Details Come Out On eBay/Craigslist Fight

from the not-so-surprising dept

Thu, May 1st 2008 3:40am — Mike Masnick

Some details have come out on the eBay-Craigslist lawsuit that was in the news last week. Ebay has released its filings in the lawsuit, suggesting pretty much exactly what you'd expect, with a few exceptions. There was a clause in the original agreement between the two companies if one started competing with each other -- allowing the other to resell shares without a right of first refusal. When eBay brought Kijiji to the US, Craigslist began the process of exercising that provision. However, eBay quickly tried to separate anyone dealing with Kijiji from anyone dealing with Craigslist, pulling its representative off of Craigslist's board since he was tangentially working with Kijiji. It then tried to put a different board member in place -- choosing a recent eBay hire who had no knowledge or experience with Kijiji. eBay presented this idea to Craigslist, stating that it was keeping Kijiji completely separate from its work with Craigslist, while also hinting at the idea that eBay really, really, really would just prefer to buy Craigslist entirely. Craigslist does not appear to have responded (even to the newly proposed board member) and then held a few board meetings without an eBay member present, added in a poison pill to dilute shares and then exercised the poison pill, pushing eBay below the 25% threshold, which it needed to put in place a board member.

The filings clearly only show eBay's side of things, so as such it's not surprising that, based on the facts presented, it does look like Craigslist took some questionable actions to get eBay off its board. Craigslist claims it will respond soon, which should be interesting. You can certainly understand where Craigslist is coming from (no one wants a competitor on its board) -- but the question is whether it went about shaking off eBay in a legitimate manner. From the facts presented so far, that's far from clear. The ability to dilute the shares was not a part of the original agreement (even if such competition happened). Behind closed doors issuing of additional shares raises a lot of questions -- no matter how well intentioned.

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Filed Under: competition, dillution, poison pill
Companies: craigslist, ebay

19 Comments

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Haywood, 1 May 2008 @ 4:49am

Knowing and doing business with both......
I'd be inclined to give Craig's List a pass. Ebay truly is the evil empire, never met a fee they didn't like, normally backing the wrong party in any dispute, almost never backing up the vendors when take down notices show up, regardless of how silly.
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moe, 1 May 2008 @ 5:38am

Re: Knowing and doing business with both......
Sure, I see no problem with selectively applying the law based on the experience of customers. After all, we're only talking about a contractual lawsuit and alleged improprieties with publicly-traded securities.

/sarcasm
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Anonymous Coward, 1 May 2008 @ 5:53am

Re: Re: Knowing and doing business with both......
Since when does that matter?
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a c o'ward, 1 May 2008 @ 6:19am

Re: Re: Knowing and doing business with both......
craigslist stock isn't publicly traded
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Anonymous Coward, 1 May 2008 @ 6:21am

Fuc ebay, i wish them all the worst possible things in life.
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Jake, 1 May 2008 @ 6:43am

Sounds to me like neither company is going to come out of this with any credit.
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bri (profile), 1 May 2008 @ 7:39am

Seems pretty clear cut to me...
Ebay had a contractual obligation to not compete directly with Craigslist. Ebay then purchases an overseas company and launches it in the US in direct competition with Craigslist. Craigslist follows the terms of the contract, dilutes Ebay's shares and freezes them out. Sure, we don't have all the details, but it's pretty hard to see how Ebay could come out looking like the good guy in all this.
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Jason, 1 May 2008 @ 8:09am

sweet
how awesome would it be if they both imploded? then I could start Jasonslist and eBuy.
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Anonymous Coward, 1 May 2008 @ 8:12am

Re: Seems pretty clear cut to me...
ah, but you see, it wasn't Ebay competing with Craigslist, it was Kijiji. That's like holding Pepsi responsible for something KFC did to Church's Chicken. In our society the schools are supposed to raise our kids, not us, so why should a parent company be responsible for anything their kids are doing?
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Rick, 1 May 2008 @ 8:15am

Craigslist is acting evil.
Their actions, which I agree were to protect themselves, are very unethical. If eBay OWNED 25%+ of craigslist, they should have been treated with a lot more respect.

Devaluing their ownership behind their backs after taking the money eBay PAID them seem highly unethical, regardless of the reasons.

