eBay 1998 Annual Report Download - page 15

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Government Inquiries
On January 29, 1999, the Company received requests to produce certain records and information to the federal
government relating to an investigation of possible illegal transactions in connection with the Company’ s website.
The Company has been informed that the inquiry includes an examination of the Company’ s practices with respect
to these transactions. The Company is fully cooperating with the inquiry. In order to protect the investigation, the
court has ordered that no further public disclosures be made with respect to the matter at this time. Should this or
any other investigation lead to civil or criminal charges against the Company, the Company would likely be harmed
by negative publicity, the costs of litigation, the diversion of management time and other negative effects, even if it
ultimately prevails. The Company’ s business would certainly suffer if it were not to prevail in any action like this.
A large number of transactions occur on the eBay website. As a result, the Company believes that government
regulators have received a substantial number of consumer complaints about the eBay website which, while small as
a percentage of the Company’ s total transactions, are large in aggregate numbers. As a result, the Company has from
time to time been contacted by various federal, state and local regulatory agencies and been told that they have
questions with respect to the adequacy of the steps the Company takes to protect its users from fraud. For example,
the City of New York-Department of Consumer Affairs received complaints from users about transactions on the
Company’ s website. In investigating these complaints, the Department of Consumer Affairs requested information
about the Company and these transactions. The Company has provided the requested information. The Company is
likely to receive additional inquiries from regulatory agencies in the future, which may lead to action against it. The
Company has responded to all inquiries from regulatory agencies by describing its current and planned antifraud
efforts. If one or more of these agencies is not satisfied with its response to current or future inquiries, the resultant
investigations and potential fines or other penalties could harm its business. See “Risk Factors—Government
inquiries may lead to charges or penalties.”
Privacy Policy
The Company believes that issues relating to privacy and use of personal information relating to Internet users
are becoming increasingly important as the Internet and its commercial use grow. The Company has adopted a
detailed privacy policy that outlines how eBay uses information concerning its users and the extent to which other
registered eBay users may have access to this information. Users must acknowledge and agree to this policy when
registering for the eBay service. The Company does not sell or rent any personally identifiable information about its
users to any third party; however, the Company does disclose information to sellers and winning bidders that
contains the seller’ s and winning bidder’ s name, email address and telephone number. The Company also will
disclose all customer information in its possession (other than credit card information) to a law enforcement agency
or member of the Legal Buddy Program which requests this information in connection with a civil, criminal or
regulatory investigation. The Company also uses information about its users for internal purposes only in order to
improve marketing and promotional efforts, to analyze website usage statistically, and to improve content, product
offerings and website layout. eBay is a member of the TRUSTe program, a non-profit independent organization that
audits websites’ privacy statements and audits their adherence thereto.
New and Existing Regulation of the Internet
The Company is subject to the same federal, state and local laws as other companies conducting business on the
Internet. Today there are relatively few laws specifically directed towards online services. However, due to the
increasing popularity and use of the Internet and online services, it is possible that laws and regulations will be
adopted with respect to the Internet or online services. These laws and regulations could cover issues such as online
contracts, user privacy, freedom of expression, pricing, fraud, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. Applicability to the Internet of existing laws
governing issues such as property ownership, copyrights and other intellectual property issues, taxation, libel,
obscenity and personal privacy is uncertain. In addition, numerous states, including the State of California, in which
the Company’ s headquarters are located, have regulations regarding the manner in which “auctions” may be
conducted and the liability of “auctioneers” in conducting such auctions. No legal determination has been made with
respect to the applicability of the California regulations to the Company’ s business to date and little precedent exists