I created 2 categories in the back-office in 2 ways 1. Admin creates a category and assigns it to SellerA, 2. SellerA creates his own category. In both cases SellerB from the front office could see the categories (at the bottom of the screen under "Categories" column. I could even click and go there.... am I missing something (looked around and could not find any Private checkbox setting anywhere in category creation), or the product is not behaving the way it is suppose to?
I am not sure what you mean.
I am not sure if you are referring those blocks at front for public listing - that is for public users.
of course sellers can see any categories at front as visitor.
but sellers should not be able to list their products on those categories at product editing/management page.