Will eBay's Craigslist gambit backfire in the court of public opinion?

Updated: EBay has gone public with the details of its lawsuit against Craigslist and its two shareholders Craig Newmark and James Buckmaster. While suit details alleged self-dealing by Newmark and Buckmaster and a rift over eBay's Kijiji unit, which competes with Craigslist, it's worth pondering the motives--and perceptions--here.

Obviously, eBay thinks it has a strong case and that's why it went public with the complaint. The short version (Techmeme): eBay bought 28.4 percent of Craigslist in 2004 and there was a right of first refusal on share purchases that would be lifted if eBay

became

a competitor. In 2005, eBay launched Kijiji.com overseas and brought the site to the U.S. in 2007. Craigslist balked and said that eBay was engaging in competitive activity ending the right of first refusal provision in June 2007. That July eBay removed Josh Silverman from Craigslist's board because he worked on Kijiji.

In July, eBay tried to appoint Thomas Jeon, a company lawyer, to Craigslist, but "Newmark and Buckmaster engaged in a series of clandestine transactions (a poison pill and other moves to make eBay a minority stakeholder) designed to ensure that eBay would not be able to elect a director, and to either impose new transfer restrictions on eBay or dilute its interests."

Also see: eBay sues craigslist; cites dilution

Craigslist CEO Jim Buckmaster: Delightfully communist

On July 23, 2007 eBay's then CEO Meg Whitman told Buckmaster that the company put a firewall between Kijiji and its Craigslist investment and said eBay "would welcome the opportunity to acquire the remainder of the company we do not already won whenever you and [Newmark] feel it would be appropriate." Whitman reiterated that it was happy with its Craigslist investment and had no intention to sell.

Does eBay have a case in the court system? You bet. How about the court of public opinion? The answer here is not so clear. No matter how solid eBay's complaint it is, the spat is going to be portrayed as a David vs. Goliath story. Big bad eBay will be pushing around Newmark and Buckmaster.

Update: Craiglist fired back in a post:

We will file our formal response in the next few weeks, and until then will do our best to abide by protocol in not responding to specific assertions made in Ebay’s complaint.

As those who know us best will recognize, every measure we have taken has been for the sake of protecting the long term well-being of the craigslist community.

Sadly, we have an uncomfortably conflicted shareholder in our midst, one that is obsessed with dominating online classifieds for the purpose of maximizing its own profits.

It’s a conflict of interest worth keeping in mind if you decide to give this filing a read.

Frankly, it doesn't matter whether Newmark and Buckmaster cooked up a scheme to dilute eBay's holdings in the perception game. Why? Craigslist is a community service controlled by two guys that obviously care about controlling their company, but aren't nutty about making money. Personally, I don't get it since I'm a capitalist pig, but there is a certain appeal to Craigslist's approach. Craigslist is a movement, an Internet icon. eBay represents corporate America.

Realistically, how can eBay compete with that Craigslist perception?