Online auction giant will buy the assets of FairMarket for $4.5 million in cash.

For the last year, eBay has been using FairMarket's software to create online promotions and loyalty programs for its users.

"The acquisition of FairMarket's well-regarded technology platform and customer base will allow us to better expand eBay's online rewards and promotions programs," said Jeff Jordan, an eBay senior vice president and general manager.

In recent months, San Jose, Calif.-based eBay has stepped-up its marketing and promotions.

Last month, it announced a program that allows customers of Sprint and other corporate partners use rewards points to buy eBay merchandise.

And in February, Dr. Pepper/Seven Up and eBay launched a promotion allowing customers to redeem points from bottles of Dr. Pepper/Seven Up beverages for "liquid loot," which can be used in eBay-style bidding for a variety of prizes, such as CDs and concert tickets.

The acquisition of FairMarket must be approved by its stockholders. The deal is expected to close in the third quarter and eBay said it will hire some of FairMarket's staff. It's unclear whether it will retain the FairMarket office in Woburn, Mass. An eBay spokesman was not immediately available for comment.

Founded in 1997, FairMarket, which got off to a fast start during the dot-com boom then had to cut back. At one point, some considered it a challenger to eBay.

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FairMarket will reschedule its 2003 annual meeting of stockholders, which was to occur on July 25. A new meeting to consider the offer will be announced shortly. In addition, the company plans to distribute about $38 million to stockholders after the deal's completion. For the first quarter of 2003, the company reported a net loss of 6 cents per share on $1.4 million in revenues.