EBay has sold its big stake in Craigslist back to the online classified site, ending longstanding legal battle between the two companies.
The deal, announced Friday, was part of a confidential settlement in which companies agreed to end all litigation.
In 2004, eBay acquired a 28.4% stake in Craigslist reportedly valued $12 million to $15 million from a former Craigslist employee. At the time, the auction giant said that the deal gave eBay insight into Craigslist’s fast growing online classifieds business.
But the amicable partnership quickly turned nasty, and in 2008, eBay sued Craigslist after the listing company changed its shareholder plan to dilute eBay’s financial interest. Craigslist then countersued eBay, accusing the marketplace giant of stealing confidential information, trademark infringement, and breaches of fiduciary duty.
The tipping point for these legal battles started when eBay launched Kijiji, a classifieds service in the United States, which Craigslist viewed as a competitor. At the time, Craigslist claimed that when former eBay CEO Meg Whitman lobbied to take a share in the company, she told Craigslist executives that the listings company would be eBay’s partner for online classifieds in the U.S. Because eBay had launched a competitor, Craigslist claimed that eBay should give back its shares acquired in 2004.
In 2009, eBay won the lawsuit, when a judge ruled that Craigslist founder Craig Newmark and CEO Jim Buckmaster violated their responsibilities to eBay when the company diluted eBay’s share. But the legal drama didn’t end there. In 2011, U.S. prosecutors launched a criminal probe into whether eBay employees stole confidential information from Craigslist as it built its rival, Kijiji.
The truce comes as eBay (EBAY) prepares to spinoff its payments arm PayPal, which is expected to happen in the next few months.
