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New class action lawsuit targets Yelp

Two law firms and a small business, all based in Southern California, allege that Yelp's advertising sales strategy amounts to extortion. Yelp responds by saying it'll fight it.

Business reviews site Yelp amounts to an "extortion scheme," according to a class action lawsuit filed Wednesday in a Los Angeles court by two law firms and a Long Beach, Calif., veterinary hospital that claims it was "victimized" by Yelp sales representatives asking for payment in exchange for the removal of negative reviews.

"The plaintiff...asked that Yelp remove a false and defamatory review from the Web site," a release from the law firms alleges. "In response, as set forth in the lawsuit, Yelp refused to take down the review. Instead, the company's sales representatives repeatedly contacted the hospital and demanded a roughly $300 per-month payment in exchange for hiding or removing the negative review." That payment is "in the guise of 'advertising contracts,'" the release explained.

Yelp, which reportedly turned down a multimillion-dollar buyout offer from Google late last year, has faced this kind of scrutiny before. An expose in the East Bay Express newspaper early in 2009 quoted a handful of small businesses that claimed Yelp's advertising sales team was removing negative reviews on behalf of paid advertisers. Around the same time, a San Francisco chiropractor sued a Yelp user over a negative review; it was quickly settled.

Yelp was originally named as a defendant in that suit, too, but the plaintiff dropped Yelp from the suit before it was settled. "Yelp has never settled a lawsuit where it was sued," a company representative clarified to CNET via e-mail.

In response to Wednesday's class action suit, Yelp released a statement: "Yelp provides a valuable service to millions of consumers and businesses based on our trusted content. The allegations are demonstrably false, since many businesses that advertise on Yelp have both negative and positive reviews. These businesses realize that both kinds of feedback provide authenticity and value. Running a good business is hard; filing a lawsuit is easy. While we haven't seen the suit in question, we will dispute it aggressively."

A correction was made to this story: Yelp was originally a defendant in the chiropractor's lawsuit, but was dropped from the suit before it was settled.