Feds open criminal investigation of EBay: Did it misuse secret Craigslist information?

Posted by on Sep 14, 2011 in Craigslist, Marketplace

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Did EBay violate federal laws when it internally shared confidential information from Craigslist as it was about to launch its own free-classifieds business? A federal grand jury in San Jose, Calif., where EBay is headquartered, is apparently investigating that question.

At least one subpoena has been issued — no one is saying how many, or to whom they were sent — seeking information about “incidents where EBay employees engaged in alleged criminal activities and misconduct focused around the misappropriation of proprietary / confidential information from Craigslist.”

EBay, which owns 28.4 percent of Craigslist Inc., has been locked in a bitter battle with Craigslist about EBay’s launch of a competing free-classified site in the United States, Kijiji. (The site was later renamed EBayClassifieds in the U.S.; EBay now operates classifieds sites in 30 countries worldwide under nine separate brands.) Craigslist’s lawsuit against EBay in the tangled morass is pending in San Francisco, while a judge in Delaware ruled last year in EBay’s counterpart lawsuit against Craigslist that EBay was no entitled to a seat on Craigslist’s board of directors, but that Craigslist could not dilute EBay’s 28.4 percent stake in the smaller competitor.

The subpoena says that Brian Levey, an EBay attorney, forwarded confidential financial information from Craigslist to an EBay team that was working on its own classified site, according to Bloomberg. It also cited a February 2005 request by Pierre Omidyar, EBay chairman and founder, for more information about Craigslist’s approach to adding new markets and for advance notice of plans for new market launches.

In a statement, EBay spokeswoman Amanda Miller noted: “We will cooperate with any inquiry related to the disputes between EBay and Craigslist, EBay believes that Craigslist’s allegations against EBay are without merit.”

News of the investigation was broken yesterday by Reuters news service and quickly picked up by other news agencies. The U.S. attorney’s office and Craigslist both declined to comment.

Update: Here’s the full statement from EBay’s spokeswoman Miller: 

We will cooperate in any inquiry related to the disputes between EBay and Craigslist. Issues between EBay and Craigslist have been litigated in Delaware, with the court generally ruling in EBay’s favor and restoring our equity stake in Craigslist. Craigslist and EBay are currently pursuing civil claims against each other in California courts.  Craigslist asserted allegations of misconduct against EBay as a defense in the Delaware case, but the Delaware Court did not rule in Craigslist’s favor on the defense.  EBay believes that Craigslist’s allegations against EBay are without merit. We will continue to vigorously defend ourselves, and we will aggressively pursue our claims against Craigslist.”

 

Written by Peter M. Zollman

Peter M. Zollman brings more than 35 years of media experience to his role as founding principal of the AIM Group / Classified Intelligence Report. He has worked with a wide range of media companies, dot-coms, technology providers and start-ups to develop and expand successful interactive-media services. He is based in Altamonte Springs, Fla., near Orlando.