Gigaom reports there is a maelstrom brewing in the form of a class action lawsuit.
The lawsuit is claiming that the Yelp is in violation of securities law vis-à-vis “Fraud”. Part of the claim states that certain executives unloaded stock when the price was near $90 back at the beginning of the year. Yelp stock price dropped in light of the negative publicity surrounding the FTC complaints piling up from various businesses and reviewers (which is a whole other issue!).
While this class action doesn’t target Yelp’s “shady” practices directly, the lawsuit is pointing out that that Yelp has made “false and misleading statements about their true business and financial condition” relating to the “robustness of their algorithms designed to screen reviews” and future growth indicators are “extent to which they were reliant upon undisclosed business practices”.
Directly pulled out the filing:
(a) Reviews, including anonymous reviews, appearing on the Company’s website were not all authentic “firsthand” reviews, but instead included fraudulent reviews by reviewers who did not have first-hand experience with the business being reviewed;
(b) Algorithms purportedly designed to screen unreliable reviews did not comprehensively do so, and instead, the Company allowed such unreliable reviews to remain prominent while the Company tried to sell services designed to suppress negative reviews or make them go away; and
(c) In light of the above facts, the representations concerning the Company’s current and future financial condition and prospects, and the extent to which they were reliant upon undisclosed business practices, did not have a reasonable basis.
It will be interesting to see if these new angles of “attack” on Yelp are any more successful than previous suits.
Here is the complete filing for Curry vs Yelp.