May 13, 2008

eBay Vs. Craigslist, Round II. Craigslist Punches Back With Its Own Lawsuit.

Erick Schonfeld

41 comments »

Following the lawsuit eBay filed against Craigslist two weeks ago, Craigslist is punching back today. In a countersuit (complaint embedded below), Craigslist wants back the 28.4 percent of its shares that eBay bought in 2004. It also wants the court to award Craigslist eBay’s related profits, and punitive damages on top of it all. Craigslist is accusing eBay of:

unlawful and unfair competition, misappropriation of proprietary information, deceptive passing-off, business interference, false advertising, phishing attacks, free-riding, trademark infringement, trademark dilution, and breaches of fiduciary duty.

The complaint details how former eBay CEO Meg Whitman sweet talked Craig Newmark into the deal after it nearly fell apart, and then goes on to allege that eBay used its position as a large minority shareholder to try to learn competitive secrets from Craigslist, while launching competitor Kijiji in Europe. Now that Kijiji has entered the U.S. and is going straight for Craigslist, the gloves are off.

eBay filed first, though. So it has the legal advantage. But Craigslist has the reputation and publicity advantage. Everyone loves to root for an underdog. This legal brawl could lead to a customer backlash for eBay if customers decide to take sides.

In the complaint, Craigslist details eBay’s strong-arm tactics both during the negotiations for its equity stake and afterwards. One of the reasons Craigslist agreed to the deal was because eBay founder Pierre Omidyar was named to Craigslist’s board. But he only served a year, and was replaced by Joshua Silverman, the executive in charge of eBay Europe (who oversaw Kijiji). Silverman was quickly replaced, speculates the complaint, because of “antitrust” concerns.

The complaint also describes how eBay tried to undermine Craigslist by buying Google ads for keywords such as “Craigslist.org” and “Craigslits.com,” which then redirected to Kijiji. Oh boy, this is going to get ugly.

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Comments

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Sean

May 13th, 2008 at 3:13 pm

Awesome - I hope they tear eBay a new one.
Bob

May 13th, 2008 at 3:25 pm

They had to spend all that cash they were making on something…lawyers can definitely help them with that. If they had spent their spoils on developing their product then perhaps they would not be in this situation in the first place.

Bob
Jobmatchbox.com
Peter Urban

May 13th, 2008 at 3:29 pm

In Germany we used to say ‘you need a long spoon to eat out of one pot with the devil’ I am not sure if that translates well but you get the idea.

Peter
follow me @http://twitter.com/peterurban
Phillip

May 13th, 2008 at 3:31 pm

That is great! Go craigslist, screw feebay.

http://www.ioffer.com/feepay
Andrew

May 13th, 2008 at 3:33 pm

wow thats a mouthful of complaints. I do wonder what “proprietary information” craigslist has which eBay used.
Robert

May 13th, 2008 at 3:33 pm

This is like reading a high school report from the worst kid in class, with all the spelling and grammatical errors.

If writing is your day job, you might want to be more professional with your skills.
Tim G

May 13th, 2008 at 3:46 pm

@Peter - Here we say “If you sleep with the devil you’re going to get burned” (plus you’re going wake up sore). Honestly what did Craig expect. Ebay must have got him really drunk to get him to sign up in the first place.
Cracker

May 13th, 2008 at 3:46 pm

WOW! eBay, is so busted!
Jon Strom

May 13th, 2008 at 3:59 pm

The incompetence of Meg Whitman and eBay is mindboggling. The Skype acquisition was idiotic. What does voice chat have to do with auctions? (And no, trust me, sellers do NOT want to voice chat with their irate buyers).

eBay is a joke of a company.
Dailen

May 13th, 2008 at 4:07 pm

@Robert (Post #6): I’m gonna have to agree with you. I mean we’re talking beyond grammatical and technical errors, stupid spelling errors included. We’re talking incomplete sentences, sentences which are almost run-on sentences, poorly structured sentences and just plain choppy sentences. And lets not forget the malfunctioning embedded document.
Dailen

May 13th, 2008 at 4:13 pm

EDIT: Apologies for the comment about the embedded document, turns out its related to my work’s firewall
techcrunchreader

May 13th, 2008 at 4:13 pm

Why did Craigslist let eBay invest in the company in the first place?

Then they let them start Kijiji, a direct competitor.

Graigslist’s lawsuit is 3 years late…

Note to Graig Newmark: Was about time, fight!
todd alan

May 13th, 2008 at 4:18 pm

Didn’t eBay just a few months ago piss many of their smaller merchants off my by changing their rules in favor of the larger merchants? And now this? What’s going on over there? Don;t they realize that public perception matter more than ever now?
caco

May 13th, 2008 at 4:18 pm

i was also amazed at how many spelling mistakes this article had. usually dont see them in techcrunch articles.

anyways, perhaps craigslist should be working on a strategic plan to steal some of ebay’s auction shares… cheaper/free auctions integrated in craigslist perhaps?
Paul Short

May 13th, 2008 at 4:18 pm

Get ugly? It already has. Buying domain misspellings is just small-time thinking. And isn’t it against the AdWords TOS to buy ads with large brand names or competitor names in them?
A_____

May 13th, 2008 at 4:30 pm

techcrunchreader Craigslist DID NOT want eBay. CL had set up a corp back in the late 90’s to deal with their growth and legality. When they did this one of their partners was given an equity ownership. That individual sold his share to eBay without CL’s permission or even their knowledge.

