Extortion/Unfair Competition claims in Yelp! Inc. Introduction Yelp! Inc. is a US public company that was founded in the year 2004 and has its headquarters in San Francisco, California (Levitt v Yelp!). The company was founded by Jeremy Stoppelman and Russell Simmons who were previously employees of PayPal Company. Its affiliates Yelp mobile app and Yelp.com, publish reviews about Eat24, a food deliver service, SeatMe, an online reservation service, and reviews about local businesses. The company also offers training services concerning local businesses can respond to reviews about their businesses business data, and how to host social events for reviewers (Levitt v Yelp!). The company has lately been indulged in a series of court cases regarding alleged manipulation of the reviews that local businesses receive and that the company hosts on its website. The local businesses allege that the manipulation results from their refusal to advertise their services on the site, leading to a decline in the revenue that the company raises from such advertisements (Levitt v Yelp!). Whereas these lawsuits have failed on the basis of procedure, there are intellectual property issues that need to be discussed regarding the extortion and unfair business practices by the company. This paper seeks to outline the genesis and nature of the court claims and also to explore the possibility of prosecuting the claims as organized crime. The Extortion/Unfair Business Practices The claims that local business owners filed in the district court of California were that Yelp! Inc. had developed a habit of extorting money from such businesses by appearing to force them to advertise on the companys online platform (Levitt v Yelp!). Those who refused to advertise on the platform have their reviews manipulated by removing all or some of the positive reviews. The local businesses view this practice as unethical and as a contravention of the Californian State competition law (Levitt v Yelp!). Upon dismissal by the district court of California on the grounds of lack of evidence that there had been extortionist practices on the part of the company, the local businesses appealed in the US court of appeals. For a start, the representative local businesses were Cats and Dogs Hospital, Inc., Tracy Chan, Boris Levitt, and John Mercurio (Levitt v Yelp!). According to the district court, the appellants had not stated an arguable claim and that there was no prima facie case that the court would uphold against the company. The law that the company was alleged to have violated was the California Unfair Competition Law regarding attempted extortion and civil extortion (Levitt v Yelp!). The company was also alleged to have violated the Californian Professions and Business Code, among other civil law violations (Levitt v Yelp!). The nature of the business that Yelp! Inc. operates is that reviews about businesses are assigned a star (*). The number of starts that a review receives translates to the popularity of the business hence the reliability by customers. Businesses do not have the permission to opt out of the reviews or ratings and the company has the monopoly to manipulate what happens to the reviews as and when it feels the need to do so(Levitt v Yelp!). The system is programmed to filter any malicious reviews that violate the terms and conditions of the company (Levitt v Yelp!). The reviewer can also remove their reviews if they desire to do so or if they are asked by the company that is the subject of the review to do so. Finally, Yelp! Inc. administrators can remove reviews as and when they desire to do so (Levitt v Yelp!). This bias informed the local businesses to lodge the cases in court because they thought that the company was misusing its power to propagate unfair businesses practices against them (Levitt v Yelp!). They had averred at the trial court that the removal of the reviews was occasioned by the decisions of the local businesses to snub the company by carrying out their businesses in other platforms. The company charges its advertising services at $300-$1200 per month and upon payment of the advertising fee, the businesss name is allowed to appear on the search results of Yelp! Inc., prevents any information about its competitors from appearing on their page, and adds photos and videos as a way of enhancing their pages on Yelp! Inc.s website (Levitt v Yelp!). These inducements and the subsequent deletion of the positive reviews about those businesses that do not advertise on the platform have been viewed as attempted extortion by the company, hence the lodging of the court cases under unfair competition and extortion law (Levitt v Yelp!). For Boris Levitt, Yelp! Inc. contacted her business to advertise on their platform when her rating was at 4.5 stars (Levitt v Yelp!). She declined the offer but a few days after declining, her reviews reduced to 3.5 stars. She averred that this was enough evidence to show that Yelp! Inc. manipulated reviews on the basis of the refusal of the businesses to advertise on the platform. For Cats and Dogs, negative reviews had been posted on its page on Yelp! Inc.s platform and the business requested the removal of such negative reviews against it because they were based on falsehood and malice (Levitt v Yelp!). Yelp! Inc. in turn called the business urging it to purchase advertising space on the website but it declined. A few days after declining, Yelp! Inc. returned the negative reviews that it had already removed from Cats and Dogs page. The business, thus, averred that these grounds were sufficient for the court to hold the company