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Craigslist files lawsuit against eBay, claims unfair competition

Weeks after eBay accuses Craigslist of trying to dilute its ownership stake, Craigslist managers accuse eBay of trying to harm the Web's No.1 classified site.

UPDATE (3:50 p.m.):To include eBay response.
Craigslist's headquarters in San Francisco's Sunset District Greg Sandoval

Craigslist, the Web's No.1 online classified site, has filed a lawsuit against eBay, in a move that will surprise few.

According to a copy of the lawsuit, filed Tuesday in California Superior Court in San Francisco, Craigslist accuses eBay of unfair competition, misappropriation of proprietary information, false advertising, and breach of fiduciary duty. Craigslist has asked the court to force eBay to surrender its interest in the company.

The two companies have been circling each other ever since eBay, which is a minority shareholder in Craigslist, opened a U.S. version of Kijiji, a Craigslist competitor. The hostilities between the Web's top auctioneer and classifieds section were kept quiet until last month when eBay filed a lawsuit against Craigslist alleging that the company tried to dilute eBay's 28 percent share.

The move was designed by Craigslist's founder Craig Newmark and CEO Jim Buckmaster to remove eBay from Craigslist's board of directors, eBay alleged in its suit.

On Tuesday, eBay issued a statement: "We regret that Craigslist felt compelled to resort to unfounded and unsubstantiated claims in order to divert attention from actions by Craigslist's board" adding that Craigslist and eBay always agreed that the two sides have the "absolute right to compete with each other."

The two sides have coexisted relatively peacefully since August 2004, when eBay bought a minority interest in Craigslist. Last summer, when eBay launched Kijiji, Buckmaster told CNET that he wasn't worried about having a competitor sitting on the board. His attitude changed just weeks after when he asked eBay to sell its position in the company, according to court documents filed by eBay.

Meg Whitman, eBay's then CEO, declined to sell but the reasons for Buckmaster's change of heart were outlined in Craigslist's suit.

In the months leading up to the U.S. launch of Kijiji, "eBay used its shareholder status to plant on Craigslist's board of directors the individual responsible for launching and/or operating Kijiji," Craigslist said in its suit.

Craigslist also said that eBay has "hounded" Craigslist managers with "improper demands for confidential Craigslist information, which could be used for anticompetitive reasons."