Since the advent of Yelp, the San Francisco reviews platform, many small businesses have gained exposure (and ultimately sales) via positive customer comments. But negative reviews can be damaging, and some business owners have gone so far as to sue reviewers for making "defamatory" statements online.

This week, Yelp said it began implementing a new type of consumer alert on its website, tagging businesses that may be making "questionable legal threats" against reviewers. Three such alerts have been handed out so far, on a pet-sitting service in Dallas, Texas, a moving company in Pompano Beach, Florida, and the dentistry practice of Dr. Nima Dayani, which is based in New York City.

"Consumers have the right to share their opinions about their experiences with businesses, but there will always be a small handful of businesses who mistakenly think it's a good idea to threaten consumers who exercise their free speech rights," noted Vince Sollitto, a senior VP at Yelp, writing in a blog post. "Consumers don't necessarily know that these threats are sometimes empty or meritless (and often both!), so the threat of legal action is enough to scare them into silence. We don't think it's right." 

Dr. Dayani, for one, had sued a former patient for posting what he views to be a defamatory review of his practice. (In the review, the patient, Mary Rohs, said that she was asked to wait for two hours, and that her consultation with Dr. Dayani did not ultimately result in a diagnosis. Dayani says that two diagnoses were arrived at, and a course of treatment was discussed.)

Dayani claims that Yelp did not investigate the accuracy of the negative review before tagging his business with an alert -- a marker that he equates to a "Scarlet Letter" of shame. (In Hawthorne's novel, The Scarlet Letter, the red letter "A" refers to an adulterer.) 

"That Yelp is now censuring us for taking legal action against posters of false information is troubling, and we plan on discussing with Yelp [to] eliminate their new 'Scarlett [sic] Letter' banner," Dayani said in an emailed statement to Inc. "Although there is hard evidence to counter the false allegations made by the reviewers, Yelp appears to have no interest in fact checking or offering a business the most basic due process before posting its banner."

When contacted by Inc., Yelp declined to respond specifically to Dayani's claims. It's worth pointing out, however, that the company provides a free chat function, giving businesses the opportunity to resolve issues with their customers rather than taking legal action.

Some businesses have taken to asking customers to sign non-disparagement clauses, which would prohibit them from posting negative reviews of the service. But the practice of having customers sign "gag clauses" is controversial.

The so-called "Right to Yelp" bill, otherwise known as the Consumer Fairness Act, would ban these clauses from business contracts, and give the Federal Commission and state attorneys general the authority to take legal action against businesses attempting to sue reviewers. A similar bill, called the SPEAK FREE act, would allow consumers faced with a lawsuit over online reviews to dismiss those claims early on in court. California has already outlawed such anti-disparagement clauses.

Inc.com columnist Bubba Page, founder and CEO of Outro.com, has warned that the onus is now on business owners to respond effectively to criticism, as online reviews grow increasingly powerful.

"Small businesses can't afford to do anything other than their best by customers," Page wrote in a column. "Previously, a small business may have simply accepted the criticism and moved on. With the importance of reviews growing, the obligation is now on the small business to react in the right away."

"Small businesses have had to set aside more time and resources for dealing with unhappy customers," he adds.

Published on: Jul 27, 2016