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eBay Attacks Craigslist

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The legal fisticuffs are finally flying between eBay (Nasdaq: EBAY  ) and Craigslist.

eBay claims that the minority stake it acquired five years ago from a disgruntled investor has been diluted so much that the online auction specialist no longer has a seat on Craigslist's board.

Craigslist has some serious claims of its own, though. It argues that eBay used the inner workings of Craigslist to launch its own rival Kijiji marketplace.

Yes, there's a lot of bad blood here. It makes you wonder how the two can even be joint investors in a company when each one has mutually exclusive goals.

Craigslist was once seen as an eBay slayer. Even though eBay was able to stand up to rival auction sites from Yahoo! (Nasdaq: YHOO  ) , Amazon.com (Nasdaq: AMZN  ) , and Overstock.com (Nasdaq: OSTK  ) , Craigslist put out a viral -- and, in nearly every case, free -- platform, with a localized focus that threatened the viability of eBay's fee-based auctions.

Of course, Craigslist didn't kill eBay. The world's leading auction site has stumbled lately, but it's still substantially larger than it was five years ago. If anything, Craigslist has been a nail in the coffin for newspapers, with free local ads eating into traditional personal and classified spots.

The auction marketplace is also thriving overseas, whether it's Latin America's MercadoLibre (Nasdaq: MELI  ) or eBay's recently acquired Gmarket in South Korea.

I'm no legal eagle. I can't even begin to guess who will be the victor in this battle. The one thing I do know is that these two companies need to be separated. The easy solution would be for Craigslist to buy out eBay -- or even vice versa -- but Craiglist has taken a Wikipedia-esque attitude in failing to monetize its site. However, until one or the other is shown the door, pride is going to make this situation unbearable.

How do you see the case between Craigslist and eBay playing out? Share your prediction in the comment box below.

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Longtime Fool contributor Rick Munarriz is a satisfied eBay user, with 177 positive feedbacks to show for it. He owns no shares in any of the companies in this story and is a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 08, 2009, at 12:24 PM, WhatDidYouExpect wrote:

    It's obvious to me that ebay considers CraigsList a serious threat. Both sites are designed to sell primarily consumer products via an online format, with the difference being that CL is a classified ad approach and ebay is an auction site. Because CL is not monetized, it has had to rely on equity contributions for support. When ebay bought in, it was fully aware of this. To expect that ebay's ownership position would never be diluted by later offerings sounds like a poorly planned attempt to wrestle the issue into court. Many companies use high attorney and court costs to bury competitors who cannot afford the legal expenses. What other reason could ebay have possibly had in wanting a board seat on a competitor's company? Oh, I almost forgot; Industrial espionage. Whichever the case may be - Shame on you ebay! I expect the judge to kick this case as far down the street as he possibly can.

  • Report this Comment On December 08, 2009, at 12:28 PM, gregcollier wrote:

    Craigslist truly has become an island unto themselves.

    No stranger to the courtroom, Craigslist will face off against one of its very own investors, eBay, on December 7. Craigslist diluted eBay’s investment share to 25% by selling stock, in a move that eBay alleges was an unfair attempt by Craigslist to limit its power as an investor. Sounds like a recipe for an awkward holiday party…

    In an attempt to be the victim, Craigslist cries foul on eBay by alleging their investment relationship was purely one focused on stealing confidential information so they could start a rival U.S. classified service. Craigslist seems to seriously believe that eBay has nothing better to do with their time or their money then play spy. Their ego may sink their island.

    It is no surprise that Craigslist would stoop to such underhanded and arguably illegal tactics to alienate those closest to them under the guise of business security. Craigslist does the same thing to its users in refusing to provide them with protection against injury or fraud.

    Forget prolonging the inevitable. With their recent accusations and wild conduct, Craigslist seems to be facilitating its demise into obscurity. It is safe to say I won’t be planning any vacations to their island anytime soon.

  • Report this Comment On December 09, 2009, at 2:13 AM, dgmennie wrote:

    eBay is so long overdue for real competition that it has become a corrosive force in the auction marketplace. More power to Craigslist if it can succeed!

    It is too bad these basic issues might be decided by "the use high attorney and court costs to bury competitors who cannot afford the legal expenses" or obtuse legal arguments such as "diluting eBay’s investment share to 25% by selling stock."

    What a crock! Sellers on eBay are discusted by the triple-dipping (listing fees, comissions, and PayPal charges) on every transaction and are more than ready to embrace alterenatives. Any act by eBay to sandbag Craigslist now is a mean-spirited mix of pure despiration coupled with unvarnished self-interest. If the current legal system allows eBay to prevail, the courts should declair themselves incompetent and disband.

  • Report this Comment On December 20, 2009, at 8:51 AM, scottymchoty wrote:

    For Get Both Of Them !!

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