A while back I wrote about a lawsuit, possibly with unethical motives, that was filed by Ebay against Craigslist. In the suit, Ebay claims that the people in charge of Craigslist, a popular internet classifieds site, have actively tried to reduce Ebay’s influence as a minority shareholder in the company.

WSJ’s Marketwatch had this to say about the suit:
The countersuit escalates an ongoing struggle between one of Silicon Valley’s biggest Internet players and a smaller, but strategically important partner that’s been reluctant to both embrace eBay and cash in on its own popularity.

Craigslist is one of the most popular websites in the united states, mainly due to it’s ease of use, and the fact that most of it’s features are free to use except for a minimal charge for real-estate and job postings. The company still manages to profit in the several hundred million dollar range, without the large fees and massive overhead of some of the larger job listing websites.

WSJ:
In its own suit, Craigslist counters that eBay has “engaged in conduct designed to harm Craigslist, its users, and consumers.” That conduct includes “unfair competition” and attempts to “treat Craigslist as if it were one of eBay’s subsidiaries,” according to the suit.

This is a very revealing look into the corporate culture of Ebay, and Cragislist. It appears Craigslist feels threatened by Ebay, and is growing tired of their attempts to strong-arm them out of the market for online classifieds.

Personally I think that Ebay should just let craigslist go. As a Google exec said recently, (paraphrased) “we do well when the internet is healthy.” Ebay has nothing to gain by squashing Craigslist.

When I’m trying to sell something on the internet, I’ll usually try craigslist since it’s easy and free but doesn’t have any mechanism for bidding so I’ll usually have to high-ball the price and then negotiate, and even then it’s sometimes difficult to sell things because people have no obligation to complete the transaction and will often flake out.

So basically this results in a situation where I will use Craigslist to sell inexpensive things, or things in high demand, and Ebay for things I want a good price on that are likely to get bidded up and might be difficult to find a serious buyer for.

WSJ:
The company alleges that after eBay bought a Dutch classified listings site in 2005, eBay executive Garrett Price said, “We just purchased the largest classifieds site in the Netherlands for $290 million, what do you think we would pay for the largest classifieds site in the United States?”

But then I guess ebay sees things differently, since they have huge bank accounts ready to drop the hammer on companies which they think can benefit their brand.

The one problem here though, is that if one day I logged onto Craigslist and it had a huge Ebay logo at the top and had all of the bulky features of Ebay I’d probably delete the bookmark and never go back there again as would many of the people like me who use it solely for it’s simplicity and ease of use.

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This is sort of unexpected… It looks like Ebay is trying to sue Craigslist over some kind of dilution of share value. Ebay is a minority shareholder in Craigslist (not that minority though, owning 28%).

I’m sure the execs at Ebay have been fairly jealous of Craigslist, in that they have an equal market share in the selling of aftermarket goods online with almost none of the overhead that Ebay has, while still managing to make a respectable profit with hardly any cost to the users.

Ebay tried to copy Craigslist a while back by creating a similar site called kijiji.com, besides being nearly impossible to remember, has failed almost entirely. I think they fail to realize the reason why Craigslist is so popular, being that it is part of west coast culture and has been for many years. Posting classified adds online isn’t a revolutionary concept, and there really isn’t much need for anything more complicated than Craigslist for most things.

Some people on Slashdot had some insightful comments on this.

Luyseyal wrote:
Hostile takeover. Ebay files the lawsuit to devalue the shares. Then, Ebay buys up more and more shares to have greater control over an eventual vote. Ebay tenders an offer for Craigslist. Since it owns more, it can influence the shareholder vote more significantly. Ebay wins the auction (ha) and cancels the lawsuit.

This is an interesting strategy… but kind of unethical though don’t you think?

Drhamad wrote:

1) Craigslist is a closely held company not traded on the open market
2) This is a dilution suit. This means that basically, in a closely held company, it’s easy for a majority shareholder to screw a minority shareholder, since the minority shareholder can’t outvote them and can’t get other shareholders to support it. Therefore, we have a lot of laws protecting minority shareholders. In this case, it seems that eBay has issued extra stock, which means that eBay no longer really has 28%, but rather less, effectively. This CAN be legal, but there has to be a solid, nonpredatory reason for it.
3) eBay managed to get its share because craigslist had issued some shares to close employees, on the assumption that it didn’t matter and was just to feel nice. One of those employees decided to sell his stake publicly, and eBay bought it. Normally, no one would have been able to get access to Craigslist stock.

Looks like trouble in paradise.

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