Vistaprint 2010 Annual Report Download - page 34

majority of applicable laws were adopted before the advent of the Internet and do not contemplate or
address the unique issues raised by the Internet or e-commerce. Those laws that do reference the
Internet, such as the Bermuda Electronic Transactions Act 1999, the U.S. Digital Millennium Copyright
Act and the U.S. CAN-SPAM Act of 2003, are only beginning to be interpreted by the courts, and their
applicability and reach are therefore uncertain. Those current and future laws and regulations or
unfavorable resolution of these issues may substantially harm our business and results of operations.
If we were required to review the content that our customers incorporate into our products
and interdict the shipment of products that violate copyright protections or other laws, our
costs would significantly increase, which would harm our results of operations.
Because of our focus on automation and high volumes, our operations do not involve any
human-based review of content for the vast majority of our sales. Although our websites’ terms of use
specifically require customers to represent that they have the right and authority to reproduce a given
content and that the content is in full compliance with all relevant laws and regulations, we do not
have the ability to determine the accuracy of these representations on a case-by-case basis. There is
a risk that a customer may supply an image or other content that is the property of another party used
without permission, that infringes the copyright or trademark of another party, or that would be
considered to be defamatory, hateful, racist, scandalous, obscene, or otherwise objectionable or illegal
under the laws of the jurisdiction(s) where that customer lives or where we operate. There is,
therefore, a risk that customers may intentionally or inadvertently order and receive products from us
that are in violation of the law or the rights of another party. If we should become legally obligated in
the future to perform manual screening and review for all orders destined for a jurisdiction, we will
encounter increased production costs or may cease accepting orders for shipment to that jurisdiction,
which could substantially harm our business and results of operations. In addition, if we were held
liable for actions of our customers, we could be required to pay substantial penalties, fines or
monetary damages.
We expect that revenues we derive from third party referral programs will decrease in the
future due to our termination of membership discount program offerings, which could
adversely affect our results of operations.
For the year ended June 30, 2010 we derived approximately 1.9% of our total revenues from
referral fees generated from all sources, as compared to 5.0% for the year ended June 30, 2009. We
removed the membership discount program offerings from our websites in November 2009 and
terminated our relationship with the third party merchant responsible for these programs. As a result,
for the year ended June 30, 2010, 0.8% of our revenue was derived from third party membership
discount programs as compared to 3.9% in the same prior year period. In the future, referral fees
could generate more or less of our total revenues due to a variety of factors, including, among others,
new product and service offering decisions or customers’ acceptance of our partner offers. We expect
to partially offset any anticipated reductions in referral fee revenues from a variety of sources, but if
we are not successful in doing so our revenues and profitability could be adversely affected.
Purported Federal class action lawsuits have been filed alleging that certain of our customers
were, without their knowledge or consent, enrolled in and billed for membership discount
programs previously offered by third party merchants on our Vistaprint.com website. If we or
the third party merchants are unable to successfully resolve these lawsuits or similar claims
that may be brought in the future, our reputation, revenues and results of operations could be
adversely affected.
During each of the last three fiscal years, we generated a small portion of our revenue from
order referral fees, revenue share and other fees paid to us by third party merchants for customer
click-throughs, distribution of third party promotional materials, and referrals arising from products and
services of the third party merchants we offer to our customers on our website, which we collectively
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