E-Commerce Titans Clash - EBay Sues Craigslist

New York (NY) - eBay, the world’s most popular online auction site, is suing Internet classified advertiser Craigslist. eBay contends that its 4-year investment in the company has been unfairly diluted, while Craigslist says the suit is unfounded and unethical. Craigslist adds that the lawsuit "came out of the blue."

The suit was filed in Deleware and contends that Craigslist took actions back in January that diluted eBay’s share in the company. Details are scant because the lawsuit has been filed under seal because some of the financial information is under confidentiality agreements.

Back in 2004, eBay purchased a 28.4% stake in Craigslist. Craigslist isn’t publically traded and gave stock to its initial employees - one of those employees sold his share to eBay for an undisclosed sum (but probably made a mint doing it). Analysts believe Craigslist probably issued stock which decreased eBay’s share in the company.

eBay released a press statement saying that Craiglist founder Craig Newmark and the company’s board adopted measures that diluted eBay’s interest by "more than 10 percent". Mike Jacobson, eBay’s Senior Vice President and General Counsel added that Craigslist’s actions have "disadvantaged eBay and its investment in craigslist."

In what is a sign of the laid back and "hip" culture at Craigslist, the company rejected the claims and responded not with a press statement, but through the company blog. In an entry humorously titled, "Tainted Love", Craigslist says it is "surprised and disappointed" in eBay. The post adds that the lawsuit was filed without "any attempt to engage in a dialogue with us."

Since the lawsuit is under seal it is unknown what Craigslist did or did not do to rile up eBay’s attorneys. One thing’s for sure, the company is being pretty vocal in thumbing its nose at eBay. "To be perfectly clear, Ebay’s stake in craigslist has not been unfairly diluted as they have claimed," said Craigslist.