Zynga 2012 Annual Report Download - page 33

work with, such as players, vendors or developers, violate applicable laws or our policies, such violations may
also put our players’ information at risk and could in turn have an adverse effect on our business.
In the area of information security and data protection, many states have passed laws requiring notification
to players when there is a security breach for personal data, such as the 2002 amendment to California’s
Information Practices Act, or requiring the adoption of minimum information security standards that are often
vaguely defined and difficult to practically implement. The costs of compliance with these laws may increase in
the future as a result of changes in interpretation. Furthermore, any failure on our part to comply with these laws
may subject us to significant liabilities.
Our business is subject to a variety of other U.S. and foreign laws, many of which are unsettled and still
developing and which could subject us to claims or otherwise harm our business.
We are subject to a variety of laws in the United States and abroad, including laws regarding consumer
protection, intellectual property, export and national security, that are continuously evolving and developing. The
scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be
conflicting, particularly laws outside the United States. For example, laws relating to the liability of providers of
online services for activities of their users and other third parties are currently being tested by a number of
claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and
trademark infringement, and other theories based on the nature and content of the materials searched, the ads
posted or the content provided by users. It is also likely that as our business grows and evolves and our games are
played in a greater number of countries, we will become subject to laws and regulations in additional
jurisdictions. We are potentially subject to a number of foreign and domestic laws and regulations that affect the
offering of certain types of content, such as that which depicts violence, many of which are ambiguous, still
evolving and could be interpreted in ways that could harm our business or expose us to liability. In addition,
certain of our casino-themed games, including Zynga Poker, may become subject to gambling-related rules and
regulations and expose us to civil and criminal penalties if we do not comply. We have recently begun efforts to
expand our business to include RMG and announced a partnership agreement with bwin.party to develop, test
and operate certain real money online poker and casino games in the United Kingdom. We also recently filed an
Application for a Preliminary Finding of Suitability with the Nevada Gaming Control Board. RMG is subject to
stringent, complicated and rapidly changing licensing and regulatory requirements, both federally and in each
state, as well as internationally. Regulatory and legislative developments, including excessive taxation, may
prevent or significantly limit our ability to enter into or succeed in RMG. Becoming familiar with and complying
with these requirements will increase our costs and subject our business to greater scrutiny by regulators in many
different jurisdictions.
It is difficult to predict how existing laws will be applied to our business and the new laws to which we may
become subject. If we are not able to comply with these laws or regulations or if we become liable under these
laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce
our exposure to this liability. This may require us to expend substantial resources or to modify our games, which
would harm our business, financial condition and results of operations. In addition, the increased attention
focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or
otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could harm
our business and operating results.
It is possible that a number of laws and regulations may be adopted or construed to apply to us in the United
States and elsewhere that could restrict the online and mobile industries, including player privacy, advertising,
taxation, content suitability, copyright, distribution and antitrust. Furthermore, the growth and development of
electronic commerce and virtual goods may prompt calls for more stringent consumer protection laws that may
impose additional burdens on companies such as ours conducting business through the Internet and mobile
devices. We anticipate that scrutiny and regulation of our industry will increase and we will be required to devote
legal and other resources to addressing such regulation. For example, existing laws or new laws regarding the
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