Craigslist countersues eBay

May 13, 2008 6:58:32 PM PDT
Online classifieds giant Craigslist countersued its minority owner, eBay Inc., on Tuesday, alleging the online auctioneer is violating federal and state antitrust laws. EBay attempted to quash competition with a series of actions relating to its own classifieds site Kijiji, which launched last year in the U.S., according to Craigslist's complaint, filed in state Superior Court in San Francisco.

EBay internally calls Kijiji the "Craigslist killer," the complaint claims.

San Jose, Calif.-based eBay said the allegations are unfounded and unsubstantiated. It claims Craigslist is trying to divert attention from eBay's own lawsuit, filed in April, which alleges that Craigslist founder Craig Newmark and Chief Executive Jim Buckmaster engaged in a series of "clandestine transactions" intended to dilute eBay's stake unfairly.

The lawsuits pit two of the world's top Web sites against each other. EBay ranks 17th in popularity, according to traffic ranking site Alexa, while Craigslist ranks 45th.

The latest complaint outlines a fractious four years since eBay purchased a roughly 28 percent stake in Craigslist from an unnamed former shareholder who solicited outside bids. The terms of the deal were never disclosed, but Craigslist's complaint said it believed that shareholder's stake had not been "properly issued."

At the time, Craigslist and eBay had agreed that if either party engaged in competitive activity, they would lose certain rights, such as the right to appoint a board member.

But eBay named a representative to Craigslist's board who was a Kijiji insider, actions Craigslist claims violate the federal Clayton Antitrust Act and California law prohibiting participation on the board of a competitor.

EBay also asked for confidential Craigslist information - such as launch dates for new sites and site traffic statistics - as it secretly planned to launch Kijiji, which violates federal and California laws against unfair competitive activity, the complaint says.

EBay infringed Craigslist's trademark by placing misleading ads for Kijiji on Google using Craigslist's name, the complaint said.

EBay also engaged in business interference, false advertising, phishing attacks, trademark infringement and trademark dilution, and broke its duty to shareholders, the complaint alleges.

Craigslist, based in San Francisco, wants eBay to divest from Craigslist, stop using its name in advertisements for eBay and pay damages.

Craigslist says it's constantly been pressured to sell a higher stake to eBay, despite initial assurances by eBay's former chief executive Meg Whitman that the eBay was content with its minority stake.

Following the purchase of a Netherlands classified site, eBay executive Garrett Price said at a Craigslist board meeting, according to the complaint: "We just purchased the largest classifieds site in the Netherlands for $290 million, what do you think we would pay for the largest classifieds site in the United States?"