The eBay v. Craigslist trial -- a Silicon Valley epic battle -- started innocently enough. On August 13, 2004, the Wall Street Journal called eBay's purchase of a minority stake in Craigslist an "unusual pairing:"
"In an unusual pairing of an Internet colossus and a classified-listings Website with a cult following, eBay Inc. said it acquired 25% of Craigslist, a deal that Craigslist's executives say will allow the site to retain one of its most treasured assets: its soul."
The Wall Street Journal went on to quote eBay spokesman Hani Durzy as saying:
"The reason we did this minority investment really was for learning purposes -- it gives us access to learn how the classified market online works."
Perhaps eBay learned what it needed to know. The following year eBay began operating its own classified ads website overseas, kijiji.com, and in 2007 eBay brought kijiji to the United States. In July 2007, Information Week reported,
"An eBay spokesperson acknowledged that Kijiji competes with Craigslist and said the company is retaining its boardseat and equity position in Craigslist at present."
Craigslist did not agree, and immediately sent eBay a notice of Competitive Activity, and subsequently diluted eBay's shares, which eliminated eBay's right to appoint a director. Craigslist also implemented a poison pill that would prevent eBay from selling its shares to anyone other than to Craigslist. eBay commenced this lawsuit hoping to restore its position and to void the poison pill.
More than two years later, little has changed. According to Wired Magazine in August, 2009,
"...craigslist is killing Kijiji, despite the fact that Kijiji has the marketing and technical support of one of the sector’s most powerful companies behind it."
In October, Delaware's Chancery Court knocked out two of eBay's seven claims against Craigslist, but the remaining five are set for trial next week, including challenges to a first refusal right and Craigslist's dilution of eBay's shares.
Did the Craigslist "board ofdirectors engage in a scheme to dilute eBay's shares," as eBay contends, or did Craigslist adopt "reasonable governance measures" to protect against "eBay's exploitation of its position as stockholder to harm Craigslist and obtain unfair commercial advantage," as Craigslist contends?