The reviews are in—and it's a landmark win for Yelp.
The company won a lawsuit from shareholders, alleging they were fraudulently misled about the validity of the website's reviews — even pondering if Yelp compromised the reviews in favor of more advertising dollars — when a judge dismissed the case earlier this week.
Reuters is reporting that U.S. District Judge Jon Tigar, in San Francisco, dismissed the lawsuit, reasoning that investors should understand that Yelp's technology to screen user-generated reviews is vulnerable to fake reviews and thus all of the website's reviews cannot be real. At the same time, Tigar didn't find any intent from Yelp to defraud with its reviews, either.
According to Reuters, shareholders said Yelp was inflating its share price by misrepresenting the validity of its reviews in a way to coerce businesses into purchasing ads or tendering fees to remove fake or negative reviews, but apparently Tigar didn't find that to be the case.
This comes after Tigar also tossed a similar class-action lawsuit against Yelp this past April.
Tigar said a small amount of complaints accused Yelp of compromising reviews in exchange for money, stating "especially when compared to the tens of millions of reviews hosted by Yelp."
The "community managers, scouts, and ambassadors" being used alongside the company's automated screening technology "does not indicate that Yelp's directors and officers knew that any significant number of reviews were not authentic or firsthand, beyond what defendants represented to the public," Tigar said.
Is this a fair verdict?