eBay 2001 Annual Report Download - page 44

goods or the unlawful sale of goods, could harm our business. In addition, we have received signiÑcant and
continuing media attention relating to the listing or sale of unlawful goods on our websites. 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 or counterfeit 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 sought to work actively
with the content community to eliminate infringing listings on our websites, some content owners have
expressed the view that our eÅorts are insuÇcient. Content owners have been active in defending their
rights against online companies, including eBay. Allegations of infringement of third-party intellectual
property rights have in the past and may in the future result in litigation against us. Such litigation is
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.
Our business may be harmed by fraudulent activities on our websites.
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 websites. 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 buyer protection programs.
Other than through these programs, 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. Our liability for these sort of claims is only beginning to be clariÑed and may be
higher in some non-U.S. jurisdictions than it is in the U.S. 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. In addition, aÅected users will likely complain to regulatory agencies
who could take action against us, including imposing Ñnes or seeking injunctions.
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
websites. We were informed that the inquiry includes an examination of our practices with respect to these
transactions. We have continued to provide 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
case against certain auction houses for price Ñxing. We have provided the information requested in the
subpoena.
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