eBay, Craigslist Trade Slings in Court

Key execs' testimony, so far, reads like a 'he said, she said.'

by Auctiva.com staff writer
- Dec 11, 2009

eBay executives, including former CEO Meg Whitman, were in a Delaware courtroom last week for the start of the company's legal battle with classified ads site Craigslist.

In a 2008 lawsuit, eBay alleges Craigslist founder Craig Newmark and Craigslist CEO Jim Buckmaster unfairly devalued eBay's stake in the online classifieds company from 28 percent to 24 percent to keep eBay off of Craigslist's board—and to keep eBay from acquiring the entire company.

Craigslist's countersuit claims eBay used confidential information it gained from Craigslist employees to start Kijiji, eBay's own online classified ads site.

"eBay told us that we were 'the play' in classifieds," Newmark told the court early in the week. eBay also assured Craigslist "they would be comfortable with a courtship period, where eBay would be completely happy with 28 percent," he testified.

However, according to Newmark, eBay soon wanted to increase its stake in the company and began buying stakes in other online classified ad sites.

"eBay—specifically Meg Whitman—made commitments, and broke them," Newmark added.

Whitman, who was the first person to testify in the trial last Monday, told the court eBay didn't misuse confidential information to create or benefit Kijiji. She also said eBay wasn't shy about wanting to acquire Craigslist when it initially acquired shares in the company in August 2008 before settling for a minority share.

"I said, 'Listen, we want to be a good partner; in the end we would like to own all of Craigslist,'" Whitman noted, although she admitted she knew that was unlikely.

According to eBay, the auction site had plans to begin Kijiji as far back as April 2007, and told Craigslist executives about the venture in late-May 2007, noted Brian Levey, a vice president at eBay.

When Craigslist lawyer Michael Clyde asked Levey why the company waited so long to share that information with Craigslist's principals, he responded: "We didn't want to announce something before we were ready to launch. From an intellectual property perspective, we didn't want people becoming squatters."

But according to Newmark, he wouldn't have allowed eBay to acquire a stake in Craigslist had he known the auction site planned to create Kijiji. He also says he was unaware eBay employees were sharing confidential Craigslist information.

eBay, however, says Craigslist knew from the beginning that it planned to create Kijiji. eBay founder Pierre Omidyar said Craigslist was agreeable to him sitting on both Craigslist's and eBay's boards in the beginning. He also testified that he told Craigslist's founder about eBay's plans to create its own classified ads site.

"This case is about Craigslist's secret scheme to wrongfully diminish eBay's rights as a minority shareholder, which eBay is asking the court to remedy," says Alan Marks, an eBay spokesman.

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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