Yelp has long faced accusations that it manipulates its business-review ratings to sell advertising - five stars for a big ad buy, say, and two stars for a turndown.

The verdict from a federal appeals court: There's nothing illegal about that.

Yelp adamantly denies giving its paying clients more favorable reviews, but even if such allegations could be proved, said the Ninth U.S. Circuit Court of Appeals in San Francisco, Yelp is entitled to set a price for its ads - and the businesses reviewed have no legal right to a high rating.

"As Yelp has the right to charge for legitimate advertising services, the (alleged) threat of economic harm ... is, at most, hard bargaining," and not extortion or unfair business practices, Judge Marsha Berzon said in Tuesday's 3-0 ruling.

The court upheld a federal judge's dismissal of a proposed class-action damage suit by small-business owners who claimed Yelp's sales representatives told them their ratings would depend on their decision to buy ads.

"I've got hundreds of people who have called me with this problem: When they stopped advertising with Yelp, their good reviews got stripped out," the business owners' lawyer, Lawrence Murray, said after Tuesday's ruling.

"What does it take, to have a gun to their head? ... This is extortion in any other setting."

Yelp said it's not true and couldn't happen, because its review-filtering software doesn't distinguish between advertisers and non-advertisers.

"For years, fringe commentators have accused Yelp of altering business ratings for money," said the San Francisco company's litigation director, Aaron Schur. "Yelp has never done this, and individuals making such claims are either misinformed or, more typically, have an ax to grind."

One plaintiff, Boris Levitt, owner of a furniture-restoration business in San Francisco, said several five-star ratings disappeared from his Yelp page two days after he refused to buy ads. Tracy Chan, a San Francisco dentist, said a Yelp sales representative offered her "lots of benefits" for advertising, then removed nine five-star ratings from her page a few days later - ratings that were restored after she signed an advertising contract.

Cats and Dogs Animal Hospital of Santa Barbara said Yelp offered to "hide negative reviews" in exchange for ad sales. The owner of Wheel Techniques, a Santa Clara auto body shop, said he asked Yelp why a competitor had a higher rating and was told that the rival company bought ads.

Such claims, if credible, might tarnish Yelp's own ratings with the public. Like the businesses its users rate, Yelp must work hard to maintain its own credibility with consumers, said Gartner Research Director Brian Blau.

"On the surface, you'd think this news would be an endorsement for Yelp," Blau said Wednesday. But it could leave consumers wondering, "If Yelp is permitted to do this, will they? They said they aren't, but will they in the future? That's going to be the bigger question."

In this case, the appeals court said the plaintiffs failed to show that the company violated their rights or broke any laws, even if they proved all their allegations.

Yelp's ratings, based on reviews by members of the public, are within its discretion, Berzon said - a "benefit" the company chooses to provide. Because the company's ads also have value, she said, "any implicit threat by Yelp to remove positive reviews absent payment for advertising was not (legally) wrongful."

Chronicle staff writer Benny Evangelista contributed to this report.

Online extra

To view the ruling, go to http://1.usa.gov/W7Esnl.