liable for unfair competition and extortion (Levitt v Yelp!). For Mercurio, some negative reviews that existed on its page on Yelp! Inc.s website were not based on authentic customers. He called to request the removal of the negative posts but was requested to purchase advertising space on the website just like the other businesses. When he declined to do so the reviews were not removed and other negative reviews were added (Levitt v Yelp!). This, according to him, was an extortionist strategy by Yelp! Inc. This evidence would persuade the court to rule on his favour. Finally, Dr. Tracy Chan was promised many favours by the company such as having his ratings remain high on the site and having such ratings remain as they are without nay manipulation if he agreed to purchase advertising space on the companys website (Levitt v Yelp!). After declining the offer, the company reduces her ratings from 5 to 3 stars and upon her enquiry she was told that the system manipulates the ratings depending on their content (Levitt v Yelp!). She was advised to purchase advertising space so that the ratings would be manipulated in her favour. However, when she agreed to sign an advertising contract with the company, the ratings were increased from 3 to five and previous positive reviews restated on the page(Levitt v Yelp!). She later cancelled her contract with the company and her ratings dropped again. This, she argued, constituted sufficient ground for lodging an extortion case against the company and urged the court to rule in her favour (Levitt v Yelp!).The district court dismissed these allegations on the basis of two grounds. First, the applicants had not disclosed an arguable claim against Yelp! Inc. secondly, Yelp! Inc. had adequate defence under the Communications Decency Act of 1996 (CDA), 47 U.S.C. ? 230(c)(1) and, thus, the company had immunity under this Act. Californias Unfair Competition Law governs unfair business practices that are designed to unlawfully and unlawfully defraud other people or businesses through deceptive, unfair, misleading, and untrue advertising. The case of Cel-Tech Commcns, Inc. v. L.A. Cellular Tel. Co 20 Cal. 4th 163, 180 (1999) established three types of unfair competition. The three types are acts that are unfair, unlawful, and fraudulent. The court in the case of Davis v. HSBC Bank Nev N.A., 691 F.3d 1152, 1168 (9th Cir. 2012), held that the three grounds are independently actionable and the applicant only needs to show that respondent has extorted or attempted to extort money from them through any of the three grounds. Californian law about extortion is provided for under the Hobbes Act 18 U.S.C. ? 1951(b)(2). The Act states that for the offence to be committed, a person must have obtained property from another without that other persons consent. Further, there must have been threat of use of force official right, fear, or violence at the time of obtaining that property. The court has previously held in Brokerage Concepts, Inc. v. U.S. Healthcare, Inc. 140 F.3d 494, 523 (3d Cir. 1998) that the threat of economic harm, as was the case with the businesses, is not usually considered to be wrongful especially where the person issuing the threats has the right to that property in contention (Brokerage Concepts, Inc. v. U.S. Healthcare, Inc.). It is also not extortion where the person issuing the threats if in pursuit of payment of a legitimate service that they have offered, as was held in the case of United States v. Vigil 523 F.3d 1258, 1265 (10th Cir. 2008), The upshot of these decisions is that the complainants must show that they had a right not to be threatened with economic loss if they failed to purchase advertising space in the companys platform (United States v. Vigil). The right could be an existing one or a right that bars the defendant from issuing the threats. In these cases, there was no such a right according to the court (United States v. Vigil). Put differently, the claimants did not prove to the court that they had preexisting rights to have only positive reviews appearing on their pages on the companys platform. Likewise, they had no right to have negative reviews removed from their pages and the company was under no obligation to have those reviews remain intact on the pages since in some instances the system was an automated one. Thus, this case failed on matters of civil procedure other than failure to state claims of intellectual property. For example, the court of appeal stated that for Yelp! Inc. to be held liable for extortion and unfair business practices, the applicants had to show that their case had a plausible chance of success as defined in the case of Ashcroft v. Iqbal 556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly 550 U.S. 544 (2007). This criterion could not have enabled the appellants to win the case on the basis of plausibility and civil procedure. It would have been difficult for them to convince the court that the conduct of Yelp! Inc. amounted to extortion using this criterion. The court even refused to interpret the concept of unfairness on the part of Yelp using the Californian Unfair Competition Law and instead held that unfairness means that the defendant has contravened an antitrust law of legislative policy (Levitt v Yelp!). Owing to this apparent unfairness to the appellants, it is important to explore other areas of law that can be used to prosecute this case (Levitt v Yelp!). It is clear that the conduct of the company is prosecutable under other laws other than the unfair competition law that the court found no liability. The section that follows will