according to the court, not sufficient to state a claim of extortion beyond a speculative level.  As a result, the court dismissed the complaint without prejudice.  The plaintiffs were given 30 days to file an amended complaint.

Richard B. Newman is an Internet Defamation Lawyer and
Business Litigation Attorney at Hinch Newman LLP