Should I cut off my foot if it steps in mud, just because it got my pants dirty?
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neophyte, 1 May 2008 @ 8:37am

who really owns craigslist anyway?
I've always wondered both who owns it and how it makes money . . . can someone explain this to me?
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suckerpunch-tm, 1 May 2008 @ 8:48am

re: Craigslist is acting evil.
eBay never paid Craigslist anything. eBay bought their 25% stake in craigslist from a former employee of CL, even though CL asked that former employee NOT to sell to eBay.
Craigslist never wanted eBay to be part of the ownership group from the start, but since the former employee was free to sell his share however they wanted, thts how eBay ended up owning 25% of CL.

Hope that makes sense.
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suckerpunch-tm, 1 May 2008 @ 8:53am

Re: who really owns craigslist anyway?
Craigslist makes money by charging for ads in certain catagories & cities.
For instance in San Francisco, anyone placing a job ad must pay a fee. $75 I beleive.
Similar in NY & LA among several other cities.
In NY, there is also a fee to post brokered apartment rentals.

Craigslist is a privately held company, shares being owned by its employees (sans the 25% held by eBay).
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Mike (profile), 1 May 2008 @ 10:20am

Re: Seems pretty clear cut to me...
Ebay had a contractual obligation to not compete directly with Craigslist.

No, actually, it didn't. It could compete, but that enabled certain rights to both parties -- but it didn't include diluting shares.

Ebay then purchases an overseas company and launches it in the US in direct competition with Craigslist.

No, actually, it didn't. Ebay started up Kijiji itself (didn't buy it).

Craigslist follows the terms of the contract, dilutes Ebay's shares and freezes them out.

No, actually, it didn't. Craigslist changed the board charter unilaterally without informing eBay or getting eBay's board seat's vote in order to dilute the shares. That was not part of the contract.
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Anonymous Coward, 1 May 2008 @ 10:22am

Re: Re: Seems pretty clear cut to me...
horrible analogy. Pepsi does not OWN KFC, it is merely a product sold in KFC. Ebay OWNS Kijiji, so yes Ebay is responsible for the actions of Kijiji and in this case they are responsible for the direct competition with Craigslist.
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snowburn14, 1 May 2008 @ 10:48am

Re: Re: Re: Seems pretty clear cut to me...
Um, actually, they DO own KFC. They bought them out a while ago (1986, if various online sources can be believed).
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Etch, 1 May 2008 @ 11:00am

Re: Re: Re: Seems pretty clear cut to me...
Actually, Pepsie owns Frito Lay, Tropicana, Quaker Oats, KFC, Pizza Hut, and Taco Bell, but the fast-food restaurants were later spun off into Tricon Global Restaurants, now Yum!
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Lookcube, 10 May 2008 @ 6:13pm

Competition will benefit users
Craiglist is an enormously useful service. I've found places to live, meet great people, and helped grow small side businesses with it. Nearly everyone I know has had at least one positive experience with it.

Craiglist however has never really had serious competition. Now they do - not only from eBay, but also from spammers and bots. Competition is good for improving quality and service, but it's rarely good for the market leader. I think I first read on Techcrunch the idea that modern websites are like TV shows, and that even successful websites only have a lifespan of 5-7 years. If that's the case, then the battle for free local classifieds is about to heat up. This is great news for people who enjoy innovation.

Craigslist is not known for innovation. Nor does it necessarily need to be - after all if it's ain't broke, don't fix it. It's simplicity is a large part of it's success. However the Internet thrives on innovation, and those who stand still are eventually surpassed. Craigslist knows this, which is why they recently announced that they are hiring in their blog. But why so late to respond? When you have a lock on a market, there is no incentive to change. eBay is a great example of what happens when a successful website lacks serious competition. Competition is going to be beneficial for users. imo, eBay/Kijiji is a terrible alternative, but others will emerge as the better service...

I think about this stuff a lot - which is why I've just released my own free local classifieds service called Lookcube. There's enormous potential in local websites - a chance for people to meet, join, and organize, small business and freelancers to grow, and goods to be exchanged - all outside of the corporate sphere - if I can help make that happen, my effort will be a success.
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Roxanne, 18 May 2008 @ 12:47pm

Try this
Try using http://www.pedrosplaza.com
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