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Lawsuit Accusing Yelp of Defrauding Shareholders Is Dismissed Once and for All

A judge ruled investors should understand not all Yelp reviews are real.

Michael Dorausch/Flickr

Score one for Yelp: The user-submitted review site recently skewered by South Park has prevailed yet again in a lawsuit brought against it by shareholders, reports Reuters. The suit alleged that the plaintiffs "had been fraudulently misled about the authenticity and quality of its reviews," and also accused Yelp of manipulating its ratings to benefit businesses who pay to advertise on the site. It also accused Yelp executives of selling off tens of millions of dollars worth of "artificially inflated stock" while misleading shareholders about its business practices.

A U.S. district judge in San Francisco handed down the decision last week, writing, "Reasonable investors would understand that not all Yelp reviews are real, particularly given the company's admission that its technology to screen user-generated content for its website is not foolproof." An earlier class-action version of the lawsuit was dismissed back in April; the judge has now stated that the plaintiffs cannot sue again.

Accusations that Yelp manipulates reviews based on whether a business chooses to advertise or not are certainly nothing new; the company beat similar allegations in a 2014 lawsuit accusing it of extortion.

While Yelp's stock price has been shaky as of late, the company is at least having good luck in the courtroom: In addition to last week's victory, earlier this year a court dismissed a class-action lawsuit filed by Yelp users who argued they should be paid for their reviews. And while some chefs and restaurateurs may really hate Yelpers, the federal government seems to feel otherwise: a recently proposed bill intends to protect consumers' rights to post negative reviews without fear of being fined or sued.

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