Split Ruling in eBay vs. Craigslist

Both Internet powerhouses claim victory in bitter 'poison pill' dispute.

by Auctiva.com staff writer
- Sep 10, 2010

A Delaware judge has ruled Craigslist was wrong to take a "poison pill" that diluted eBay's stake in the classifieds site and stripped eBay of its seat on the board of directors.

In the Sept. 9 decision, the judge reinstated eBay's 28.4-percent share of Craigslist stock. But he stopped short of restoring eBay's board seat, and declined eBay's request for reimbursement of legal fees.

Though Craigslist founders Craig Newmark and Jim Buckmaster argued they took the dilutive action to thwart eBay's takeover advances, the judge ultimately agreed with eBay that the move was in retaliation for eBay's launch of Kijiji, a competing site now known as eBay Classifieds.

"Jim and Craig acted to punish eBay for competing with Craigslist," states Chancery Court Judge William B. Chandler III, in his decision.

In a released statement, eBay says it got what it wanted from the lawsuit.

"eBay brought this suit to protect its own shareholders and preserve its valuable investment in Craigslist," says Michal R. Jacobson, eBay's general counsel. "The evidence presented at trial demonstrated that the actions were taken by Mr. Buckmaster and Mr. Newmark to benefit themselves at the expense of eBay, and we are gratified that the court recognized these actions were both unfair and unlawful, and rectified the situation."

Writing in the Craigslist blog, Buckmaster says he's satisfied with the court's finding that a provision allowing for a staggered board was adopted "in good faith to prevent eBay, a business competitor, from having access to confidential Craigslist board discussions."

Wall Street analysts suggested the ruling will give eBay access to certain information about Craigslist, but probably won't allow eBay to influence company strategy.

The next phase of the lawsuit goes to a California Superior Court to decide whether eBay unlawfully used confidential Craigslist information to launch its own online classifieds business.

About the Author

Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.

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