EventHorizon1984 Blog Log: Craigslist

Craigslist Complaint against eBay INC.

http://blog.craigslist.org/2008/05/unlawful-and-unfair/

Unlawful and Unfair

We filed a complaint in California today, charging eBay with 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.

We respectfully ask the Superior Court in San Francisco to enjoin this conduct and order eBay to (1) make full restitution to craigslist, (2) disgorge their related profits (3) restore to craigslist all shares of the company acquired by means of, or for the purpose of unfair competition, and (4) pay punitive damages for their malicious behavior.

Full text of the complaint is available.

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Complaint excerpt.

Filed: 2008 MAY 13 12:27AM
Superior Court of the State of California
County of San Francisco

craigslist, Inc.,
Plaintiff,
v.
eBay Inc.;
eBay Domestic Holdings, Inc.'
Defendants.

Complaint for:
Unfair and Unlawful Competition under CAL.BUS and PROF.CODE 17200
False Advertising under CAL.BUS and PROF.CODE 17500
California Trademark Infringement and Unfair Competition
California Passing off and Unfair Competition
Dilution under CAL.BUS & PROF.CODE 14200
Breach of Fiduciary Duty
Jury Trial Requested

I. INTRODUCTION

1. craigslist and its 25 San Francisco employees operate websites designed to serve local communities with classified ad placements and other services. Other than small fees for job postings in ten cities and brokered apartment rentals in one city, craigslist provides its services to the public free of charge. In August 2004, eBay Inc. and its subsidiary eBay Domestic Holdings, Inc. (collectively, "eBay") acquired a minority interest in craigslist from a former shareholder. This acquisition followed repeated representations to craigslist by eBay's top executives regarding the community values they shared with craigslist, and after repeated assertions regarding the benefits that would be enjoyed by craigslist users, the greater internet community, and the general public. Since acquiring its interest, however, eBay has instead engaged in conduct designed to harm craigslist, its users, and consumers in California and elsewhere. This conduct includes but is not limited to 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.

2. As a company that now directly competes with craigslist through its Kijiiji classified ads website launched in the United States in 2007, eBay cannot deny that it has certain duties under the law. Yet eBay has chosen to ignore these duties and, without this Court's intervention, it will continue to do so. By way of example, eBay has engaged in the following wrongful behavior:

In the months leading up to the U.S. launch of its competing Kijiiji site (referred to inside eBay as the "craigslist killer"), eBay used its shareholder status to plant on craiglist's board of directors the individual responsible for launching and/or operating Kijiiji and other eBay classifieds properties in Europe;
Later recognizing the antitrust risk of having a Kijiiji insider serve on craigslist's board, eBay withdrew him, but then proceeded to nominate a second Kijiiji insider, namely the individual responsible for Kijiiji's worldwide competition policy;
Throughout its tenure as a craigslist shareholder, under the guise of shareholder requests for information, eBay has hounded craigslist with improper demands for confidential craigslist information which could be used for anticompetitive purposes; and
eBay has used craiglist's mark and name in commerce to confuse the public and illegally divert internet traffic from craigslist to eBay and its Kijiiji site.

3. eBay's improper conduct has not relented and, absent judicial intervention, eBay will continue to abuse its position. craiglist therefore brings this action against eBay to remedy the substantial and ongoing harm to fair competiion - including harm to craigslist and California consumers - through a concerted scheme by eBay and its agents to: (i) interfere with craiglist's business and operations, (ii) unfairly trade on craigslist's confidential and proprietary competitive information - gained in its capacity as a craigslist shareholder and board member - in order to unfairly compete, and (iii) infringe on craiglist's trademark and trade name in order to phish internet traffic away from craigslist and toward eBay's own websites. eBay's unfair trade practices have harmed and, unless enjoined, will continue to cause irreparable harm to craigslist, its employees, millions of consuers, fair competition, and the people of California.

"In the first craigslist board of directors meeting attended by Mr. Omiydar, under an agenda item called "craigslist-eBay Relationship Goals," eBay stated that "eBay has successfully followed a strategy of working extremely closely with affiliates on their path to becoming wholly-owned subsidiaries of eBay Inc." During this meeting, eBay cited numerous examples of staged acquisitions of companies in various countries, where eBay initially acquired only a portion of the company, but ultimately succeeded in purchasing the companies in their entirety."

"That the Court order eBay to restore to craigslist all shares of the company owned by eBay which were acquired by means of, or for the purpose of, unfair competition; or, in the alternative, that the Court order eBay to divest its interests in craigslist since eBay's continued holding of craigslist stock, particularly in combination with the acts and conduct as alleged in this Complaint, is a use of such shareholding to bring about, or attempt to bring about, a substantial lessening of competition and otherwise significantly or incipiently threatens or harms competition;"

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http://blog.craigslist.org/2008/05/kettles-and-pots/

Kettles and Pots

Although our response to each of Ebay’s unfounded claims will have to wait, 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, for example:

1. Ebay is suing us for implementing a shareholder rights agreement, which it has called a “poison pill”. Here is a 2004 filing by Ebay regarding an increase in authorized shares, which it reserves the right to use for the purpose of implementing a poison pill:

http://sec.edgar-online.com/2004/05/17/0000950134-04-007721/Section9.asp

2. Ebay is suing us for offering each of our shareholders the opportunity to exchange their shares for an incrementally larger number of shares bound by a “right of first refusal” agreement, whereby shares must be offered to craigslist on the same terms offered to any other potential acquirer. It had previously insisted that craigslist shareholders be bound by a right of refusal agreement, and has from time to time bound shareholders of Ebay and its various subsidiaries by right of first refusal agreements.

3. Ebay is suing craigslist for implementing an indemnification agreement, which calls for craigslist to pay legal fees for craigslist directors and officers should they be sued individually in the course of their duties. Here is a 1998 filing by Ebay regarding a similar indemnification agreement for its own directors and officers;

http://www.secinfo.com/dut49.71xp.7.htm#1stPage

4. Ebay is suing us for implementing staggered board elections. Here is a 1999 filing by Ebay indicating that Ebay itself is no stranger to staggered board elections:

http://sec.edgar-online.com/1999/04/20/16/0001012870-99-001210/Section5.asp

This entry was posted on Thursday, May 1st, 2008 at 1:57 pm and is filed under Legal.