Amazon.com 2004 Annual Report Download - page 26

We May Be Subject to Product Liability Claims if People or Property Are Harmed by the Products We Sell
Some of the products we sell may expose us to product liability claims relating to personal injury, death, or
property damage caused by such products, and may require us to take actions such as product recalls. Certain
businesses and individuals also sell products using our e-commerce platform that may increase our exposure to
product liability claims, such as if these sellers do not have sufficient resources to protect themselves from such
claims. Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for
liabilities actually incurred or that insurance will continue to be available to us on economically reasonable
terms, or at all. In addition, some of our vendor agreements with our distributors, manufacturers, and third party
sellers do not indemnify us from product liability.
We Could Be Liable for Breaches of Security on Our Website
Afundamental requirement for e-commerce is the secure transmission of confidential information over
public networks. Although we have developed systems and processes that are designed to protect consumer
information and prevent fraudulent credit card transactions and other security breaches, failure to mitigate such
fraud or breaches may adversely affect our operating results.
We Could Be Liable for Fraudulent or Unlawful Activities of Sellers
The law relating to the liability of providers of online payment services is currently unsettled. In addition,
we are aware that governmental agencies have investigated the provision of online payment services and could
require changes in the way this business is conducted. Under Merchants@, Marketplace and certain other of our
programs, we may be unable to prevent sellers from collecting payments, fraudulently or otherwise, when buyers
never receive the products they ordered or when the products received are materially different from the sellers’
descriptions. Under our A2Z Guarantee, we reimburse buyers for payments up to certain limits in these situations
and as our third party sales grow, the cost of this program will increase and could negatively affect our operating
results. Any costs we incur as a result of liability because of our A2Z Guarantee or otherwise could harm our
business. In addition, the functionality of our payments program depends on certain third-party vendors
delivering services. If these vendors are unable or unwilling to provide services, our payments program and our
businesses that use it may not be viable. Finally, we may be unable to prevent sellers in our Merchants@,
Marketplace, Merchant.com, and certain other programs from selling unlawful goods, from selling goods in an
unlawful manner, or violating the proprietary rights of others, and could face civil or criminal liability for
unlawful activities by our sellers.
We May Not Be Able to Adapt Quickly Enough to Changing Customer Requirements and Industry
Standards
Technology in the e-commerce industry changes rapidly. We may not be able to adapt quickly enough to
changing customer requirements and preferences and industry standards. Competitors often introduce new
products and services with new technologies. These changes and the emergence of new industry standards and
practices could render our existing websites and proprietary technology obsolete.
The Internet as a Medium for Commerce Is Subject to Uncertainty
Consumer use of the Internet as a medium for commerce is subject to uncertainty. While the number of
Internet users has been rising, the Internet infrastructure may not expand fast enough to meet the increased levels
of demand. In addition, activity that diminishes the experience for Internet users, such as spyware, spoof emails,
viruses and spam directed at Internet users, as well as viruses and “denial of service” attacks directed at Internet
companies and service providers, may discourage people from using the Internet, including for commerce.
Furthermore, newer users of the Internet could be less active e-commerce customers compared to our earlier
customers. If use of the Internet as a medium for commerce grows at a slower rate than we anticipate, our sales
would be lower than expected and our business could be harmed.
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