EBay reveals details of its lawsuit against Craigslist

Alleges that Craigslist's board diluted eBay's stake in the company

EBay is accusing Craigslist's board of directors of secretly plotting to dilute eBay's investment in the online classified advertising site after the auction company developed a competing service, according to a lawsuit filed under seal by eBay last week and released Thursday.

Some sections of the complaint (pdf format) have been removed to protect certain information about Craigslist, which is a private company and governed by confidentiality restrictions.

EBay filed the lawsuit against Craigslist, its founder Craig Newmark and CEO Jim Buckmaster in the Delaware Court of Chancery on April 22. According to the lawsuit, Craigslist's board held a number of secret meetings beginning in October 2007 in an effort to dilute eBay's 28.4 per cent stake in the company, which it acquired in August 2004.

Craigslist spokeswoman Susan MacTavish Best declined to comment on the unsealing of the lawsuit beyond what was posted on Craigslist's blog. She said the company would have more to say when it filed its formal response in the next few weeks.

"As those who know us best will recognize, every measure we have taken has been for the sake of protecting the long term well-being of the Craigslist community," the blog post states. "Sadly, we have an uncomfortably conflicted shareholder in our midst, one that is obsessed with dominating online classifieds for the purpose of maximizing its own profits. It's a conflict of interest worth keeping in mind if you decide to give this filing a read."

According to the complaint, in early 2005, eBay launched Kijiji, an online classifieds Web site, in certain non-English-speaking countries. EBay later then launched the Web site in the US on June 29, 2007. On the same day, Buckmaster sent a letter to eBay saying that it had engaged in competitive activity by launching Kijiji in the US, the lawsuit states.

On July 12, Buckmaster sent a letter to Meg Whitman, then eBay's president and CEO, saying he had "negative feelings" toward eBay's launch of Kijiji in certain markets in the US.

"We are no longer comfortable having eBay as a shareholder and wish to explore options for our repurchase, or for otherwise finding a new home for these shares," Buckmaster said in the letter.

In her response, Whitman said eBay had taken steps to "completely firewall off the operations relating to our Kijiji offering" from the corporate management of its equity investment in Craigslist. Whitman also offered to acquire the piece of Craigslist that eBay did not already own. Ebay said it had no interest in liquidating its holdings in Craigslist, especially given Craigslist long-term revenue potential.

In the lawsuit, eBay said that on October 15, 2007, and October 25, 2007, Newmark and Buckmaster met as a board with its outside attorneys without notifying eBay. Additionally, the two again met as a board with the attorneys in December 2007 and in January without notifying eBay and approved a series of "self-interested, self-dealing transactions detrimental to eBay's interests as a minority stockholder in Craigslist."

According to eBay, Buckmaster and Newmark took steps to limit eBay's ability to sell its stake in the company, which diluted its shares to 24.85 per cent of Craigslist's outstanding shares, less than the 25 per cent necessary to allow eBay to elect a director to Craigslist's board.

EBay is asking the court to rescind the various transactions undertaken by Newmark and Buckmaster that resulted in the dilution of its stake in Craigslist.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Linda Rosencrance

Computerworld
Comments are now closed.

Latest News Articles

Most Popular Articles

Follow Us

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Resources

Best Deals on GoodGearGuide

Compare & Save

Deals powered by WhistleOut
WhistleOut

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?