Customer review site Yelp can be a source of stress for small business owners, who fear that a poor ranking or negative comment can sabotage sales. Some businesses even claim that Yelp plays on their fears by manipulating rankings in order to extort them into buying ads.
Yelp, however, has for years adamantly denied that it rigs its rankings. And on Tuesday, the company’s claim for its integrity got a boost after the Federal Trade Commission reportedly concluded an investigation into’s Yelp’s recommendation software and sales practices, and decided to take no action:
“[T]he FTC recently concluded a deep inquiry into our business practices and informed us that it will not be taking any action against Yelp. The FTC looked into our recommendation software, what we say to businesses about it, what our salespeople say about our advertising programs, and how we ensure that our employees are not able to manipulate the ratings and reviews that we display on our platform,” Yelp wrote in a new blog post.
News of the investigation first surfaced last April when the Wall Street Journal reported that the FTC received more than 2,000 complaints about Yelp from businesses between 2008 and 2014. Yelp, however, points out that this number amounts to only a tiny fraction of the number of its overall listings, which cover everything from restaurants to barbers to airports.
Yelp also earned another victory in September when a federal appeals court in California threw out a class action suit brought by a dentist and others, which claimed Yelp had “extorted” them by tying ad purchases to positive ad placements. The court’s decision, however, was based on the grounds that Yelp has a legal right to engage in “hard bargaining” if it wishes; the court did not make a finding about the company’s actual business practices.
After the court ruling, Yelp described the complaints as “conspiracy theories” and pointed to a Harvard Business School study that concluded the company does not manipulate its reviews based on who advertises with it.
The FTC investigation into Yelp occurred at a time when social media has given customers an unprecedented degree of power to sound off about businesses. The phenomenon has even led some companies to include non-disparagement clauses into their contracts; a hotel in New York, for instance, last year threatened to withhold $500 from a bride’s security deposit for every negative review posted online by her wedding guests.