eBay 2007 Annual Report Download - page 27

money laundering and counter-terrorist financing laws could result in significant criminal and civil lawsuits,
penalties, and forfeiture of significant assets.
We are subject to risks associated with information disseminated through our service.
The law relating to the liability of online services companies for information carried on or disseminated
through their services is currently unsettled. Claims could be made against online services companies under both
U.S. and foreign law for defamation, libel, invasion of privacy, negligence, copyright or trademark infringement, or
other theories based on the nature and content of the materials disseminated through their services. Several private
lawsuits seeking to impose liability upon us under a number of these theories have been brought against us. In
addition, domestic and foreign legislation has been proposed that would prohibit or impose liability for the
transmission over the Internet of certain types of information. Our service features a Feedback Forum, which
includes information from users regarding other users. Although all such feedback is generated by users and not by
us, claims of defamation or other injury have been made in the past and could be made in the future against us for
content posted in the Feedback Forum. Several court decisions have narrowed the scope of the immunity provided
to Internet service providers like us under the Communications Decency Act. This trend, if continued, may increase
our potential liability to third parties for the user-provided content on our sites. Our liability for such claims may be
higher in jurisdictions outside the U.S. where laws governing Internet transactions are unsettled. If we become
liable for information provided by our users and carried on our service in any jurisdiction in which we operate, we
could be directly harmed and we may be forced to implement new measures to reduce our exposure to this liability.
This may require us to expend substantial resources or to discontinue certain service offerings, which would
negatively affect our financial results. In addition, the increased attention focused upon liability issues as a result of
these lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business.
Any costs incurred as a result of this potential liability could harm our business.
Government inquiries may lead to charges or penalties.
A large number of transactions occur on our websites. Government regulators have received a significant
number of consumer complaints about both eBay and PayPal, which, while small as a percentage of our total
transactions, are large in aggregate numbers. As a result, from time to time we have been contacted by various
foreign and domestic governmental regulatory agencies that have questions about our operations and the steps we
take to protect our users from fraud. PayPal has received inquiries regarding its restriction and disclosure practices
from the Federal Trade Commission and regarding these and other business practices from the attorneys general of a
number of states. In September 2006, PayPal entered into a settlement agreement with the attorneys general of a
number of states under which it agreed to pay $1.7 million to the attorneys general, shorten and streamline its user
agreement, increase educational messaging to users about funding choices, and communicate more information
regarding protection programs to users. 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 efforts, customer support procedures, operating procedures and
disclosures. If one or more of these agencies is not satisfied with our response to current or future inquiries, we could
be subject to enforcement actions, fines or other penalties, or forced to change our operating practices in ways that
could harm our business.
We are subject to general litigation and regulatory disputes.
From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary course of
business. The number and significance of these disputes and inquiries are increasing as our business expands and
our company grows larger. We have in the past been forced to litigate such claims. We may also become more
vulnerable to third-party claims as laws such as the Digital Millennium Copyright Act, the Lanham Act and the
Communications Decency Act are interpreted by the courts and as we expand geographically into jurisdictions
where the underlying laws with respect to the potential liability of online intermediaries such as ourselves are either
unclear or less favorable. In Germany, the German Federal Supreme Court has ruled that we may owe duties, under
certain circumstances, to content owners and competitors relating to taking reasonable steps to prevent the listing of
illegal, counterfeit, and pirated items. Any claims or regulatory actions against us, whether meritorious or not, could
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