Doug Kelley was perplexed when Craigslist ads for his Sacramento carpet-cleaning business started disappearing from the popular Web site. Every time he re-posted one of his classified ads, it would vanish – often within minutes. After competitors' ads started showing up, some of them openly denigrating his company, West Coast Carpet Care, Kelley knew he had a problem. Since then, Kelley estimates he has spent $11,000 in attorney's and court fees fighting his online business adversaries.

Like other small businesses worldwide using the free classified Web site, Kelley stumbled last year onto a little-known dark side of Craigslist. Some critics say it's a situation where anything goes, including slanderous attacks and competitors ejecting each other's ads in a process called "flagging."

Using conventional software to circumvent Craigslist rules, some individuals have figured out how to quash competition by removing ads of their rivals, whether they're house-cleaning services or real estate sellers. Craigslist employs an automatic tool that yanks offensive or false ads if enough different users flag them. The problem: Single users can cheat the system with software that makes the flagging appear to be from multiple users.

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