eBay releases complaint against Craigslist

The mystery over what prompted eBay to sue Craigslist last week appears to have been solved.

Apparently eBay feels that its ownership stake in Craigslist was unfairly reduced because of eBay's rival online classifieds service Kijiji, which was launched overseas in 2005 and in the U.S. in 2007, according to the 26-page complaint, which was filed in Delaware's Court of Chancery and made available online by eBay on Wednesday.

According to the heavily redacted copy of the complaint, which names Craigslist founder Craig Newmark and CEO Jim Buckmaster, Craigslist views Kijiji as a competitive activity that cancels some shareholder rights eBay acquired in 2004 when it bought a stake in Craigslist. In response, Craigslist reorganized its stock structure in January, reducing eBay's stake in the online classified site from 28.04 percent to 24.85 percent, and in the process losing the ability to elect a director.

However, eBay feels Craigslist overstepped its rights and sued for diluting its stake.

"The original agreement between the two parties always envisioned that there could be competitive activity," eBay spokeswoman Kim Rubey told the Associated Press.

The complaint also discloses that Meg Whitman, who was CEO of eBay at the time, offered to buy the remainder of Craigslist in a letter to Craigslist in July 2007. Whitman's letter was in response to a letter Buckmaster sent that expressed "'negative' feelings toward eBay's launch of Kijiji," and "we are no longer comfortable having eBay as a shareholder."