Craigslist Fires Back at eBay
SAN FRANCISCO - Craigslist is responding to a lawsuit by online auction site
eBay
(EBAY) - Get Report
with one of its own.
Among its list of accusations, Craigslist claims that eBay has engaged in unlawful and unfair competition, business interference, false advertising, trademark infringement and breaches of fiduciary duty.
In August of 2004, eBay acquired a 28.4% stake in Craigslist, a free online classifieds Web site. At the time, eBay repeatedly asserted that it shared the same community values as Craigslist, according to the lawsuit filed in California Superior Court in San Francisco, where Craigslist is based.
"Since acquiring its interest, however, eBay has instead engaged in conduct designed to harm craigslist, its users, and consumers in California and elsewhere," the lawsuit states.
eBay disputes the claims.
"We regret that craigslist felt compelled to resort to unfounded and unsubstantiated claims in order to divert attention from actions by craigslist's board that unfairly diluted our minority interest," said spokeswoman Kim Rubey in a statement.
"eBay has, and will continue to be, a minority shareholder who believes in craigslist, shares its values and acts with openness, honesty and integrity in its dealings with craigslist's board and the online community. We strongly refute any suggestion to the contrary."
Earlier this month,
accusing Craigslist of trying to dilute its stake by reorganizing shares so that eBay ended up with 24.85%. Under that arrangement, eBay lost certain rights granted to shareholders with a 25% stake or more, including the ability to choose a board director when all three were up for election.
For its part, Craigslist points specifically to eBay's Kijiji, an online classified site started outside of the U.S. but made its way into the country last June.
The company accuses eBay of planting on its board of directors the operator of Kijiji in Europe. Once eBay realized the anti-trust implications, it replaced that member with another Kijiji insider, according to the lawsuit.
Craigslist further asserts that "throughout its tenure as a craigslist shareholder, under the guise of shareholder requests for information, eBay has hounded craigslist with improper demands for confidential craigslist information, which could be used for anticompetitive purposes."
It also maintains that eBay has used Craigslist's name "to confuse the public and illegally divert Internet traffic from craigslist to eBay and its Kijiji site."
In her retort, Rubey pointed out that Craigslist and eBay have an absolute right to compete with each other, by Craigslist's own admission.
"As initially envisioned with our investment and known by craigslist's board, we also will continue to help grow the global classifieds market with products we believe serve targeted customer segments whose needs are not being met in the market today," she said.
eBay's own lawsuit, filed in Delaware Chancery Court, is revealing because it shows the company's interest in Craigslist. Last July, Meg Whitman, who was eBay's chief executive at the time, told Craigslist's CEO Jim Buckmaster that "we would welcome the opportunity to acquire the remainder of the (company) we do not already own whenever you and (Craigslist founder Craig Newmark) feel it would be appropriate."
Craigslist continues to firmly assert its independence. In its lawsuit, it states that "eBay's improper conduct has not relented and, absent judicial intervention, eBay will continue to abuse its position."
Shares of eBay were up almost 1%, or 29 cents, to close at $31.41 on Tuesday.