Why eBay Is Suing Craigslist

Details about eBay's lawsuit against Craigslist are emerging more than a week after the legal action first came to light.First, a quick bit of history: Online auction giant eBay acquired about 25 percent of Craigslist, of online classified listings fame, back in August 2004. The following year, eBay launched its own classified listings site, Kijiji, outside of the United States; in June 2007, it introduced the service to some U.S. markets as well. From Craigslist's perspective, the latter move represents competitive activity and, as a result, nullifies some of eBay's shareholders rights.

But eBay maintains Craigslist's two-person board went too far in its actions and held meetings without its knowledge. It's now suing for allegedly diluting its stake unfairly. The suit, filed in Delaware, asks the court to "rescind the transactions challenged herein and [declare] that they are voice or unenforceable."

"Since negotiating our investment with Craigslist's board in 2004, we have acted openly and in good faith as a minority shareholder, so we were surprised by these recent unilateral actions," said Mike Jacobson, eBay SVP and general counsel, in a statement.The Wall Street Journal, Associated Press