eBay and Craigslist Lawsuit

12/9/2009    by John

The battle between eBay and Craigslist has finally reached the courtroom. At issue is did eBay use the information it obtained by being on the Board of Craigslist to help it create a stronger competitor and should have Craigslist diluted eBay as a result.

Back in 2004 eBay paid $32 million for its stake in Craigslist. Of this sum $16 million to Philip Knowlton (a former employee) and $8 million each to Craigslist co-founder Craig Newmark and CEO Jim Buckmaster. In return eBay obtained 28.4% of Craigslist, a board seat and special rights that included an ability to block the issuance of new shares.

eBay created a competitor to Craigslist, Wijiji, and launched the site Internationally in 2005 and the US version in 2007.

The launch of the US site was kept from Craigslist despite concerns from the top eBay attorney. One of the eBay representatives how held the Board seat, Josh Silverman, went on to lead the International Classified business of eBay.

The lawsuit presently underway is specifically about whether Craigslist did wrong by issuing additional shares and diluting eBay to only owning 24.85% of Craigslist. A shareholding below 25% resulted in eBay losing their board seat.

A great Wired Magazine article about the court case highlights the role of Meg Whitman who is hoping to become the next Governor of California.

The trial started on December 7, 2009 and is expected to feature the founders of both eBay and Craigslist.

Interesting times.