Craigslist, eBay Face Off In Court

The lawsuit, in which eBay accuses Craigslist of diluting its investments and diminishing its voting power, went on trial Monday.
eBay's lawsuit accusing Craigslist of diminishing eBay's rights as a minority shareholder in the online classified ad company went on trial Monday in a Delaware courtroom.

eBay, which bought Craiglist stock from a shareholder in 2004, claims Craiglist founder Craig Newmark and chief executive Jim Buckmaster acted inappropriately in implementing measures that diluted eBay's investments and diminished its voting power. It also accuses the pair of adopting poison-pill rules that inhibited eBay's ability to sell its Craigslist shares to anyone other than Newmark, Buckmaster, or their company.

Craigslist denies the claims and has filed a separate suit in California, saying that as a shareholder, eBay "engaged in conduct designed to harm Craigslist, its users, and consumers in California and elsewhere."

eBay's motivation, according to Craigslist, was to gain control of the classified ad service. Once those attempts failed, the online auctioneer and retail site launched a competing service, Kijiji, in the hopes of killing off Craigslist.

Craigslist's suit is not scheduled to go before a jury until late 2011, Buckmaster said Monday in the company's blog.

Because Craigslist is a private company, details of eBay's stock purchase were not disclosed when originally announced. On Monday, however, Buckmaster said eBay paid $16 million, which included the rights-of-first-refusal over any sale of Buckmaster's and Newmark's shares and veto rights over mergers and acquisitions.

Craigslist claims those special rights ended in 2007, when eBay launched Kijiji in the United States. However, at the time of the launch, Craigslist did not appear to care. "We assume that eBay will continue to be a steadfast member of our board, and conduct themselves honorably and appropriately," a spokeswoman told InformationWeek at the time.

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