FTC Subpoena Revelations, Thousands Of Complaints Send Yelp's Stock Price Tumbling

The Federal Trade Commission has exposed thousands of consumer complaints they've received about the company.

Yelp is facing one of its biggest challenges yet: The Federal Trade Commission says thousands of business owners have filed complaints against Yelp (PDF) between 2008 and 2014--and the company's stock dipped 12% a few hours later. In total, consumers made 2,045 complaints against Yelp to the federal government. The disclosure was made in response to an investigation by the Wall Street Journal into whether Yelp gives preferential treatment to companies who advertise on the service. The FCC disclosed that Yelp receives six federal subpoenas monthly, some of which request the names of anonymous users. It's bad news for the massive review database company--and great news for competitors like Foursquare, Facebook, and even Google's review efforts.

The WSJ story comes at a bad time for Yelp, which disclosed in its most recent annual report that the company lost more than $10 million in 2013. Late last year, Fast Company spoke with Peter Shankman, a prominent New York-based tech investor and social media consultant who made a cash bet that Yelp would go out of business within two years due to an alleged practice of making positive reviews for companies who don't pay Yelp harder to see. In a comment thread on the article, multiple Fast Company readers alleged Yelp hid positive reviews for their business after they refused to spend additional advertising money with them.

A steady stream of business owners have gone on record, including in the Los Angeles Times, claiming that Yelp threatened to display negative reviews more prominently if they didn't pay for advertising. Yelp also deals with constant posting of fake reviews by business owners or companies, a practice called “astroturfing,” that have created additional controversy.

[Image: Flickr user thisisbossi]

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11 Comments

  • Allen Codie Evans

    Yelp will post very negative reviews that have not been verified and are false.. If try to have it removed there is no response from Yelp but I have had customers that have posted positive reviews and they are never posted. Its like they try and force you to pay to advertise with they. They do NOT filter the negative reviews but only filter the positive review unless you are paying them I guess. Big Scam

  • Scott Reilly

    Yelp shuffles my positive reviews from the filter to being posted. Funny thing is they never filter my negative reviews. Some of the negative reviews I am ok with, it is the erroneous false reviews that I object to. Yelps customer service department are useless. They all give you the same scripted answer the algorithm system decides what is true and what is false. I really hope the real truth comes out in court and Yelp finally learns it's lesson.

  • Chris Barnes

    You pay Yelp to keep your closest competitors ads off your yelp page! I know they got me for 6 months at $300 a pop. I dont think they did anything good for my business!

  • I've been dealing with Yelp as a business owner for years. Yelp has never hinted at the possibility of manipulating reviews. I turned down their initial advertising offer years ago. I built my online reputation, received hundreds of thousands in business through them, and paid them nothing for years.

    Having said that, Yelp set themselves up for this. All reviews show for a short time. Then, if the reviewer doesn't pass muster with Yelp's filtering algorithm, the review gets filtered. Years ago my first good reviews popped up. A Yelp ad rep called. I said no. My good reviews got filtered. I was mad. Then I got more reviews. Some of them stuck. Then more and more stuck.

    Correlation is not causation. The filtering mechanism is automated. The Yelp ad reps should have waited to see if my first few reviews were going to stick before calling. Instead they jumped too quickly and made it look like my refusal to pay caused my good reviews to disappear - but it wasn't so.

  • Jason Hanleybrown

    I run a regional business that wins awards for service. We have a terrible time with Yelp. Yelp's screening mechanism gives preference to users of Yelp that provide a lot of free content. It does not screen for whether a review is "real" or accurate. Increasingly, we see "Elite Yelpers" use their status to strong arm discounts. And, we have at this point hundreds of real reviews screened by real customers who are not "Elite" Yelpers. We've literally have had people publish that we abused them because "they are blind" (and then ask us for payment to remove the review...) and we find the same Elite has given a terrible review to a driving school (...how can a blind man be a customer of a driving school?) You inform Yelp and they just shrug. We believe this is actually part of their content strategy. "Elite" status means their reviews always stick. And, people that have a lot of time to write hundreds of Yelp reviews are not by definition an honest consumer.

  • I am on elite member of Yelp. I do write reviews as I can and remember. It doesn't always happen because life can get busy but when I have some down time, I will write as many as I can. My reviews are opinions of my own and no one elses. They're honest and based on observation and comparison to other establishments of the same type/category. Not everyone is the same and so your note above will definitely not hold water.

  • How they're shown, or if they're shown at all, had nothing to do with you, and is all about the company trying to blackmail small businesses. Here's a tip: work for a better company, one with ethics.

  • Jason Hanleybrown

    I run a regional business that wins awards for service. We have a terrible time with Yelp. Yelp's screening mechanism gives preference to users of Yelp that provide a lot of free content. It does not screen for whether a review is "real" or accurate. Increasingly, we see "Elite Yelpers" use their status to strong arm discounts. And, we have at this point hundreds of real reviews screened by people who are not "Elite" Yelpers. We've literally have had people publish that we abused them because "they are blind" (and then ask us for payment to remove the review...) and we find the same Elite has given a terrible review to a driving school (...how can a blind man be a customer of a driving school?) You inform Yelp and they just shrug. We believe this is actually part of their content strategy. "Elites" status means their reviews ALWAYS stick. And, people that have a lot of time to write hundreds of Yelp reviews are not by definition an honest consumer.