Craigslist founder says kept eBay doubts to himself

Craig Newmark, founder of the San Francisco-based website Craigslist, walks from the the courthouse during the Ebay versus Craigslist trial at the Chancery court in Georgetown, Delaware, December 10, 2009.

WILMINGTON, Del./SAN FRANCISCO (Reuters) - Craigslist founder Craig Newmark told a Delaware court on Friday he did not voice his objections to shareholder eBay Inc when the online giant launched a rival classifieds business.

Newmark said he kept his suspicions, and subsequent disappointment, to himself rather than discuss the issue with then-Chief Executive Meg Whitman as the relationship with minority shareholder eBay deteriorated.

He also said, in answer to questions by an eBay attorney, that he raised no concerns with eBay founder Pierre Omidyar, who sat on Craigslist's board in 2005, when eBay began launching its international online classifieds businesses.

"I never accused them with my specific unhappiness, which was a betrayal of trust," said Newmark, who added he never again spoke with Whitman after agreeing to a shareholder deal.

EBay is fighting to reinstate its minority stake and board seat in Craigslist, where it became a shareholder in 2004.

In a week's worth of testimony in Delaware Chancery Court, executives from two of the most prominent Internet companies testified to a series of missteps and betrayals that led to the unraveling of their relationship. A ruling on the case may come as early as January.

EBay claims that after it launched the Kijiji online classified business in the United States, where Craigslist is the dominant player, Newmark and Craigslist CEO Jim Buckmaster hatched a "coercive plan" to dilute eBay's stake and eliminate its board seat.

Craigslist, meanwhile, has sued eBay in San Francisco, saying the larger rival used its board seat to glean confidential information about the classified ad business.

CULTURE CLASH

Newmark, who said he had never visited the Kijiji site, said he "didn't want to voice a suspicion and only a suspicion that things were going badly," when he first realized eBay was expanding into classifieds abroad.

EBay's attorney sought to cast doubt on Newmark's memory of events and claim that Whitman assured Craigslist that eBay would collaborate, but not compete, with it.

"The problem with coming to court and telling us what someone said is it's hard to know (if it happened) ... when it doesn't make it into the contract," pressed the attorney.

"You're right. I take people at their word," replied Newmark on his second day on the stand.

EBay bought its stake in Craigslist in 2004 from Philip Knowlton, a disgruntled former Craigslist employee, in the hopes of acquiring the entire classified site company.

Whitman, who testified Monday, told the Georgetown, Delaware, court that she had considered classifieds an important area in which to expand and originally considered Craigslist as her company's "play" in that market.

Whitman said eBay hoped to form a bond with Newmark and Buckmaster and eventually convince them eBay would make a "good home" for Craigslist. But testimony and evidence submitted to the court showed a culture clash right from the start.

EBay executives focused on making money from their dealings with Craigslist and mocked Newmark and Buckmaster for "amateurish board meetings" and inability to use the Power Point software program.

Emails showed eBay executives considered the relationship with Craigslist "dead" within a year of their company becoming a shareholder.

Emails also showed eBay executives thought the Kijiji launch would violate provisions of their shareholder agreement with Craigslist and that they anticipated losing their seat on the classified ad company's board as a result.

The trial is taking place in Delaware, where Craigslist is incorporated, and is being broadcast over Courtroom View Network.

The case is eBay Domestic Holdings Inc v Newmark, et al, Delaware Chancery Court, No. 3705-CC.

(Editing by Steve Orlofsky)