eBay 2012 Annual Report Download - page 49

We are subject to regulatory activity and antitrust litigation under competition laws.
We receive scrutiny from various government agencies under U.S. and foreign competition laws. Some jurisdictions also provide private
rights of action for competitors or consumers to assert claims of anti-
competitive conduct. Other companies and government agencies have in the
past and may in the future allege that our actions violate the antitrust or competition laws of the U.S., individual states, the European
Commission, or other countries, or otherwise constitute unfair competition. Contractual agreements with buyers, sellers, or other companies
could give rise to regulatory action or antitrust litigation. Also, our unilateral business practices could give rise to regulatory action or antitrust
litigation. Some regulators, particularly those outside of the U.S., may perceive our business to have so much market power that otherwise
uncontroversial business practices could be deemed anticompetitive. For example, in the U.S., we have been sued by a plaintiff representing a
putative class of sellers who alleges that we have illegally monopolized a market for online auctions. In Korea, the national competition authority
has investigated allegations that we have engaged in illegal exclusive conduct and rendered a decision against us in October 2010. The main case
was conclusively resolved in our favor, and a related administrative action is on appeal. A further investigation was concluded by the Seoul
prosecutor's office, which chose not to bring any charges. The competition authorities in Germany and Australia have conducted investigations
(now completed) of various actions taken by our businesses. Such claims and investigations, even if without foundation, typically are very
expensive to defend, involve negative publicity and substantial diversion of management time and effort, and could result in significant
judgments against us or require us to change our business practices.
In several jurisdictions, we have taken actions designed to improve the security of transactions and the quality of the user experience on our
websites and mobile platforms. Beginning in June 2008, we have required users in the U.K. to offer PayPal as a payment alternative on most
transactions on our localized U.K. site, and since October 2008, we have required sellers on eBay.com to accept one or more accepted payment
methods (currently PayPal, credit or debit cards processed through Internet merchant accounts, ProPay, Skrill (formerly known as
Moneybookers) and Paymate) and no longer allow any forms of paper payment, including checks and money orders, to be listed by sellers in the
U.S. for most categories of items. While these initiatives are intended to improve and make safer our users' buying experience and/or increase
activity on our sites, certain users may be negatively affected by or react negatively to these changes, and may allege that we have (and are
abusing) market power. We have faced inquiries from government regulators in various jurisdictions related to such actions. For example, in
2008, both the Australian Competition and Consumer Commission and the Reserve Bank of Australia reviewed our policies requiring sellers to
offer PayPal as a payment alternative on most transactions on our localized Australian website and precluding sellers from imposing a surcharge
or any other fee for accepting PayPal or other payment methods. We may face similar inquiries from other government regulators in the future.
Negative reactions to these changes by our users or government authorities could, among other things, force us to change our operating practices
in ways that could harm our business, operating results and profitability.
Our business may be adversely affected by factors that cause our users to spend less time on our websites or mobile applications,
including seasonal factors, national events and increased usage of other websites.
Anything that diverts our users from their customary level of usage of our websites or mobile applications could adversely affect our
business. We would therefore be adversely affected by geopolitical events such as war, the threat of war, or terrorist activity, and natural
disasters, such as hurricanes or earthquakes. Similarly, our results of operations historically have experienced seasonal fluctuations because
many of our users reduce their activities on our websites with the onset of good weather during the summer months, and on and around national
holidays. In addition, our GSI business is highly seasonal, with the fourth quarter holiday season accounting for a disproportionate amount of
GSI's net revenues due to consumers increasing their purchases and businesses increasing their advertising to consumers during that period, and
any factors that limit or dampen consumer spending during the fourth quarter holiday season could harm our GSI business. In addition, increased
usage of social networking or other entertainment websites or mobile applications may decrease the amount of time users spend on our websites
or mobile applications, which could adversely affect our financial results.
Our failure to cost-effectively manage certain aspects of our business could harm us.
We have expanded significantly our headcount, facilities and infrastructure in the U.S. and internationally, and anticipate that further
expansion in certain areas and geographies will be required for some of our businesses. We are also increasing our product and service offerings
across our businesses. This expansion increases the complexity of our businesses and places a significant strain on our management, operational
and financial resources. The areas of our business that are put under strain by our growth include the following:
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