explore the possibility of prosecuting the case under Californian law governing organized crime because the acts of the company appear to have been carried out in a manner to suggest that there was a conspiracy to unfairly disadvantage the businesses of the appellants. Yelp! Inc. Extortion Case as Organized Crime According to the Federal Bureau of Investigations (FBI), organized crime constitutes criminal activities that are organized and formalized in a manner aimed at obtaining money illegally (FBI.gov). The groups that carry out these activities use such illegal and unlawful means as undue influence, threats of violence, extortion, corruption, and graft. These groups use their existing influence on their countries, locales, and regions, and their impact if felt throughout these regions (FBI.gov). The organized crime activities are conducted by an enterprise whose sole purpose is to extort money through such activities as counterfeiting, bribery, money laundering, fraud, drug trafficking, racketeering, and embezzlement of public funds (FBI.gov) (FBI.gov). The FBI further defines an organized crime enterprise as a the group of individuals who carry out the acts of organized crime as discussed above with an aim of obtaining money illegally and unlawfully (FBI.gov). Thus, the key words in these definitions are obtaining money unlawfully, a group of individuals, an enterprise, and the acts that constitute organized crime. The Yelp! Inc. extortion cases were dismissed by the district court of California and the court of appeals of the United States on grounds of civil procedure (FBI.gov). The applicants and appellants were unable to prove to the courts that they had plausible cases to show that the company unlawfully and illegally engaged in extortion and unfair business practices with the intention of obtaining money from them (FBI.gov). The finding of the courts did not mean that the company did not carry out the stated activities of extortion. Thus, this part seeks to explore the possibilities of prosecuting the case under organized crime because it satisfies some of the ingredients of organized crime both under Californian law and the federal criminal law in this area. Under federal law, organized crimes are defined and explained in Racketeer Influenced and Corrupt Organizations (RICO) Act, while in California the crimes are defined in the California Penal Code and the California Control of Profits of Organized Crime Act (RICO Act). Californian law on extortion is substantively provided for under Chapter 7 of the Penal Code, under sections 518-527 (RICO Act). Under section 518, a person is said to have extorted property from another person if they consensually obtain such property from the other person using false pretense, threat of use of force, colour of official right, or the wrongful use of force. Thus, the first ingredient is consent (Penal Code). The person from whom the property is obtained consents to the use of that property but upon being threatened, forced, or unduly influenced to consent on the use of the said property. Using this definition, Yelp! Inc. can be said to have extorted money from the applicants and appellants in the extortion cases because the company used its influence and power to force them to consent to purchase advertising space on the companys site (Penal Code). The company deleted positive reviews from the applicants pages and added either added negative reviews or removed all reviews from the pages to force them to purchase advertising space on the site (Levitt v Yelp!). Those who failed to give in to the force were enticed with such favours as the permission to add photos and videos on their pages, addition of more positive reviews and the deletion of all negative reviews. Such enticements and threats contravened their rights to use the pages as per their contracts and also contravened the existing contract law of California (Levitt v Yelp!). This definition can, therefore, be used to find the company guilty of extortion in contravention of section 518 of the penal code of the country. Section 519 defines the contents of the fear that constitutes extortion and the threats that accompany that fear (Levitt v Yelp!). The most relevant definition in the scope of this paper is subsection 1 which includes the threat to cause harm to the person who is being extorted, harm to their property, or harm to a third party. The acts of Yelp! Inc. undoubtedly amount to extortion in this sense because they were meant to threaten the local businesses with negative reviews or no reviews at all if they failed to purchase the advertising space offered by the company. In fact, the company did not only issue threats but also made good such threats by reducing the ratings of the businesses and adding negative reviews. If the threat of economic harm on the businesses is not adequate in the prosecution of a criminal case of this nature, the actual occasioning of the economic harm on the businesses would suffice to found a claim on this ground. Several cases have been decided in Californian courts with regard to extortion. For example, in People v. Hesslink (1985) 167 Cal.App.3d 781, 787 the accused person demanded certain amounts of money from the victim and on defence, he claimed that section 518 of the Californian penal code provided that a specific amount of money must have been demanded by the accused person to found a claim under that section. The court declined such a defence and held that section 518 did not specify any amount of money that must be demanded by the accused person for a claim of extortion to be proved. Problems