McMillan Law Group won a small claims court case against Yelp, which claimed the online reviewing system failed a contract.
The high-profile local search site Yelp.com is a widely used online resource for small businesses looking to expand their clientele and customer bases.
But some object to its digital methods and promotional practices, which the internet powerhouse vigorously defends.
Here in San Diego, a Liberty Station law firm that used to advertise on the Yelp site has just gotten major exposure in the Wall Street Journal after winning a small-claims court judgment against the company.
And operators of a Clairemont electronics repair shop are questioning Yelp’s good faith in the marketplace.
Nationwide, Yelp's critics in the small business community have said in court cases that the company fails to deliver on contractual promises.
There are widespread complaints that Yelp downgrades their visibility and customer reviews when they refuse to advertise.
"Here we are, number 19 with 177 five-star reviews. I don't see the logic in that,” Mario Leon said Thursday, as he scrolled through his local trade group’s listings on Yelp. "We've asked them numerous times why that's happening. And they say that's just the way the filter works."
Leon and his uncle John Goodman service iPhone, iPads and iPods at SD iRepairs.
He says he doesn't want to bite the hand that feeds him, because Yelp has steered a lot of customers to their shop on Clairemont Drive.
But he wonders why the firm's rankings drop, good reviews fall off and bad ones creep in after they rejected requests for ad buys from Yelp’s sales force.
"You'll drop off a couple four or five star reviews, then you'll see a two, three, four star jump up in there,” he noted. “We ask them 'Okay, what are the specifics?' And they can never give you a straight answer or exactly why it's actually happening. But they want to call and ask for a payment from you."
Meantime, across town in Liberty Station, consumer bankruptcy attorney Julian McMillan says what’s happening to SD iRepairs is no coincidence.
McMillan recently was awarded a $2,700 small-claims judgment against Yelp over issues relating to his advertising contract.
The judge in the case, Peter Doft, characterized Yelp's actions as “the modern day version of the Mafia going to stores and saying ‘You wanna not be bothered … you wanna not have incidents in your store? Pay us protection money’.”
Yelp is appealing his findings to the Superior Court.
"Oh, there's no question that they're abusing their power as an internet giant to basically -- as the judge put it -- extort money from small business,” he said in an interview Thursday at his Roosevelt Road office, adding that he’ll be pursuing how Yelp’s digital filters and algorithms operate in a separate Superior Court action.
"I'm going to find out everything everybody wants to know about this filter soon enough, and then I'll be able to answer that question,” McMillan added. “I'm not the techno-geek. But I'm going to get him in here, get him into the courtroom, and I'm going to get him to explain it to everybody."
McMillan also has filed a complaint with the Federal Trade Commission.
"If you're a small mom and pop restaurant or shop and you have one or two negative reviews on Yelp, that can be crushing to you,” he added.
In an extensive phone conversation Thursday from Yelp’s headquarters in San Francisco, the firm’s vice president of corporate communications, Vincent Sollitto, strenuously denied that the company extorts businesses or manipulates its rankings and reviews.
He explained that Yelp’s reviews and listings rise and fall by way of a "living algorithm", and cited an independent study by Harvard and Yale business professors concluding that "Yelp does not seem to favor advertisers -- at least by selective filtering."
A recent blog on Yelp’s site tells skeptics: “A simple Google test debunks the conspiracy," and suggests how to proceed.
Sollitto also said Yelp “busted” McMillan's firm for posting "fake reviews”.
McMillan disputes that, saying he'll be happy to introduce Sollitto the actual clients: “All he needs do is fly down to San Diego and he can shake their hands.”