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.