Learn a little before you spout off - Craig is as close to Jesus of the Net as we have.
EH

May 13th, 2008 at 4:40 pm

re: Bob@2: Craigslist competitor has a problem with Craigslist. News at 11!
Mogilny

May 13th, 2008 at 4:42 pm

@Robert and Dailen. This is a blog. As long as the information is not loss, silly mistakes should be forgiven.

I hate court cases. Boring.
Tim G

May 13th, 2008 at 4:49 pm

@16 - my bad.
Lookcube

May 13th, 2008 at 4:51 pm

eBay knows that the writing is on the wall for their auction service - users are leaving and using local no or low fee services like Craigslist. Craigslist is winning, and eBay knows it.

That said, I have to be honest and say that eBay is going to win this lawsuit. In the court of opinion, however, eBay will lose.

But no one is going to let Craigslist own the local classifieds space without a fight. Craigslist is rightfully admired for it’s user support, but it has failed to innovate and that leaves room for competition. If you fail to innovate, others will do it for you.

Competition is going to be good for users. There are many players in the social media scene - Myspace, Facebook, Orkut, but not many in the local classifieds space. That’s about to change.

My website Lookcube http://www.lookcube.com is a brand new free local classifieds website. My goal is to improve the exchange of local goods and services, with a particular emphasis on mobile integration and small business tools. This is a great time for both entrepreneurs and end users in this space.
techcrunchreader

May 13th, 2008 at 5:13 pm

@A_____ I didn’t want to go into legal stuff. Now the long story: The legal structure was poorly executed, he should have been advised to include a legal clause saying that no partner can sell his share without the consent of the other partners AND a clause saying that the partners can’t carry on any business of the same nature as (or) competing with that of Craigslist. What happened to him is unfair, but he should have known (been advised?) better. So that’s why I said he let them invest in the company, he didn’t protect himself from situation like this.

From what I have read, Craig seems like a nice guy, that’s why I said fight!

So A_____ , take a deep breath and go pray your new God.
Pete Laurina

May 13th, 2008 at 5:38 pm

@Lookcube I like the plug on your own website at the end there… classic
A_______

May 13th, 2008 at 5:59 pm

Techcrunchreader is the new Jesus of the Net. I hereby remove Craig Newmark as the previous Jesus of Neterith and adopt the know-it-all Techcrunchreader.
Carsten Cumbrowski

May 13th, 2008 at 6:39 pm

Without knowing all the details and what happened behind closed doors, I did get a pretty good feeling about what might happened.

It goes something like this: eBay is interested in getting back a good chunk of the market share for classifieds from Craigslist. Craigslist is not willing to sell, but got soft when eBay agreed to buy only only a minority share of Craigslist that Craig was able to keep control of the company and a nice lump-sum of cash as well (Having a company that is worth millions of dollars on paper does not put millions of dollars in your bank account).

eBay tries to from the inside to get control over the company and eventually the shares needed to practically own Craigslist and integrate it into the eBay platform. This did obviously not work as planned so eBay turned around and launched its own Craigslist clone somewhere else on the world to learn and get the experience that they could not get with their minority ownership of Craigslist.

When they felt comfortable with what they got, eBay brought the baby home and tries to divert potential Craigslist users to their own service to eventually outgrow Craigslist and push them out of the Market. Basically following the principle, IF I CAN”T OWN IT, I WILL DESTROY IT.

Some of it might not have been the plan all along and developed in the process, but I think that the actions taken by eBay speak for itself. My support goes to Craigslist, underdog or not does not matter to me in this case. I simply do not like anybody who uses backstabbing as business practice.
Damion Hankejh

May 13th, 2008 at 6:42 pm

This case is already over. Congratulations, Craig.
YouYap.com

May 13th, 2008 at 7:30 pm

Ebay is notorious in going after everyone. I remember old days when I sell on ebay and I got a domain with word “bay”
Remember when there go after bidbay.
Ebay is very greedy people. I wish someone crush the company. Lets all gang up against ebay
Mark - Ex Competitor of Kijiji

May 13th, 2008 at 8:07 pm

Back in the day I worked for a Craiglist clone in Europe and Ebay knocked on the door. They asked for all the corporate info (revenues/PPC spent…) and talked a lot about acquiring us. A week later they launched their competitive Kijiji service.

