Facebook 2013 Annual Report Download - page 22

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Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, and
other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims,
changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or
otherwise harm our business.
We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business,
including user privacy, rights of publicity, data protection, content, intellectual property, advertising, marketing, distribution, electronic
contracts and other communications, competition, protection of minors, consumer protection, taxation, securities law compliance,
and online payment services. The introduction of new products or expansion of our activities in certain jurisdictions may subject us
to additional laws and regulations. In addition, foreign data protection, privacy, and other laws and regulations can be more restrictive
than those in the United States. These U.S. federal and state and foreign laws and regulations, which can be enforced by private parties
or government entities, are constantly evolving and can be subject to significant change. In addition, the application and interpretation
of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate, and may
be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. For
example, the interpretation of some laws and regulations that govern the use of names and likenesses in connection with advertising
and marketing activities is unsettled and developments in this area could affect the manner in which we design our products, as well
as our terms of use. A number of proposals are pending before federal, state, and foreign legislative and regulatory bodies that could
significantly affect our business. For example, the European Commission is currently considering a data protection regulation that
may include operational requirements for companies that receive personal data that are different than those currently in place in the
European Union, and that may also include significant penalties for non-compliance. Similarly, there have been a number of recent
legislative proposals in the United States, at both the federal and state level, that would impose new obligations in areas such as privacy
and liability for copyright infringement by third parties. In addition, some countries are considering legislation requiring local storage
and processing of data that, if enacted, could increase the cost and complexity of delivering our services. These existing and proposed
laws and regulations can be costly to comply with and can delay or impede the development of new products, result in negative
publicity, increase our operating costs, require significant management time and attention, and subject us to inquiries or investigations,
claims or other remedies, including fines or demands that we modify or cease existing business practices.
We have been subject to regulatory investigations and settlements and we expect to continue to be subject to such proceedings in
the future, which could cause us to incur substantial costs or require us to change our business practices in a manner materially
adverse to our business.
From time to time, we receive formal and informal inquiries from regulators regarding our compliance with laws and other
matters. In 2012 the Federal Trade Commission approved a settlement agreement with us that, among other things, requires us to
complete bi-annual independent privacy assessments and to establish and refine certain practices with respect to treatment of user
information and the privacy settings we offer. In 2011 and 2012, the Irish Data Protection Commissioner audited the data, security,
and privacy practices and policies of Facebook Ireland. We expect to continue to be the subject of regulatory investigations and audits
in the future by these and other regulators throughout the world.
Violation of existing or future regulatory orders or consent decrees could subject us to substantial monetary fines and other
penalties that could negatively affect our financial condition and results of operations. In addition, it is possible that future orders
issued by, or inquiries or enforcement actions initiated by, regulatory authorities could cause us to incur substantial costs or require
us to change our business practices in a manner materially adverse to our business.