Cats and Dogs Animal Hospital, Inc., a veterinary practice in Long Beach, California, brought a class action lawsuit against Yelp! Inc. in California federal court, alleging violations of California unfair competition law.

The complaint, filed on February 23, 2010, claims that Yelp! promises to manipulate user reviews in exchange for the purchase of advertising on the popular and influential consumer-review site.  In particular, the complaint alleges that Yelp! advertising employees systematically call business owners that are the subject of negative reviews and promise to remove or relocate negative reviews in exchange for monthly advertising deals.  It further alleges that members of the class were "threatened, implicitly or expressly, that if they did not purchase advertising from Yelp, their Yelp.com pages would be detrimentally manipulated, including for example, by removing positive reviews and posting new, negative reviews." The complaint relies heavily on press accounts detailing complaints from other businesses about the alleged extortionate behavior. 

Yelp CEO Jeremy Stoppleman responded with a two-part blog post (part 1, part 2) vigorously disputing the allegations, saying that the plaintiff's claims are "false" and "ignore empirical evidence in favor of conspiracy theories."  In part 2 of the blog post, Stoppelman stated that "we have never and will never extort businesses; the accusation is beyond ludicrous," and offered an explanation of why some business owners might get the wrong impression:

Why might some business owners think Yelp is shady? Here's the anatomy of a typical Yelp conspiracy theory:

Step 1. Business owner gets a sales call from Yelp that explains an advertising product which seems nuanced; hears stuff like "Favorite review at top" and "Enhance your presence". Business owner eventually decides, "Thanks, but no thanks on the ads, Yelp."

Step 2. Business owner newly-exposed to Yelp decides it’s interesting and aggressively solicits all their family and friends to write reviews.

Step 3. We've already cautioned against this practice and this is why: a few days later, our automated filter suppresses the suspicious-looking reviews.

Step 4. Business assumes algorithmic process in Step 3 is actually a Yelp employee manually punishing the business for declining to advertise in Step 1.

Optional Step 5. Now-angry business finds the Orly Taitz of internet lawyers who may or may not have read about our recent funding round.