The online auction giant eBay is suing the popular internet community ad site Craigslist to "safeguard its four-year financial investment".

In a statement, eBay claimed that in January, Craigslist executives took actions that "unfairly diluted eBay's economic interest by more than 10%". No details of those actions were given by eBay.

In its company blog, Craigslist said it was surprised and disappointed by eBay's "unfounded allegations". The company said eBay's legal action "came to us out of the blue".

The case, which is sealed, has been filed in a court in Delaware, where Craigslist is registered. In a press statement, eBay claims that Craigslist's founder Craig Newmark and its chief executive Jim Buckmaster adopted unspecified measures in January that have disadvantaged eBay and its investment.

Preserve our investment

EBay's general counsel Mike Jacobson said: "Since negotiating our investment with Craigslist's board in 2004, we have acted openly and in good faith as a minority shareholder, so we were surprised by these recent unilateral actions.

He continues: "We are asking the Delaware court to rescind these recent actions in order to protect eBay's stockholders and preserve our investment."

Craigslist, the seventh most popular English-language page on the Web, hit back in a blog.

"We have always treated eBay fairly as a minority shareholder, and plan to continue doing so, despite this unfortunate development," it said.

"EBay has absolutely no reason to feel threatened - unless a hostile takeover of Craigslist, or the sale of eBay's stake in Craigslist to an unfriendly party, is their ultimate goal."

Uneasy relationship

The relationship between Craigslist and eBay has not always been an easy one.

Online auction site eBay acquired a 28.4% stake when it bought shares from a former employee who had been given equity by Mr Newmark.

Mr Newmark and Mr Buckmaster give away for free most of the services that Craigslist provides.

They have always appeared to have little ambition to milk profits from the popular site, which offers everything from houses for rental to nannies for hire.

A year after the deal was completed, eBay, which had said it wanted to learn from Craigslist, started, a rival international network of classified ad sites that now sells ads in all 50 US states.

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