Craigslist accuses eBay of hypocrisy with lawsuit

SAN FRANCISCO (Reuters) - Popular online classified site Craigslist accused minority shareholder eBay Inc EBAY.O on Thursday of suing Craiglist over the same business practices used by eBay itself.

Craig Newmark, the creator of craigslist, arrives for Time's celebration of the magazine's '100 Most Influential People' in New York in this May 8, 2006 file photo. REUTERS/Keith Bedford

EBay sued privately held Craigslist last week, alleging “clandestine” directors’ meetings in recent months had diluted eBay’s 28.4 percent stake to 24.85 percent. The lawsuit was unsealed on Wednesday.

"It's worth pointing out that eBay is suing us for implementing protections for Craigslist that it clearly believes are perfectly appropriate for protecting itself," Craigslist said in a posting on its blog site, here

Craigslist provided links to eBay filings in which eBay reserved the right to implement a poison pill, called for the company to pay legal fees if its officers were sued, and staggered board elections. EBay has raised all those issues in its filing against Craigslist in Delaware Chancery Court.

“There is a vast difference between the corporate governance of a public company with hundreds of thousands of shareholders and a private company controlled by two insiders with a single minority stockholder,” eBay spokeswoman Kim Rubey said.

“Corporate measures applicable to public companies like eBay cannot easily be compared to measures at a company as closely held as Craigslist,” Rubey added.

Both sites are leading engines of online commerce, but Craigslist has not followed the Silicon Valley script of raising billions of dollars by going public.

EBay bought its stake in 2004 when a Craigslist insider sold his shares. Company founder Craig Newmark, who says he sees no purpose in gathering more money than one person needs to live, has long said he does not want to sell Craigslist, which does not charge for most of its listings.

“Well, we have been saying consistently we are not interested in selling,” he told Reuters on Wednesday.

In the lawsuit, eBay said it offered to buy the rest of the company last year. A list released by Silicon Alley Insider this week valued Craigslist at about $5 billion, the world’s third-most-valuable Web startup after Facebook and Wikipedia.

“We believe that the Craigslist directors breached their duty to us by unilaterally diluting our interest in the company, plain and simple,” eBay’s Rubey said. “Their responses thus far have been nothing more than attempts to divert attention away from their own self-dealing actions.”

EBay and Craigslist are both partners and rivals.

In 2005, eBay launched its own free online classifieds site called Kijiji, first in several European and Asian markets, and in 2007, it entered the United States. Kijiji operates in hundreds of German cities and has spread to markets including France, Italy, India, Taiwan and Canada.

They compete directly in the United States and a dozen other countries.

Editing by Braden Reddall