Pierre Omidyar was on the hot seat on Monday afternoon in the eBay v. Craigslist trial over corporate governance. After eBay acquired 28 percent of Craigslist in 2004, Mr. Omidyar sat on the board of Craigslist in addition to serving as Chairman of the Board at eBay, the company he founded in 1995. Craigslist's lawyer raised the issue of potential conflicts of interest.

The lawyer also asked about Omidyar's fiduciary duty to Craigslist. "If you were to become aware of a significant competitive threat to Craigslist in which it could take action, would you be responsible to bring that to the attention of the Board?"

Omidyar said yes, and said the most significant threat to Craigslist was eBay. He said eBay shared public and non-public information with Craigslist and were "adamant" with Craigslist CEO Jim Buckmaster and founder Craig Newmark that they needed know eBay was moving into classifieds.

Lawyers on both sides grilled Omidyar and former CEO Meg Whitman about what they told Craigslist executives during initial negotiations and how the relationship after they had acquired the shares (or "courtship," as eBay described it) progressed.

Two major points emerged in questioning the witnesses:

• Did eBay tell Craigslist it was moving into the classifieds market and would compete with Craigslist? (Omidyar said he did make it very clear to Craigslist that eBay was committed to moving into the classified space, though he did not provide them with details.)
• Did eBay use confidential information provided to it by Craigslist to further its own classifieds business. Garrett Price, who will testify on Tuesday, provided the eBay team responsible for classifieds with confidential Craigslist data. However, the information flowed both ways, eBay was able to show it provided Craigslist with its own proprietary data. While Meg Whitman and Pierre Omidyar said they believed eBay had a duty with regards to confidential information provided by Craigslist as part of its stake in the company, they said they did not check to see what eBay was specifically doing to protect that information.

It was also revealed during the trial that eBay and Craigslist had been negotiating on a joint venture in Europe. eBay wanted to license the Craigslist name to use in Europe. Buckmaster made a counter-proposal. But when lawyers asked witnesses what happened to kill those discussions, nobody knew.

Josh Silverman's testimony was quite different from that of Meg Whitman and Pierre Omidyar. He said Craig Newmark believed he was internationally famous and loved, but Silverman said in his experience, there was not much brand awareness of Craigslist at all. And while Newmark believed he had unique knowledge of classifieds, Silverman said he had negotiated with 6 classifieds services and acquired 3 of them for eBay, and said, "I didn't feel they had unique expertise that we needed." Finally, he said Craigslist was unprounounceable and unspellable in Europe. (He wasn't crazy about the Kijiji name for similar reasons, he said.)

Silverman had been with eBay since 2003, including a stint as head of Shopping.com and Skype, where he is currently Chairman.

Silverman will return to the witness stand on Tuesday. Also scheduled to testify is Bill Levy, an eBay lawyer, and Edward West, a Craigslist lawyer. Craig Newmark may testify as early as Wednesday.

Interesting Factoids

• As part of negotiations in which eBay acquired a 28% stake from a disgruntled Craigslist shareholder, the two companies agreed that there would be a 3-year period of courtship in which eBay could woo Craigslist into giving it a controlling interest. Omidyar said eBay expected that would mean the two would begin working together right away, but said he soon discovered that Craigslist expected little in the way of working together until 2 and a half years into the courtship. He called it, "Definitely a mismatch of expectations."
  
  
• Attending Craigslist Board meetings: Craig Newmark, Jim Buckmaster, Pierre Omidyar, Craigslist lawyer Edward West and eBay executive Garrett Price.
  
  
• eBay paid Philip Knowlton $16 million for the 28% share of Craigslist. eBay paid Newmark and Buckmaster another $16 million for shareholder rights.
  
  
• Meg Whitman acknowledged that if eBay launched a jobs classifieds website in the U.S., it would lose some shareholder rights.
  
  
• Meg Whitman attended a meeting in Paris in September 2004 - one month after acquiring the CL shares - where the European eBay team told her they wanted to move into classifieds and not support further CL expansion. She said her guidance was that perhaps they should use the CL name.
  
  
• Meg Whitman said Craigslist revenue was $40 - $50 million in 2004.
  
  
• Pierre Omidyar stepped down from Craigslist board after only 2 board meetings because he felt frustrated that his counsel was not sought.

Trial proceedings will be updated regularly on the AuctionBytes Blog

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