In the equivalent of an online sale gone horribly wrong, mercantile giants eBay and craigslist are at each other’s throats in what promises to be a long-running legal drama.
The initial salvos include the airing of a public version of the lawsuit filed last week by eBay and postings on the craigslist blog.
Craigslist.org, the online classified site, is tied together with eBay, the giant online auctioneer, through an August 2004 investment in which eBay acquired 28.4 percent of the company’s outstanding stock. The other shareholders are founder and Chairman Craig Newmark and Chief Executive James Buckmaster.
Ties between the companies, however, began to fray in June 2007 when eBay launched Kijiji, an online classified site that until then had been limited to foreign markets—in the United States.
Within two weeks of the rollout, Mr. Buckmaster sent a letter to eBay Chief Executive Meg Whitman, saying “we are no longer comfortable having eBay as a shareholder.” In response, Ms. Whitman said eBay was not interested in selling out, but stood ready to buy the rest of craigslist.
In the fall of 2007, the lawsuit said, Mrs. Newmark and Buckmaster, comprising the entire board of directors, held a series of meetings to discuss the “potential threat of an unwelcome takeover” and adoption of a “poison pill” designed to make a hostile takeover excessively costly for a would-be acquirer. The poison pill and a stock issuance that diluted eBay’s interest to 24.85 percent of outstanding shares were approved in January, the lawsuit said.
Also approved was a right-of-first-refusal provision that eBay said would bar it from selling its stock to anyone not controlled by Mrs. Newmark and Buckmaster.
In a blog posting on Wednesday, meanwhile, craigslist portrayed eBay as a disgruntled stockholder.
“Sadly, we have an uncomfortably conflicted shareholder in our midst,” the blog said, “one that is obsessed with dominating online classifieds for the purpose of maximizing its own profits.”
In a blog post last week, the craigslist blog said that 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 to to an unfriendly party. In which case, they’re out of luck.”