eBay 1999 Annual Report Download - page 35

liability, we have prohibited the listing of certain items and increased the number of personnel reviewing
questionable items. We may in the future implement other protective measures that could require us to spend
substantial resources and/or to reduce revenues by discontinuing certain service offerings. Any costs incurred as
a result of liability or asserted liability relating to the sale of unlawful goods or the unlawful sale of goods, could
harm our business. In addition, we have received significant and continuing media attention relating to the listing
or sale of unlawful goods on our website. This negative publicity could damage our reputation and diminish the
value of our brand name. It also could make users reluctant to continue to use our services.
Our business may be harmed by the listing or sale by our users of pirated items
We have received in the past, and we anticipate we will receive in the future, communications alleging that
certain items listed or sold through our service by our users infringe third-party copyrights, trademarks and
tradenames or other intellectual property rights. Although we have actively sought to work with the content
community to eliminate infringing listings on our website, some content owners have expressed the view that
our efforts are insufficient. An allegation of infringement of third-party intellectual property rights may result in
litigation against us. Any such litigation could be costly for us, could result in increased costs of doing business
through adverse judgment or settlement, could require us to change our business practices in expensive ways, or
could otherwise harm our business. See ‘‘Legal proceedings.’’
Our business may be harmed by fraudulent activities on our website
Our future success will depend largely upon sellers reliably delivering and accurately representing their
listed goods and buyers paying the agreed purchase price. We have received in the past, and anticipate that we
will receive in the future, communications from users who did not receive the purchase price or the goods that
were to have been exchanged. While we can suspend the accounts of users who fail to fulfill their delivery
obligations to other users, we do not have the ability to require users to make payments or deliver goods or
otherwise make users whole other than through our limited insurance program. Other than through this program,
we do not compensate users who believe they have been defrauded by other users. We also periodically receive
complaints from buyers as to the quality of the goods purchased. Negative publicity generated as a result of
fraudulent or deceptive conduct by users of our service could damage our reputation and diminish the value of
our brand name. We expect to continue to receive requests from users requesting reimbursement or threatening
or commencing legal action against us if no reimbursement is made. This sort of litigation could be costly for
us, divert management attention, result in increased costs of doing business, lead to adverse judgments or could
otherwise harm our business.
Government inquiries may lead to charges or penalties
On January 29, 1999, we received requests to produce certain records and information to the federal
government relating to an investigation of possible illegal transactions in connection with our website. We have
been informed that the inquiry includes an examination of our practices with respect to these transactions. We
have provided further information in connection with this ongoing inquiry. In order to protect the investigation,
the court has ordered that no further public disclosures be made with respect to the matter.
On March 24, 2000, B&B received a grand jury subpoena from the antitrust division of the Department of
Justice requesting documents relating to, among other things, changes in B&B’s seller’s commissions and buyer’s
premiums and discussions, agreements or understandings with other auction houses, in each case since 1992. We
believe this request may be related to a publicly reported criminal investigation of auction houses for price fixing.
Should these or any other investigations lead to civil or criminal charges against us, we would likely be harmed
by negative publicity, the costs of litigation, the diversion of management time and other negative effects, even
if we ultimately prevail. Our business would certainly suffer if we were not to prevail in any action like this.
Even the process of providing records and information can be expensive, time consuming and result in the
diversion of management attention.
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