ADT 2013 Annual Report Download - page 81

FORM 10-K
Our business operates in a regulated industry.
Our operations and employees are subject to various federal, state, provincial and local laws and regulations
in the United States and Canada in such areas as consumer protection, occupational licensing, environmental
protection, labor and employment, tax and other laws and regulations. Most states and provinces in which we
operate have licensing laws directed specifically toward the security services industry. Our business relies
heavily upon the use of both wireline and wireless telecommunications to communicate signals, and
telecommunications companies are regulated by federal, state and local governments.
In certain jurisdictions, we are required to obtain licenses or permits in order to comply with standards
governing employee selection and training and to meet certain standards in the conduct of our business. The loss
of such licenses or permits or the imposition of conditions to the granting or retention of such licenses or permits
could have a material adverse effect on us. Furthermore, in certain jurisdictions, certain security systems must
meet fire and building codes in order to be installed, and it is possible that our current or future products and
service offerings will fail to meet such codes, which could require us to make costly modifications to our
products and services or to forgo marketing in certain jurisdictions.
Changes in laws or regulations could require us to change the way we operate or to utilize resources to
maintain compliance, which could increase costs or otherwise disrupt operations. In addition, failure to comply
with any applicable laws or regulations could result in substantial fines or revocation of our operating permits
and licenses. If laws and regulations were to change or if we or our products failed to comply with them, our
business, financial condition, results of operations and cash flows could be materially and adversely affected.
Increasing government regulation of telemarketing, email marketing and other marketing methods may
increase our costs and restrict the operation and growth of our business.
We rely on telemarketing and email marketing conducted internally and through third parties to generate a
substantial number of leads for our business. The telemarketing and email marketing services industries are
subject to an increasing amount of regulation in the United States and Canada. In the United States, the FTC and
FCC have issued regulations that place restrictions on unsolicited automated telephone calls to residential and
wireless telephone subscribers by means of automatic telephone dialing systems, prerecorded or artificial voice
messages and telephone fax machines, and require us to maintain a “do not call” list and to train our personnel to
comply with these restrictions. The FTC regulates both general sales practices and telemarketing specifically and
has broad authority to prohibit a variety of advertising or marketing practices that may constitute “unfair or
deceptive acts or practices.” Most of the statutes and regulations in the United States allow a private right of
action for the recovery of damages or provide for enforcement by the FTC, state attorneys general or state
agencies permitting the recovery of significant civil or criminal penalties, costs and attorneys’ fees in the event
that regulations are violated. The Canadian Radio-Television and Telecommunications Commission enforces
rules regarding unsolicited communications using automatic dialing and announcing devices, live voice and fax.
In December 2010, the Government of Canada passed legislation to restrict the sending of unsolicited
commercial electronic messages including email messages, although that legislation has not yet been proclaimed
into force. We are diligent in our efforts to comply with all such applicable regulations, but cannot assure you
that we or third parties that we rely on for telemarketing, email marketing and other lead generation activities
will be in compliance with all applicable regulations at all times. Although our contractual arrangements with
such third parties expressly require them to comply with all such regulations and to indemnify us for their failure
to do so, we cannot assure you that the FTC, FCC, private litigants or others will not attempt to hold us
responsible for any unlawful acts conducted by such third parties or that we could successfully enforce or collect
upon such indemnities. Additionally, changes in such regulations or the interpretation thereof that further restrict
such activities could result in a material reduction in the number of leads for our business and could have a
material adverse effect on our business, financial condition, results of operations and cash flows.
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