eBay 2000 Annual Report Download - page 41

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. Litigation against other online companies could result
in interpretations of the law that could also require us to change our business practices or otherwise increase
our costs. See ""Legal Proceedings'' and ""Risk Factors Ì We are subject to intellectual property and other
litigation.''
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. In some cases individuals have been arrested and convicted for fraudulent
activities using our website. While we can suspend the accounts of users who fail to fulÑll 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 initial 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 were 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, ButterÑelds received a grand jury subpoena from the Antitrust Division of the
Department of Justice requesting documents relating to, among other things, changes in ButterÑelds' seller
commissions and buyer 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 Ñxing. We have provided the information requested in the subpoena.
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
eÅects, even if we ultimately prevail. Our business would suÅer if we were not to prevail in any actions like
these. Even the process of providing records and information can be expensive, time consuming and result in
the diversion of management attention.
A large number of transactions occur on our website. We believe that government regulators have
received a substantial number of consumer complaints about us which, while small as a percentage of our total
transactions, are large in aggregate numbers. As a result, we have from time to time been contacted by various
federal, state and local regulatory agencies and been told that they have questions with respect to the adequacy
of the steps we take to protect our users from fraud. We are likely to receive additional inquiries from
regulatory agencies in the future, which may lead to action against us. We have responded to all inquiries from
regulatory agencies by describing our current and planned antifraud eÅorts. If one or more of these agencies is
not satisÑed with our response to current or future inquiries, the resultant investigations and potential Ñnes or
other penalties could harm our business.
We have provided information to the antitrust division of the Department of Justice in connection with an
inquiry into our conduct with respect to ""auction aggregators'' including our licensing program and our
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