have also arisen as to what constitutes threat of economic harm to establish a claim of extortion. In People v. Massengale (1968) 261 Cal.App.2d 758, 765, for example, the court held that there are not precise words that can be said to constitute the offence of extortion and blackmail. The conduct of the accused party is held to have the same weight as their acts. In the case of Yelp! Inc., conduct, words, and actions were used and, therefore, it would not be difficult to establish that a claim of extortion was proven. The local businesses were enticed and forced at the same time to purchase advertising space, failure to which draconian measures were taken against the reviews on their pages on the companys online platform. Although these acts did not establish a plausible claim under intellectual property law, the reasoning of the court in this case appears to suggest that a criminal case can be established against the accused company. Organized crime in the perspective of extortion and other crimes that make use of illegal means to acquire property are defined in the California Control of Profits of Organized Crime Act. This law is titled as the Penal Code section 186-186.8 and gives the definitions of crimes that give rise to proceeds of organized crime (RICO Act). The scope of this paper is extortion and as an organized crime in Californian criminal law. Section 186.2 (a)(6) lists extortion as a criminal profiteering activity and provides that such act, attempt, or threat may be prosecuted as a crime. It is important to note that the act, attempt, or threat must have been conducted for a financial gain (RICO Act). Thus, the complainant in the case of this nature must show that the accused person or entity issued threats of use of force or forced such a complainant to act in the manner that they acted, or attempted to force them to act in such a manner for financial gains. Section 186.2(b) lists such activities as organized crimes and defines organized crime to include extortion, among other listed crimes. From these definitions and provisions of statute law in California, it can be deduced that the acts of Yelp! Inc. constitute organized crime if there is a finding of extortion in such acts. The acts can, thus, be prosecuted under the California Control of Profits of Organized Crime Act as criminal profiteering activities whose penalties are listed under the said Act (RICO Act). The section that follows will analyze various Californian court cases to determine whether the acts of the company constituted extortion and whether such extortion meets the ingredients of founding a claim under criminal profiteering activities as defined by the California Control of Profits of Organized Crime Act. First, courts have held that even when the defendant has the right to the property against which they are issuing threats, there is no justification for issuing such threats. The net effect of the threats is that the offence of extortion is committed. In the case of Flatley v. Mauro (2006) 39 Cal.4th 299, 326, the court held that it was immaterial that the demands the respondent was making to the appellant were duly justified to him. The operative words in that case were that the respondent used force or threats of force to demand money from the appellants. Further, the court in Gomez v. Garcia (9th Cir.1996) 81 F.3d 95, 97 held that even if the defendant seeks to recover his debt from the victim there is no justification for the use of force or the attempted use of such force. In a nutshell, there is no justification for any person extorting money from the other. Linking this decision to the Yelp! Inc. extortion cases, the company cannot justify its threats and acts against the local businesses using any means because there are no justifications against such acts under criminal law. The fact that the company used its influence and status to unfairly and unlawfully entice or force the local businesses to advertise on its online platforms is enough proof that it either extorted or attempted to extort money from such businesses. There is also no free speech defence to extortion exclamations. Thus, a robber who demands money from a victim cannot file the constitutional defence of free speech and expression. This was the position of the court in the case of United States v Queen (5th Cir. 1975) 514 F.2d 1250, 1268 where it was held that the US constitution does not protect free speech where such speech is used to extort money and other property from other people. Some Californian courts have held that for civil extortion to be established, the applicant must prove the existence of extortion and that they must have given out the money for which the respondent was extorting. This appears to have been the reasoning behind the courts in Yelp cases. The court in Fuhrman v. California Satellite Systems (1986) 179 Cal.App.3d 408, 426-4280 also followed the same reasoning to hold that the appellant must have actually given out the money for which the respondent was extorting from them. Thus, without such proof, a claim of extortion was not established (Fuhrman v. California Satellite Systems). The case of Yelp is, however, different from such reasoning because the nature of extortion was in such a way that the company was not asking for money from the local businesses. The company was asking the businesses to purchase advertising space so that their reviews would be updated accordingly. Whichever way we look at it, criminal extortion appears to be essentially and substantially different from civil extortion (Fuhrman v. California Satellite Systems). The standard