eBay 2011 Annual Report Download - page 31

New and existing regulations could harm our business.
We are subject to the same foreign and domestic laws as other companies conducting business on and off the Internet. It is not always clear
how existing laws governing issues such as property ownership, copyrights, trademarks and other intellectual property issues, parallel imports and
distribution controls, taxation, libel and defamation, obscenity and personal privacy apply to online businesses such as ours. The majority of these
laws were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address the unique issues of
the Internet and related technologies. Those laws that do reference the Internet, such as the U.S. Digital Millennium Copyright Act, the U.S.
“CAN-SPAM” Act and the European Union's Directives on Distance Selling and Electronic Commerce, are being interpreted by the courts, but
their applicability and scope remain uncertain. As our activities and the types of goods and services listed on our websites expand, including
through acquisitions such as Bill Me Later and StubHub, regulatory agencies or courts may claim or hold that we or our users are subject to
licensure or prohibited from conducting our business in their jurisdiction, either generally or with respect to certain actions (e.g., the sale of real
estate, event tickets, cultural goods, boats and automobiles). Recent financial and political events may increase the level of regulatory scrutiny on
large companies in general, and financial services companies in particular, and regulatory agencies may view matters or interpret laws and
regulations differently than they have in the past and in a manner adverse to our businesses.
Our success and increased visibility has driven some existing businesses that perceive our business model to be a threat to their business to
raise concerns about our business models to policymakers and regulators. These established businesses and their trade association groups employ
significant resources in their efforts to shape the legal and regulatory regimes in countries where we have significant operations. They may employ
these resources in an effort to change the legal and regulatory regimes in ways intended to reduce the effectiveness of our businesses and the
ability of users to use our products and services. In particular, these established businesses have raised concerns relating to pricing, parallel
imports, professional seller obligations, selective distribution networks, stolen goods, copyrights, trademarks and other intellectual property rights
and the liability of the provider of an Internet marketplace for the conduct of its users related to those and other issues. Changing the legal or
regulatory regimes in a manner that would increase our liability for third-party listings could negatively impact our business.
Over the last few years some large retailers and their trade associations have sought legislation in a number of states and the U.S. Congress
that would make eBay liable for the sale of stolen property or would ban certain categories of goods from sale on our platform, including gift
cards and health and beauty products. While no such legislation has passed to date, the proponents continue to seek passage of such legislation,
and if any of these laws are adopted they could harm our business.
Numerous states and foreign jurisdictions, including the State of California, where our headquarters are located, have regulations regarding
“auctions” and the handling of property by “secondhand dealers” or “pawnbrokers.” Several states and some foreign jurisdictions, including
France, have attempted, and may attempt in the future, to impose such regulations upon us or our users. Attempted enforcement of these laws
against some of our users appears to be increasing. In France, we have been sued by Conseil des Ventes, the French auction regulatory authority,
which has alleged that sales on our French website constitute illegal auctions that cannot be performed without its consent. Although we have won
this lawsuit in the lower court, this decision is being appealed. A lawsuit alleging similar claims has been brought against us by two associations
of French antique dealers, and is now pending on appeal after we won this lawsuit in the first instance. We intend to vigorously defend against
these lawsuits. However, these and other regulatory and licensure claims and enforcement actions could result in costly litigation and, if
unsuccessful, we could be required to change the way we or our users do business in ways that increase costs or reduce revenues (for example, by
forcing us to prohibit listings of certain items or restrict certain listing formats in some locations). We could also be subject to fines or other
penalties, and any of these outcomes could harm our business.
A number of the lawsuits against us relating to trademark issues seek to have our websites subject to unfavorable local laws. For example,
“trademark exhaustion” principles provide trademark owners with certain rights to control the sale of a branded authentic product until it has been
placed on the market by the trademark holder or with the holder's consent. The application of “trademark exhaustion” principles is largely
unsettled in the context of the Internet, and if trademark owners are able to force us to prohibit listings of certain items in one or more locations,
our business could be harmed.
As we expand and localize our international activities, we become obligated to comply with the laws of the countries or markets in which
we operate. In addition, because our services are accessible worldwide and we facilitate sales of goods and provide services to users worldwide,
one or more jurisdictions may claim that we or our users are required to comply with their laws based on the location of our servers or one or more
of our users, or the location of the product or service being sold or provided in an ecommerce transaction. For example, in the Louis Vuitton
Malletier litigation, we were found liable in France, under French law, for transactions on some of our websites worldwide that did not involve
French buyers or sellers (see “Item 3: Legal Proceedings” below). Laws regulating Internet and ecommerce companies outside of the U.S. may be
less favorable than those in the U.S., giving greater rights to consumers, content owners, competitors, users and other third parties. Compliance
may be more costly or may require us to change our business practices or restrict our service offerings, and the
26