Consumer Reviews Gain Global Attention in the U.S. and Germany as Litigation Flies

There’s a new feature available on the Yelp site, but it doesn’t reflect a cause for celebration.

The top-tiered review site, home to more than 102 million reviews through Q1 in 2016, introduced in May new warnings for users who visit businesses involved in lawsuits, when those lawsuits are meant to silence critics and challenge their negative feedback. “Consumer Alert: Questionable Legal Threats” is prominently displayed on the Yelp page for Prestigious Pets, a pet care and service provider in Texas.

The warning system, according to CBS affiliate KTVT in Dallas-Fort Worth, follows one of the most recent legal tangles involving businesses seeking to block consumers from posting their bad experiences. That’s often the case when – as with pet owners Robert and Michelle Duchouquette – the firm tries to enforce a contractual nondisparagement clause. Prestigious Pets is now seeking up to $1 million in damages after Michelle left a one-star rating on the Yelp review site, with some minor complaints about the firm.

For their part, the Duchouquettes are fighting back with legal assistance from Public Citizen, a consumer advocacy group based in Washington D.C. Public Citizen previously handled the Palmer v. Kleargear case, in which a negative user review prompted a lawsuit against the Palmers and launched the legislative effort to enact the Consumer Review Freedom Act (S 2044), which has passed the U.S. Senate and is currently pending in the House. Meanwhile, the owners of Prestigious Pets maintain they are victims of a dishonest user review process that has left the enterprise a “shell of its former success.”

The case is just the latest in the United States – and for that matter, in Germany, the United Kingdom and elsewhere – to highlight the financial and legal impacts of unfair or fraudulent review site practices. Yelp, in a statement to the CBS affiliate, said it supports the legislation to protect consumer free speech, and includes that language in its new warning label system. But Yelp also has been atarget of lawsuits claiming that some of the user reviews on its site are fake, which the company readily admits is true. In one high-profile case, the courts struck down Yelp investor claims that the fake reviews constituted securities fraud. But Yelp isn’t the only site, and pay-to-play isn’t the only reason for user-review cases.

“These cases, and others like them, demonstrate why trust and transparency in the user-review process has become imperative,” said Jeev Trika, founder ofCrowdReviews.com. “Studies show that up to ninety percent of all consumers now check user reviews when they’re researching anything from a new movie theater to a multimillion-dollar software investment. The review system has real financial impact for both businesses and customers, and this isn’t about a fun, casual glance at shiny yellow stars anymore.”

Trika said that while the Consumer Review Freedom Act is noteworthy in its emphasis on protecting consumers who write legitimate reviews about their negative experiences, the industry needs to take seriously how often intentionally fraudulent reviews – or pay-to-play providers pumping up the numbers and gaming the rankings system – are influencing the reputation, sales and profitability of businesses.

“I think consumer education is key, and people need to understand how user-generated content works in ranking systems,” Trika said. “But it isn’t the consumer’s responsibility to guarantee that review sites are reliable, that the industry itself upholds ethical standards, or that governments are enforcing them. Legal issues, including outright fraud, are a problem all over the world that’s finally getting addressed.”

In Germany, the court decisions reflect a new understanding that user reviews and star-ranking systems are serious business about which business needs to get serious. That’s the end result of one unidentified user who wrote a hotel review that made false claims about bedbugs and other damaging statements. The German courts, much like those in the United States, initially held that the review platform operators were not responsible for damages to the listed business caused by the fraudulent claims of an unknown reviewer. The site provider was seen as a neutral party required to remove review content and avoid liability only when the provider has specific information that comments violate unfair competition laws.

This spring, Germany’s courts shifted – and now, review sites will have to verify the accuracy of any user comments when requested to do so. The decision was based on a case involving a dentist who claimed his practice and professional reputation were harmed by an unvetted review by an anonymous writer.

Similar cases have occurred in the UK, where TripAdvisor once famously red-tagged a hotel in Ireland for generating its own user-review content. More recently, a March conversation about a one-star dining experience on TripAdvisor included death threat allegations as users tried to figure out what happened, what review fraud laws are applicable – and why negative reviews are met with claims that they’re fake.

As for Yelp, despite its own history of lawsuits over user-generated content, the company is taking a step in the right direction with its consumer protection stance and new, prominently displayed warnings. It’s one move forward in the fight to keep all parties in the online review process – the platforms, the business owners, the user content providers and the people who see their reviews – honest.