The lawsuit between Ebay (NASDAQ:EBAY) and Craigslist is just beginning and its genesis has finally come out.
The issue between the companies began when Ebay brought its classified business Kijiji into the US market a little less than a year ago. Craigslist viewed this as triggering an anti-competitive clause with Ebay, one of the online classified site's shareholders.
According to The Wall Street Journal's story on the lawsuit, "Craigslist directors held clandestine meetings in October 2007 to dilute eBay's minority stake in the online-classifieds company after eBay developed a rival offering."
It turns out that Ebay had also made an offer to buy all of Craigslist.
The merit in the lawsuit would appear to be with Craigslist. It is hard to imagine that it would stand by and let a large shareholder set up a direct competitor. It is harder to imagine why Ebay would file suit over the effort by Craigslist to protect itself.
The law may be on Ebay's side, to some extent. Craigslist did have a board meeting and set-up provisions to keep Ebay from taking a more active role. But, the morality of the situation favors Craigslist. Ebay's attempt to set up a competing business violated the "spirit" of the relationship between the two companies.
Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.
Reader Comments (Page 1 of 1)
5-10-2008 @ 9:19PM
Lookcube said...
In the long run, competition is going to help users.
Craiglist is an enormously useful service. I've found places to live, meet great people, and helped grow small side businesses with it. Nearly everyone I know has had at least one positive experience with it.
Craiglist however has never really had serious competition. Now they do - not only from eBay, but also from spammers and bots. Competition is good for improving quality and service, but it's rarely good for the market leader. I think I first read on Techcrunch the idea that modern websites are like TV shows, and that even successful websites only have a lifespan of 5-7 years. If that's the case, then the battle for free local classifieds is about to heat up. This is great news for people who enjoy innovation.
Craigslist is not known for innovation. Nor does it necessarily need to be - after all if it's ain't broke, don't fix it. It's simplicity is a large part of it's success. However the Internet thrives on innovation, and those who stand still are eventually surpassed. Craigslist knows this, which is why they recently announced that they are hiring in their blog. But why so late to respond? When you have a lock on a market, there is no incentive to change. eBay is a great example of what happens when a successful website lacks serious competition. Competition is going to be beneficial for users. imo, eBay/Kijiji is a terrible alternative, but others will emerge as the better service...
I think about this stuff a lot - which is why I've just released my own free local classifieds service called http://www.lookcube.com - There's enormous potential in local websites - a chance for people to meet, join, and organize, small business and freelancers to grow, and goods to be exchanged - all outside of the corporate sphere - if I can help make that happen, my effort will be a success.