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eBay and AdWords misuse?

By Rebecca Tushnet

Interesting tidbit from the eBay v. Craigslist litigation (in which the judge ruled that Craigslist?s majority shareholders breached their duty to minority shareholder eBay in adopting several share-related measures, but not by adopting a staggered board that would make it hard for eBay to install a director): eBay?s competitive site Kijiji ran a bunch of AdWord ads keyed on Craigslist. The court thought this was bad behavior, and that it justified much suspicion among Craigslist?s principal shareholders about what eBay might do next.

[The principal shareholders] received emails from concerned craigslist users who had run into what those users perceived to be a Kijiji subterfuge online. These users noted that when they typed "craigslist" or similar search terms into Google's search engine, their searches yielded Google AdWords results that contained links to what appeared to be craigslist.org or craigslist.com. Users who actually clicked on these links, however, were taken to Kijiji.com. [FN61] After confirming the accuracy of these reports, Jim sent [eBay CEO] Whitman an email demanding that the ads be removed. No one ever responded to Jim. [FN62]
FN61. See, e.g., DX-512 (writing to craigslist staff and noting the potential for monetary damages, a craigslist user explained the following: "I just searched Google about 1 minute ago and the top advertised link came in as: Sponsored Link Craigslist Com www.Kijiji .com 100% Free local classifieds site! Compare Kijiji & Craigslist. I clicked on it and it goes to Kijiji but I typed in [ ] my search on Google.com as: 'www.craigslist.com' You may want to have a word with someone. Best of luck, and 10% to me ..."); DX-514 (email from Terry Richards, administrator of the Fredericksburg, Virginia local online classifieds site BurgBoard.com, to Craig captioned "Kijiji or whatever the hell its [sic] called" stating: "Craig, How goes it? I was browsing some classified sites in VA and noticed this adsense ad that Kijijiji [sic] (WTF) is running ... I think it is unethical and unfair to your business to run ads with your brand in it." ?
FN62. Whitman forwarded Jim's email to Aqraou's Kijiji team asking that a response be issued. There is no evidence a response was made, but employees with the Kijiji team noted that eBay could "turn off the U.S. paid stuff easily."

Is the ad text in fn. 61 misleading, especially after the ActiveBatch ruling? A good class hypo.

Anyway, the court also references this as behavior indicative of further potential perfidy:

Evidence presented in this case suggests that eBay liberally passed nonpublic craigslist information around within eBay's departments. Some of this nonpublic information was information eBay obtained at craigslist board meetings (e.g., craigslist's 2007 budget). It even appears that eBay used some of craigslist's nonpublic information to develop and launch Kijiji. Moreover, by the time Jim and Craig implemented the Staggered Board Amendments they were aware that Google AdWords were misdirecting internet users searching for "craigslist" to Kijiji. Jim and Craig had reason to suspect eBay was behind the misdirection, particularly because no one at eBay responded to Jim's accusation that eBay was misusing the AdWords. It was reasonable for Jim and Craig to further suspect that if eBay was willing to misuse AdWords to advantage Kijiji at craigslist's expense, eBay would also be willing to use, for its own advantage, nonpublic craigslist information obtained in craigslist board meetings.

Full post as published by 43(B)log on March 11, 2011 (boomark / email).