EBay’s motives questioned
Feds investigating role as part-owner of Craigslist
SAN JOSE, Calif. – With eBay Inc. and Craigslist entrenched in a scorching legal feud last year, a Delaware judge observed that eBay’s “curious” decision to partner with the San Francisco online classified ad power back in 2004 was “an opportunity to learn the ‘secret sauce’ of Craigslist’s success.”
Now the question of whether eBay illegally used Craigslist’s corporate recipe to establish an online competitor is at the center of a federal grand jury investigation into the San Jose-based auction giant, puzzling some experts who wonder why the government is intervening in a civil case between quarreling Internet companies.
Based on a Sept. 7 grand jury subpoena obtained by the San Jose Mercury News, federal prosecutors are taking a close look at allegations that have emerged in a three-year showdown between eBay and Craigslist that has unfolded in courts in San Francisco and Delaware. In that spat, Craigslist claims eBay exploited its role as a Craigslist shareholder to use inside information to establish a rival online classified site, Kijiji.
The Craigslist allegations stretch back to the tenure of former eBay CEO Meg Whitman and directly implicate founder Pierre Omidyar. Whitman, who just took over as Hewlett-Packard’s CEO, does not appear to be a target of the grand jury probe, but the subpoena does seek documents connected to other top executives, including Omidyar. And if there is ever a criminal case pressed, Whitman no doubt would find herself a potential witness, as she was in the civil case in Delaware.
EBay has called the allegations “without merit,” and one of its lawyers recently accused Craigslist in a court hearing of “lobbying” for a criminal probe. Craigslist officials declined to comment but have depicted eBay’s conduct as corporate espionage.
The nature of the grand jury probe is a mystery and could range from a serious review of criminal charges to, as one top former Justice Department official describes it, “poking around” as a result of the lengthy lawsuit between the two companies.
U.S. Attorney Melinda Haag declined to comment.
But legal experts say Craigslist’s complex allegations could be tough to transform into criminal charges and are somewhat surprised the Justice Department has weighed in, particularly because prosecutors ordinarily stay out of the all-too-common battles between tech titans in the civil courts.
Still, criminal charges against eBay or its executives would test the boundaries of white-collar crime statutes, experts say.