of proof is very low because the complainant only needs to prove that the respondent issued threats, extorted, or attempted to extort property from them illegally or unlawfully. The upshot of the above analysis of court decisions on criminal extortion is that courts are stricter in criminal extortion cases that in civil extortion cases (Fuhrman v. California Satellite Systems). The reasoning of courts in cases where the complainant has been extorted, threatened with extortion or where there has been an attempted extortion is that there is no justification for extortion. There is no law that justifies the respondents acts and the complainant always has recourse in the law if there is evidence to show that they have been extorted. This is not the case with civil extortion where the courts in the Yelp cases argued that the local businesses must prove a prima facie case against the company yet there was overwhelming evidence that the company had been involved in acts of extortion. Conclusion Californian criminal law on extortion allows for the prosecution of acts that are similar to the ones committed by Yelp! Inc. Although the civil courts may not have found sufficient evidence to attach liability on the company, the standard of proof in criminal law on extortion is such that even the slightest attempt to unlawfully obtain property from another person is punishable in courts. Thus, this conclusive section attempts to revisit the acts of the company against the four local businesses in the perspective of criminal extortion and unfair businesses practices. Unlike the civil court in United States v. Enmons 410 U.S. 396, 400 (1973) that held that there was a defence to the use of force to achieve legitimate ends, Californian criminal law on extortion provides that there is no justification for the use of force, attempted use of force, or extortionist advances to obtain property from another person illegally and unlawfully Lozano v. AT & T Wireless Servs., Inc., 504 F.3d 718, 731 (9th Cir. 2007). The most useful case in this area of the law is the case of United States v. Villalobos 748 F.3d 953, 956 (9th Cir. 2014), where the court held that even if the defendant had legitimate claims to the property, some acts are too wrong that there is no justification and the only finding that the court can arrive at was that the defendant was liable. However, this case was determined by a civil court and there was not a lot that the court could do outside the standard of proof in civil cases. If the case was lodged in a criminal court, there would have been sufficient evidence to establish criminal liability in extorting money from the complainant because of the evidentiary standards of proof in criminal cases. Rothman v. Vedder Park Management 912 F.2d 315 (9th Cir. 1990) is also very instructive. In this case, an owner and operator of a mobile-home park allegedly used extortionate tactics to induce or force tenants to sign leases. The group of tenants sued the owner for violating the Racketeer Influenced and Corrupt Organizations Act 18 U.S.C. ?? 1961??68. Although the civil court held that there were no extortionate tactics that could attach civil liability on the owner and operator, the facts of this case are similar to the ones in Yelp! Extortion cases and can amount to criminal liability. In this case, the court reasoned that the tenants did not allege that the owner had threatened to either refuse to pay their utility bills or to raise the rent of those who have not signed the leases. It would appear that if there were such threats, even civil liability would have attached on the home owner and operator. We note here that in the Yelp! Extortion cases, the company not only threatened to reduce the positive reviews and increase the negative reviews but also actually made good its threats. Thus, applying the reasoning in the case of Rothman, criminal liability in extortion should attach to the Yelp! Cases City of Costa Mesa v. DAlessio Invs., LLC, 214 Cal. App. 4th 358, 375??76 (Ct. App. 2013). For Dr. Chan, positive reviews were removed from her page when he declined to purchase advertising space on the companys website. The civil court declined to attach liability because she did not have a pre-existing right to have positive reviews maintained on her page. However, the manner in which the reviews were removed is enough to attach criminal liability on the company because they were removed to force her to purchase advertising space with the company. Levitt and Mercurio had their positive reviews removed and negative reviews that had been removed reposted. All this was done to either entice them to purchase advertising space on the companys website or to force them to do so. This is criminal extortion although the civil court dismissed the claims on other grounds. The same allegations were filed by Cats and Dogs in furtherance of the claim that there was civil extortion and unfair business practices on the part of Yelp! This paper concludes that there is sufficient evidence to establish a criminal extortion case against Yelp! Inc. based on its acts against the local businesses. The claims are prosecutable under the Californian Penal Code and the Racketeer Influenced and Corrupt Organizations (RICO). The Penal Code can be used to establish a criminal case of extortion while the RICO Act can be used to establish a criminal case in the form of organized crime. Thus, there is overwhelming evidence to establish a criminal case against the company in any of the criminal laws that exists in California.
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