Employees of Internet auction site eBay shared confidential information gained from Craigslist with other employees developing eBay's own online classifieds business, an eBay executive said Wednesday.
Brian Levey said that information eBay gained as an investor in and board member of Craigslist was forwarded to eBay employees developing eBay's Kijiji domestic classifieds business.
Levey, an eBay lawyer who described himself as the "legal quarterback" of the company's August 2004 acquisition of a minority interest in Craigslist, said he didn't think a confidentiality agreement precluded eBay employees from sharing confidential Craigslist information.
"As long as it was complying with the confidentiality agreement, I think the view was, it's fine," said Levey, who suggested that the confidentiality agreement was meant to prevent disclosure of Craigslist information to third parties.
Levey was testifying in a lawsuit in which eBay, which is based in San Jose, Calif., claims that Craigslist improperly acted to dilute eBay's minority interest after a falling out in 2007. Craigslist, based in San Francisco, contends in its own lawsuit that eBay used its stake in Craigslist to gain information for its own use.
In response to Levey's testimony, eBay senior vice president Alan Marks issued a statement saying eBay was allowed to compete against Craigslist in the classifieds market, including in the U.S.
"EBay had hoped it would collaborate with Craigslist to expand the classifieds business," Marks said. "It repeatedly offered expertise to Craigslist and encouraged them to invest the profits back into the business. In addition, eBay was allowed to evaluate its minority investment in Craigslist, which it did throughout the relationship."
But in his cross-examination of Levey, Craigslist attorney Michael Clyde suggested that eBay used confidential business information not just to evaluate its investment in Craigslist, but in forming a broader strategy for participating globally in the online classifieds market.
Clyde questioned Levey at one point about an e-mail he had sent to other eBay employees who were working on Kijiji but whom Clyde said had no responsibility for Craigslist. The e-mail included years of historical financial data from Craigslist.
"I think it's a reasonable assumption to say it was not in the public domain," Levey said.
Asked about whether he knew Craigslist officials would be upset when given 10 days notice that eBay was launching its own domestic classifieds site, Levey said he wasn't sure exactly how they would respond.
"I knew they wouldn't be ecstatic," he said.
In later testimony, Garrett Price, eBay's point man in the acquisition talks with Craigslist, said he repeatedly made clear to Craigslist executives that eBay planned to enter the online classified market overseas, and that while it hoped Craigslist would be its vehicle in the North American market, competition was a possibility.
"We were extremely transparent about our view of the business," said Price, who in a June 2004 e-mail to then-CEO Meg Whitman and other eBay executives, wrote that Craigslist founder Craig Newmark and CEO James Buckmaster understood that a proposed noncompete agreement was a deal-breaker for eBay.
Price compared payments that Newmark and Buckmaster demanded in order to concede to eBay's acquisition of its minority stake to "extortion" and described the running of Craigslist board meetings as "very amateurish."
Price also described his frustration in trying to work with Craigslist officials, saying every decision had to go through Buckmaster.
"You can't function in a rapidly changing environment on a global scale with that kind of organizational structure," he said. "God help that company if he gets hit by a bus."
Clyde was scheduled to begin his cross-examination of Price on Thursday, after which Newmark was expected to take the stand.