Avon 2012 Annual Report Download - page 24

Our success depends, in part, on the quality and safety of our products.
Our success depends, in part, on the quality and safety of our products, including the procedures we employ to detect the likelihood of
hazard, manufacturing issues and unforeseen product misuse. If our products are found to be, or are perceived to be, defective or unsafe, or
if they otherwise fail to meet our Representatives’ or end customers’ standards, our relationship with our Representatives or end customers
could suffer, we could need to recall some of our products, our reputation or the appeal of our brand could be diminished, and we could
lose market share and/or become subject to liability claims, any of which could result in a material adverse effect on our business, prospects,
financial condition, liquidity, results of operations and cash flows.
If we are unable to protect our intellectual property rights, specifically patents and
trademarks, our ability to compete could be adversely affected.
The market for our products depends to a significant extent upon the value associated with our product innovations and our brand equity.
We own the material patents and trademarks used in connection with the marketing and distribution of our major products both in the U.S.
and in other countries where such products are principally sold. Although most of our material intellectual property is registered in the U.S.
and in certain foreign countries in which we operate, there can be no assurance with respect to the rights associated with such intellectual
property in those countries. In addition, the laws of certain foreign countries, including many emerging markets, such as China, may not
protect our intellectual property rights to the same extent as the laws of the U.S. The costs required to protect our patents and trademarks
may be substantial.
We are involved, and may become involved in the future, in legal proceedings that, if
adversely adjudicated or settled, could adversely affect our financial results.
We are and may, in the future, become party to litigation, including, for example, claims alleging violation of the federal securities laws or
claims relating to our advertising. In general, litigation claims can be expensive and time consuming to bring or defend against and could
result in settlements or damages that could significantly affect financial results. We are currently vigorously contesting certain of these
litigation claims. However, it is not possible to predict the final resolution of the litigation to which we currently are or may in the future
become party, and the impact of certain of these matters on our business, prospects, financial condition, liquidity, results of operations and
cash flows.
Government reviews, inquiries, investigations, and actions could harm our business or
reputation. In addition, from time to time we may conduct other internal investigations and
compliance reviews, the consequences of which could negatively impact our business or
reputation.
As we operate in various locations around the world, our operations in certain countries are subject to significant governmental scrutiny and
may be harmed by the results of such scrutiny. The regulatory environment with regard to direct selling in emerging and developing markets
where we do business is evolving, and officials in such locations often exercise broad discretion in deciding how to interpret and apply
applicable regulations. From time to time, we may receive formal and informal inquiries from various government regulatory authorities about
our business and compliance with local laws and regulations. In addition, from time to time, we may conduct internal investigations and
compliance reviews. The consequences of such government reviews, inquiries, investigations, and actions or such internal investigations and
compliance reviews may adversely impact our business, prospects, reputation, financial condition, liquidity, results of operations or cash flows.
Any determination that our operations or activities, or the activities of our Representatives, are not, or were not, in compliance with existing
U.S. or foreign laws or regulations could result in the imposition of substantial fines, interruptions of business, loss of supplier, vendor or
other third-party relationships, termination of necessary licenses and permits, and other legal or equitable sanctions. Other legal or
regulatory proceedings, as well as government investigations, which often involve complex legal issues and are subject to uncertainties, may
also follow as a consequence.
Additionally, any determination that our operations or activities, or the activities of our Representatives, including our licenses or permits, importing
or exporting, or product testing or approvals are not, or were not, in compliance with existing laws or regulations could result in the imposition of
substantial fines, civil and criminal penalties, interruptions of business, modification of business practices and compliance programs, equitable
remedies, including disgorgement, injunctive relief and other sanctions that we may take against our personnel or that may be taken against us or
our personnel. Further, other countries in which we do business may initiate their own investigations and impose similar sanctions. Even if an
inquiry or investigation does not result in these types of determinations, it potentially could create negative publicity.
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