Vistaprint 2010 Annual Report Download - page 35

Form 10-K
refer to as referral fees. Some of these third party referral-based offers were for memberships in
discount programs or similar promotions made to customers who have purchased products from us, in
which we received a payment from a third party merchant for every customer that accepted the
promotion. Some of these third party membership discount programs have been, and may continue to
be, the subject of consumer complaints, litigation, and governmental regulatory actions alleging that
the enrollment and billing practices involved in the programs violate various consumer protection laws
or are otherwise deceptive. For example, various state attorneys general have brought consumer
fraud lawsuits against certain of the third party merchants asserting that they have not adequately
disclosed the terms of their offers and have not obtained proper approval from consumers before
debiting the consumers’ bank account or billing the consumers’ credit card. Similarly, in May 2009,
Senator John D. Rockefeller IV, Chairman of the United States Senate Committee on Commerce,
Science and Transportation, announced that the Commerce Committee was investigating membership
discount programs marketed by third party merchants Vertrue, Inc., Webloyalty.com, Inc. and Affinion
Group, Inc. through e-commerce retailers, and in June 2010 the Commerce Committee approved
proposed legislation that seeks to regulate certain aspects of the membership programs. From time to
time we have received complaints from our customers and inquiries by state attorneys general and
government agencies regarding the membership discount programs previously offered on our
websites. Although we removed all such membership discount program offerings from our websites as
of November 2009 and terminated our relationship with the third party merchant responsible for these
programs, we have continued to receive complaints and inquiries about these programs.
In addition, we are currently involved in several purported class action lawsuits that were filed
against us and two affiliated third party merchants, which lawsuits have been consolidated into one
suit, alleging that we and the merchants violated certain Federal and state consumer protection laws
in connection with the offer of membership discount programs on our Vistaprint.com website. You can
find more information about this lawsuit in the section of this Report entitled, “Item 3 – Legal
Proceedings.” We and the third party merchants may receive other complaints in the future regarding
these types of membership discount programs.
The purported class action lawsuits or any other private or governmental claims or actions that
may be brought against us in the future relating to these third party membership programs could
result in our being obligated to pay substantial damages or incurring substantial legal fees in
defending claims. These damages and fees could be disproportionate to the revenues we generated
through these relationships, which would have an adverse affect on our results of operations. Even if
we are successful in defending against these claims, such a defense may result in distraction of
management and significant costs. In addition, customer dissatisfaction or damage to our reputation
as a result of these claims could have a negative impact on our brand, revenues and profitability.
Our practice of offering free products and services could be subject to judicial or regulatory
challenge, which, if successful, would hinder our ability to attract customers and generate
revenue.
We regularly offer free products and services as an inducement for customers to try our
products and services. Although we believe that we conspicuously and clearly communicate all details
and conditions of these offers—for example, that customers are required to pay shipping and
processing charges to take advantage of a free product offer—we have in the past, and may in the
future, be subject to claims by individuals or governmental regulators in Europe, the United States and
other countries that our free offers are misleading or do not comply with applicable legislation or
regulation. In addition, customers and competitors have filed complaints with governmental and
standards bodies claiming that customers were misled by the terms of our free offers. If our free
product offers are subject to further challenges or actions in the future, or if we are compelled or
determine to curtail or eliminate our use of free offers as the result of any such actions, our business
prospects and results of operations could be materially harmed.
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