Craigslist and eBay Headed for the Court Room Next Week

Craigslist and eBay are heading for all-out war as the two companies are preparing to fight it out in a lawsuit filed by the auctions site set to begin next Monday. The lawsuit is the culmination of a tense relationship between the two companies which has been going for more than five years now. eBay owns a minority stake in the privately-held Craigslist, the reason behind the dispute. The company is also saying that it plans to expand its classified offerings with acquisitions or partnerships in several countries.

eBay bought a stake in Craigslist in 2004 from one of the original investors, initially owning a 28.4 percent slice of the company. Despite initial claims that it would focus on Craigslist in the classified ads market, it later launched a competitor to the site, Kijiji, using inside knowledge it gained as a shareholder at Craigslist, the classifieds company says. This is the object of another lawsuit filed by Craigslist for unfair competition and other claims.

In 2007, after the launch of Kijiji in the US, Craigslist diluted eBay's stake in the company to just 24.85 percent, losing its seat on the board in the process, a move which eBay claims was made using various illegal tactics. It filed a lawsuit as a consequence and, after two delays, the legal proceedings are about to start next week. The lawsuit is expected to last two weeks.

In its defense, Craigslist says eBay acted in bad faith from the start and used deceptive tactics on more than one occasion. "If it could not own Craigslist, eBay would exploit its position as an insider and use Craigslist's confidential information, experience, skill and innovations against Craigslist," Craigslist lawyers wrote in the pretrial brief.

In the meantime, eBay says it’s looking to bolster its position internationally with a series of strategic acquisitions in the classifieds fields. eBay already has classified ads operations in 20 countries and will now focus on countries in which classifieds are particularly popular. The company expects to double its profits from 2008 in this sector by 2011. “I’m going to be very aggressive looking for opportunities to strengthen that portfolio, either organically or through acquisitions,” John Donahoe, eBay CEO, said. “We have the financial strength and capacity to do a sizeable acquisition. When we see an opportunity that will really strengthen the portfolio, we’ll move.” [via Reuters, Bloomberg]