By Jonathan Stempel
(Reuters) -Yelp can pursue a lawsuit accusing a reputation management company of fraudulently advertising its ability to remove "bad" reviews from the business review website.
In a decision late Thursday night, U.S. District Judge William Alsup in San Francisco said Yelp (NYSE:YELP) can pursue trademark infringement and unfair competition claims against ReviewVio, which operates as Dandy.
Yelp said ReviewVio's ads, which include the Yelp logo, harmed its reputation by suggesting that businesses could pay for artificially inflated star ratings.
This allegedly undercut honest businesses that will not pay to remove negative reviews, and undermined the usefulness of Yelp's website to consumers.
Yelp also said it lost ad revenue from businesses that paid for "review gating," which the company prohibits, or incorrectly believed that Yelp endorsed the practice.
The Federal Trade Commission encourages companies not to solicit only positive reviews, or discourage negative reviews.
In a 27-page decision, Alsup said Yelp sufficiently alleged that ReviewVio's conduct could cause confusion about the companies' relationship.
"The allegations make plausible that ReviewVio's alleged marketing influences (businesses') choice to purchase Yelp's ad services, ReviewVio's review management services or no services to promote themselves at all - believing the game rigged," he wrote.
Alsup said Yelp can seek damages for ReviewVio's alleged misrepresentations to businesses, but not to consumers.
In seeking a dismissal, ReviewVio said there was no evidence it "partook in any sort of immoral or unethical behavior."
Jenifer Wallis, a lawyer for ReviewVio, said excluding harm to consumers "substantially limits Yelp's damage claims. ReviewVio maintains that Yelp's suit is without merit and will continue to aggressively litigate this case."
James Daire, associate legal director at Yelp, said the San Francisco-based company was pleased with the decision.
"The court has recognized the harm caused by practices like review gating, which deceptively cultivates positive reviews on public platforms and diverts criticisms to private channels," he said
The case is Yelp Inc v ReviewVio Inc, U.S. District Court, Northern District of California, No. 23-06508.