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eBay declassifies classifieds-happy Craiglist suit

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You could say that eBay has declassified its Craigslist lawsuit. But that might cause some confusion.

Yesterday, the world's largest online auction house removed the seal from its legal complaint against Craigslist, revealing that the two companies are squabbling over their competition in the online classifieds market.

This hardly comes as a shock. In August 2004, eBay purchased from a former employee in Craigslist a 28.4 per cent stake in the online classified ads site that deals in everything from prostitution to contract killing. Just a few months later, eBay launched its own classifieds operation: the Swahili-flavoured Kijiji.

At first, Kijiji concerned itself with markets outside the US, including Canada, France, Germany, Italy, China, Japan, and Taiwan. But last June, eBay took the operation stateside, going toe-to-toe with itself - and the other owners of the privately held Craigslist.

According to eBay's suit - unsealed here (PDF), with certain juicy bits redacted - Craigslist head honchos Craig Newmark and Jim Buckmaster decided that Kijiji's US debut destroyed certain shareholder rights attached to eBay's stake in their operation.

The Craiglisters sent eBay a letter complaining of "competitive activity" - the lawsuit says - and in a subsequent email message to then eBay CEO Meg Whitman, Buckmaster proclaimed "we are no longer comfortable having eBay as a shareholder, and wish to explore options for our repurchase."

When eBay nabbed its stake in Craigslist it agreed to relinquish certain rights if it pulled a Kijiji. But eBay believes Newmark and Buckmaster have gone too far. Yesterday, it told The AP that the original agreement between the companies "always envisioned that there could be competitive activity".

With its suit, the auction house seeks to win back some of the shareholder rights the Craiglisters have taken away. The suit accuses Newmark and Buckmastrer of "breaching their fiduciary duties of care, loyalty, and good faith by implementing certain self-dealing transactions...which were designed specifically to benefit themselves to the detriment of eBay."

Meanwhile, in a blog post entitled "Tainted Love," the Craiglisters question whether eBay is merely trying to eat them. "We are surprised and disappointed by eBay’s unfounded allegations, which came to us out of the blue, without any attempt to engage in a dialogue with us," the post reads.

"eBay has absolutely no reason to feel threatened here — unless of course they’re contemplating a hostile takeover of Craigslist, or the sale of eBay’s stake in Craigslist to an unfriendly party." ®

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