Yelp lied about review policies to inflate stock price, lawsuit claims

Gigaom

Yelp(s yelp), a site that lets consumers post reviews of local businesses, allowed fake negative reviews to remain on its website in order to extract advertising money from local businesses, according to a class action complaint filed Wednesday in San Francisco.

The lawsuit was filed on behalf of Yelp shareholders by Joseph Curry, who claims that the company’s executives misled investors about its business practices in order to inflate Yelp’s stock price.

Specifically, Curry claims that Yelp used press releases and financial statements to tout its quality “first hand reviews” as well as its algorithms that screened out unreliable postings; however, Curry claims that in reality:

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

A Yelp spokesperson said the company has not seen the…

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