Groupon 2011 Annual Report Download - page 28

A variety of federal, state and international laws and regulations govern the collection, use, retention, sharing and security of consumer data. The existing
privacy-
related laws and regulations are evolving and subject to potentially differing interpretations. In addition, various federal, state and foreign legislative and
regulatory bodies may expand current or enact new laws regarding privacy matters. For example, recently there have been Congressional hearings and increased
attention to the capture and use of location-
based information relating to users of smartphones and other mobile devices. We have posted privacy policies and
practices concerning the collection, use and disclosure of subscriber data on our websites and applications. Several Internet companies have incurred penalties
for failing to abide by the representations made in their privacy policies and practices. In addition, several states have adopted legislation that requires businesses
to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event
of a security breach. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-
related consent orders, Federal Trade
Commission requirements or orders or other federal, state or international privacy or consumer protection-related laws, regulations or industry self-
regulatory
principles could result in claims, proceedings or actions against us by governmental entities or others or other liabilities, which could adversely affect our
business. In addition, a failure or perceived failure to comply with industry standards or with our own privacy policies and practices could result in a loss of
subscribers or merchant partners and adversely affect our business. Federal, state and international governmental authorities continue to evaluate the privacy
implications inherent in the use of third-
party web "cookies" for behavioral advertising. The regulation of these cookies and other current online advertising
practices could adversely affect our business.
We may suffer liability as a result of information retrieved from or transmitted over the Internet and claims related to our service offerings.
We may be, and in certain cases have been, sued for defamation, civil rights infringement, negligence, patent, copyright or trademark infringement, invasion
of privacy, personal injury, product liability, breach of contract, unfair competition, discrimination, antitrust or other legal claims relating to information that is
published or made available on our websites or service offerings we make available (including provision of an application programming interface platform for
third parties to access our website, mobile device services and geolocation applications). This risk is enhanced in certain jurisdictions outside the United States,
where our liability for such third-
party actions may be less clear and we may be less protected. In addition, we could incur significant costs in investigating and
defending such claims, even if we ultimately are not found liable. If any of these events occurs, our net income could be materially and adversely affected.
We are subject to risks associated with information disseminated through our websites and applications, including consumer data, content that is produced
by our editorial staff and errors or omissions related to our product offerings. Such information, whether accurate or inaccurate, may result in our being sued by
our merchant partners, subscribers or third parties and as a result our revenue and goodwill could be materially and adversely affected.
Our business depends on our ability to maintain and scale the network infrastructure necessary to operate our websites and mobile applications, and any
significant disruption in service on our websites or applications could result in a loss of subscribers, customers or merchant partners.
Subscribers access our deals through our websites and mobile applications. Our reputation and ability to acquire, retain and serve our subscribers and
customers are dependent upon the reliable performance of our websites and mobile applications and the underlying network infrastructure. As our subscriber
base and the amount of information shared on our websites and applications continue to grow, we will need an increasing amount of network capacity and
computing power. We have spent and expect to continue to spend substantial amounts on data centers and equipment and related network infrastructure to handle
the traffic on our websites and applications. The operation of these systems is expensive and complex and could result in operational failures. In the event that
our subscriber base or the amount of traffic on our websites and applications grows more quickly than anticipated, we may be required to incur significant
additional costs. Interruptions in these systems, whether due to system failures, computer viruses or physical or electronic break-
ins, could affect the security or
availability of our websites and applications, and prevent our subscribers from accessing our services. A substantial portion of our network infrastructure is
hosted by third-
party providers. Any disruption in these services or any failure of these providers to handle existing or increased traffic could significantly harm
our business. Any financial or other difficulties these providers face may adversely affect our business, and we exercise little control over these providers, which
increases our vulnerability to problems with the services they provide. If we do not maintain or expand our network infrastructure successfully or if we
experience operational failures, we could lose current and potential subscribers and merchant partners, which could harm our operating results and financial
condition.
We may be subject to breaches of our information technology systems, which could harm our relationships with our customers and merchant partners,
subject us to negative publicity and litigation, and cause substantial harm to our business.
Our business model requires us to obtain confidential information about our customers and merchant partners, including names, email addresses and
credit card and other payment account information. Because of our high profile and the
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