eBay 2004 Annual Report Download - page 62

Problems with third parties who provide services to our users could harm our business.
A number of parties provide services to our users that indirectly beneÑt us. Such services include seller
tools that automate and manage listings, merchant tools that manage listings and interface with inventory
management software, storefronts that help our users list items, and other services. In some cases we have
contractual agreements with these companies that give us a direct Ñnancial interest in their success, while in
other cases we have none. In either circumstance, Ñnancial, regulatory, or other problems that prevent these
companies from providing services to our users could reduce the number of listings on our websites or make
completing transactions on our websites more diÇcult, and thereby harm our business. Any security breach at
one of these companies could also aÅect our customers and harm our business. Although we generally have
been able to renew or extend the terms of contractual arrangements with these third party service providers on
acceptable terms, there can be no assurance that we will continue to be able to do so in the future.
Other companies or governmental agencies may view our behavior as anti-competitive.
Other companies have in the past and may in the future allege that our actions violate the antitrust or
competition laws of the U.S. or other countries, or otherwise constitute unfair competition. Such claims
typically are very expensive to defend, involve negative publicity and diversion of management time and eÅort,
and could result in signiÑcant judgments against us.
We provided information to the Antitrust Division of the U.S. Department of Justice in connection with
an inquiry into our conduct with respect to ""auction aggregators,'' including our licensing program and a
previously settled lawsuit against Bidder's Edge. Although the Antitrust Division has closed this inquiry, any
future antitrust investigation would likely harm our business due to negative publicity, the costs of the
investigation, possible private antitrust lawsuits, the diversion of management time and eÅort, and penalties we
might suÅer if we ultimately were not to prevail.
We depend on key personnel.
Our future performance depends substantially on the continued services of our senior management and
other key personnel and our ability to retain and motivate them. The loss of the services of any of our
executive oÇcers or other key employees could harm our business. We do not have long-term employment
agreements with any of our key personnel, we do not maintain any ""key person'' life insurance policies, and
our Chief Executive OÇcer has fully vested the vast majority of her equity incentives. Our new businesses all
depend on attracting and retaining key personnel. Our future success also will depend on our ability to attract,
train, retain and motivate highly skilled technical, managerial, marketing, and customer support personnel.
Competition for these personnel is intense, and we may be unable to successfully attract, integrate, or retain
suÇciently qualiÑed personnel. In making employment decisions, particularly in the Internet and high-
technology industries, job candidates often consider the value of the stock options they are to receive in
connection with their employment. Fluctuations in our stock price may make it more diÇcult to retain and
motivate employees whose stock option strike prices are substantially above current market prices. Similarly,
decreases in the number of unvested stock options held by existing employees, either because their options
have vested or because the size of follow-on option grants has declined, may make it more diÇcult to retain
and motivate employees.
Our industry is intensely competitive.
We currently or potentially compete with a number of companies providing both particular categories of
goods and broader ranges of goods. The Internet provides new, rapidly evolving and intensely competitive
channels for the sale of all types of goods. We expect competition to intensify in the future. The barriers to
entry into these channels are relatively low, and current oÉine and new competitors can easily launch online
sites at a nominal cost using commercially available software or partnering with any one of a number of
successful e-commerce companies.
Our broad-based competitors include the vast majority of traditional department, warehouse, discount,
and general merchandise stores, emerging online retailers, online classiÑed services, and other shopping
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