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eBay v. Craigslist

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from: Bonnie Goldstein

Posted Thursday, May 15, 2008, at 9:33 AM ET

In 1995, Craig Newmark started Craigslist.org, the popular classified-advertising Web site, as a hobby. Newmark declined to charge money for the service, hewing instead to a philosophy of "giving each other a break." The site followed a low-growth, community-focused model that encouraged posters to buy and sell wares and to publicize events in their neighborhood.

That same year, Pierre Omidyar, whose core values were "People are basically good, everyone has something to contribute, and an open environment brings out the best in people," created the online auction site that became eBay, also as a hobby. With users buying products from all over the world, eBay became a public company within three years. Omidyar is now among the richest people in the world. The fast-growing eBay now has more than 14,000 employees and owns Paypal and Skype.

Craigslist is equally popular (it boasts 10 billion monthly page views), but Newmark has kept his company largely private. In 13 years he has distributed stock exactly twice. He gave away roughly one-quarter of the company shares to an early collaborator (identified in news reports as Phillip Knowlton) and later granted another minority portion to CEO Jim Buckmaster, who runs the 25-employee company.

In 2004, Knowlton sold his stock to eBay, which wanted to "learn how the classified market online works." At first Newmark and Buckmaster welcomed the new partnership, believing "Mr. Omidyar had a moral compass very similar to their own" (Page 8). Shortly after the purchase was announced, Newmark wrote on his blog, "Like craigslist, eBay is about helping folks ... on a level playing field—they emphasize trustworthiness and reputation." But before long, the new stockholder "attempted to treat craigslist as if it were one of eBay's subsidiaries" (Page 9). When that failed, eBay launched its own classified advertising site, Kijiji (village in Swahili). By 2007, Kijiji was competing head-to-head with Craigslist. Newmark and Buckmaster retaliated by refusing to allow eBay's representative to attend Craigslist board meetings (Page 3) and attempted to repurchase eBay's shares (Page 4). ebay wasn't interested in selling, and on April 29, the company filed a lawsuit claiming Craigslist breached its fiduciary duties (see excerpts below and on the following three pages). This week, Craigslist countersued, claiming unlawful and unfair competition (see excerpts on Pages 5-9).

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from: Bonnie Goldstein

Posted Thursday, May 15, 2008, at 9:33 AM ET
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Bonnie Goldstein is a former special investigator to the U.S. Senate and investigative producer for ABC News.
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