Maybe this is normal in today’s corporate world, but the way they pulled information from us and fxcked us over was pretty harsh.
If I compare the services today, Kijiji surpassed my old employer but spent a massive amount of PPC advertising for that. I am glad to see that Ebay doesn’t get the web. Kijiji is a classified grave in which Ebay dumps a ton of money. They are just lucky that they employ the best Paid Search team (& Intelligence) that is out there.
Mark - Ex Competitor of Kijiji

May 13th, 2008 at 8:09 pm

And to add:
Craig Newmark pulls about $70million/year from Craigslist. Don’t think he is the underdog in this fight. He has more power and money than most people think.
Steve Rhodes

May 13th, 2008 at 11:29 pm

Craigslist having $70 million in revenue (or whatever it is, more details will probably come out unless the lawsuit gets settled) does not mean that Craig pulls in that much money.
New York City Wedding Photographer

May 13th, 2008 at 11:47 pm

Ebay suspended my account after I tried to sell my World of Warcraft game. Apparently, they changed a ruling during my auction and then penalized me for it by shutting me down Go get em’ Craig!

peace,
parris whittingham
New York City Wedding Photographer
Nigel Eccles

May 14th, 2008 at 2:04 am

In the court of public opinion eBay has already badly lost. The core thing that built Craigslist is its community. eBay clearly doesn’t understand that it can’t win by corporate strong arm tactics.

It is a shame as eBay used to be such a great innovative company. Clearly the suits have taken over and are screwing it up. (Hopefully they will sell Skype before they break it as well)
Your Uncle Bob

May 14th, 2008 at 6:17 am

Hmmm…which one to choose?

In one corner we have a clueless corporation run by a bunch of idiot MBAs. All the real talent fled years ago and they’re left with morons with white teeth and good hair.

In the other corner we have a guy who eschews profit, capitalism and anyting that remotely appears to be non-communal. (Oh nevermind he makes millions himself. Do as I say, not as I do kinda thing. He’s special ya know.) His site, although enormously popular, is absolutely the most hideous looking and user-unfriendly site on the internet.

But CL has the community and eBay has nothing. CL will win by TKO in the 4′th round.
Juan

May 18th, 2008 at 12:42 pm

Company: Pedro’s Plaza
Website: http://www.pedrosplaza.com
Launch Date: March 1, 2007
Hammer

May 20th, 2008 at 8:27 pm

EBAY SUCKS GO CRAIGSLIST. I JUST SCREWED BY THOSE IDIOTS FOR A LISTING VIOLATION, YET ALL YOU HAVE TO DO IS CHECK OUT THE MEGA SELLERS AND THEY CAN DO AND LIST WHAT THEY WANT. EBAY IS ABOUT THE ALMIGHTY DOLLAR AND THAT IS IT. I HOPE THOSE MORONS GET CRUSHED.
blah

May 30th, 2008 at 1:45 pm

Hammer:

WHY ARE YOU YELLING!?! YOU’RE NOT ON THE CELL PHONE, ARE YOU? MAYBE I SHOULD CALL SOMEONE AS WELL. YEAH, PEOPLE WANT TO HEAR MY CONVERSATION IN THIS PACKED MOVIE THEATRE AS WELL.

LOOK. I SPELLED THEATRE LIKE A EUROPEAN.

Go visit TexasKaos.com…..because everyone else is self-promoting.

NOW I’M GOING TO CALL SOMEONE TOO.

oh, & CL rocks!
john

May 30th, 2008 at 11:19 pm

ebay is going to loose this fight
average JOE

June 8th, 2008 at 2:53 am

EBay is not for the little guy anymore. Shoot eBay itself sells you stuff. Too, too many fees! you have to pay for the product you list, then eBay gets its cut whether it sells or not, aka-PayPal “eBay” then digs a little further into your pocket, and after all that you have to pay to package the item and in some cases eat the shipping costs as well. And that’s if your listing is not cancelled by eBay for some silly excuse. Not the same place anymore, I sure wish Yahoo would have stayed on. If I knew then what I know now I would have switched to them in a heartbeat, never knew eBay would get so ugly. I have been with eBay, since they practically opened their doors, but seeing how nasty they have become, I truly have second thoughts. If you’re not a corporation or mega seller, it’s not worth selling anything on eBay. EBay now caters to big business and I think these idiots help police eBay in order to get rid of the little guy so they can sell their junk at high dollar, as they eliminate their competition. If I can recall correctly eBay’s roots consisted of the average Joe, don’t remember it was all about mega sellers & big companies. What a sell out, if people had wanted to deal with big companies and so forth, why shop on eBay, when many of them have sites of their own. EBay is truly lost…ouch.

EBay’s listings now consist of eBay’s valued sellers listings showing up first and whether you are a decent seller or not, you’ll be lucky if your listing shows up somewhere in the middle or last. Therefore deal or not, does not matter on eBay, you get the deal eBay decide you ought to have. Therefore don’t be surprised if you don’t sell an item on eBay even if it dirt cheap and all you get is scam email from people trying to get into you email, paypal, and ebay account trying to take more of your $$$.