Craigslist Bares Knuckles in Legal Spat With eBay

The legal spat, which began last month, pits two of the Internet's most popular Web sites against one another.

It lays bare eBay's long-standing desire for a majority stake in Craigslist and Craigslist's continued resistance to eBay's advances.

A 'Craigslist Killer'

Craigslist claims eBay attempted to quash competition by using privileges and information gleaned from its 28 percent stake in Craigslist to benefit its own classifieds site Kijiji, which launched last year in the U.S.

According to Craigslist's complaint, filed in state Superior Court in San Francisco, eBay internally calls Kijiji the "Craigslist killer."

San Jose, Calif.-based eBay said the allegations are unfounded and unsubstantiated. It claims Craigslist is trying to divert attention from eBay's lawsuit, filed in April, which alleges that Craigslist founder Craig Newmark and chief executive Jim Buckmaster engaged in a series of "clandestine transactions" intended to dilute eBay's stake unfairly.

eBay is the sixth most popular Web site in the U.S., according to comScore's count of unique visitors, while Craigslist ranks 25th.

Accessing Confidential Information

The latest complaint outlines a fractious four years since eBay purchased its stake in Craigslist from an unnamed former shareholder who solicited outside bids. The terms of the deal were never disclosed.

At the time, the companies agreed that if eBay tried to compete against Craigslist, eBay would lose rights to Craigslist's management and information. Craigslist says eBay triggered that provision when it launched Kijiji.

When eBay named a representative to Craigslist's board who was a Kijiji insider, that violated the federal Clayton Antitrust Act and California law prohibiting participation on the board of a competitor, Craigslist claims.

eBay also asked for confidential Craigslist information -- such as launch dates for new sites and site traffic statistics -- as it planned to launch Kijiji, again violating state and federal laws, the complaint says.

Push and Pull

Craigslist also complains that eBay infringed Craigslist's trademark by placing ads for Kijiji on Google (Nasdaq: GOOG) using Craigslist's name and that eBay interfered in its business, conducted phishing attacks and broke its duty to shareholders.

Craigslist, based in San Francisco, wants eBay to divest from Craigslist, stop using its name in advertisements and pay damages.

Craigslist says eBay is constantly pressing for a greater stake, despite initial assurances from former eBay chief executive Meg Whitman that eBay was content with a minority stake. However, Whitman also described the company's relationship as a "courtship," according to Craigslist's complaint.