Craigslist counter sues eBay
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Web classified-ad company Craigslist Inc. filed a countersuit on Tuesday against Internet auctioneer eBay Inc., accusing eBay of interfering with its business operations, unfair competition by using its proprietary information, and infringing its trademark to attract visitors to eBay Web sites.
The lawsuit, filed in California Superior Court in San Francisco, was Craigslist’s first substantive response to litigation that began April 22 when eBay sued Craigslist’s two directors, founder Craig Newmark and Chief Executive Jim Buckmaster, for allegedly trying to dilute eBay’s minority interest in Craigslist.
In the initial lawsuit, eBay said that the two men held secret meetings without its knowledge in October 2007 and tried to dilute its ownership stake in Craigslist after it developed a rival offering called Kijiji. The latest suit asks for unspecified damages, and an order that would force eBay to return all shares of Craigslist that were acquired by means of unfair competition, or alternatively, to divest all shares in Craigslist.
In 2004, eBay sought to acquire a former shareholder’s minority stake in Craigslist. Craigslist’s management, founder Craig Newmark and Chief Executive Jim Buckmaster, initially balked at accepting eBay as a minority shareholder because they didn’t think their goals and values were aligned. EBay Chief Executive Meg Whitman and the company’s general counsel Michael Jacobsen met with Newmark and Buckmaster on July 22, 2004, to present their case for the minority stake, according to the court filing. Whitman impressed both of the men with her description of eBay’s values, according to the filing.
EBay purchased an option to acquire the former shareholder’s stake on July 31, 2004, and acquired the stake the next month, the Craigslist complaint states. But Craigslist says that eBay tried from the beginning of their relationship to exert control over Craigslist and sought a greater interest in the company. It pressured Craigslist to let eBay employees work out of Craigslist’s offices and claimed it shouldn’t have to pay for the job postings it advertised on Craigslist, according to the filing. EBay also made repeated requests for confidential information including planned schedule of cities where Craigslist was introducing new sites.
Craigslist and eBay expected to compete with each other, even in the area of online job listings, the sole source of Craigslist’s revenue at the time. However, under an agreement between the companies, if eBay became a minority shareholder and then began competing in online job listings, eBay would have to relinquish certain shareholder rights, Craigslist said in its complaint. EBay introduced Kijiji classifieds in the U.S. on June 29, 2007, and Craigslist notified eBay that this constituted direct competition, resulting in the loss of some eBay rights.
Buckmaster and Newmark had worried that eBay was a “wolf in sheep’s clothing,” but respected Pierre Omidyar, eBay’s founder and a member of Craigslist’s board, and shared their frustrations with him in March 2005, according to the Craigslist complaint.
