Craig Newmark probably did not anticipate the significance of his innovation when he first launched Craigslist back in 1985 as an email distribution listing. Over the years, the company has grown and as expected, so did competition. However, compared to the “high-tech” sites that we see nowadays, Craigslist seems to be stuck in the prehistoric era. The layout is dated, the site is jam-packed with information and everyone is convinced that it’s time to update the vintage look of the site. “Craigslist has become stagnant,” wrote Nick Bilton from the New York Times. These deficiencies sparked an interest in competitors to develop something more efficient and user-friendly than Craigslist’s indexing services. Unfortunately, instead of making the necessary improvements on their site, Craigslist allegedly invests a lot of its resources in policing potential competitors by sending them cease and desist letters once they’ve launched any type of potentially competing product. 3taps, a company that gathers information from search engines about Craigslist listings, became one of its most recent targets. Craigslist filed a lawsuit against 3taps, accusing the latter of copyright infringement due to “scraping” of content from Craigslist, and trademark infringement due to the allegedly unauthorized use of their registered mark. Unlike other companies, 3taps refused to give in to the online classified ads giant. On September 24, 3taps filed its answer to the claims, rejecting all allegations, and brought counterclaims, accusing Craigslist of copyright misuse and antitrust violation.
3taps claimed that Craigslist’s “sham cease and desist letters and sham lawsuits” violate Section 2 of the Sherman Act because they enable Craigslist to extend its monopoly in at least three markets – for real-time search, indexing and onboarding. In its counterclaim, 3taps accused Craigslist of maintaining or extending its monopoly power not through innovation but rather through “intentional, exclusionary conduct in connection with its anticompetitive scheme”. Through this power, Craigslist has the ability to control pricing and create additional barriers to entry against potential competitors, thus, stifling innovation as well as competition. As proof of anticompetitive effects in the relevant market, 3taps argued that after Craigslist filed the lawsuit against it, some of its search engine partners (Invatory, forsale-alert.com, HuntSmartly, Tempest, jumpoffcampus.com, wishcan.com, list-alert.com and SnapStore) have backed down which again enabled Craigslist to lessen competition. 3taps’ site called “craiggers” which was the subject of the trademark infringement claim had to be shut down as well, adding to the damages allegedly suffered by 3taps.
Effect on Consumers
Apart from potential competitors, consumers could also find themselves at the losing end. Frivolous lawsuits could scare away competitors and make them think twice before making any significant investment in the creation of new products, such as a more efficient indexing search engine. Further, with less competition, consumers are left with fewer options and mediocre quality of products, a scenario that is not consistent with neither antitrust nor intellectual property law principles. If the court decides in favor of 3taps, we could soon be seeing a superior product to that of Craigslist’s but if Craigslist wins the suit, there would be less incentive for it to improve its services. We would then have to brace ourselves for probably another decade of prehistoric classified ads search.