eBay 2000 Annual Report Download - page 21

The oÉine auction business is intensely competitive. ButterÑelds competes with two larger and better
known auction companies, Sotheby's Holdings, Inc. and Christie's International plc, as well as numerous
regional auction companies. To the extent that these companies increase their focus on the middle market
properties that form the core of ButterÑelds' business or in the western United States, its business may suÅer.
Kruse is subject to competition from numerous regional competitors. In addition, competition with Internet-
based auctions may harm the land-based auction business. Although Billpoint's business is new, several new
companies have entered this space, including competitors who are oÅering free services and signiÑcant
promotional incentives, and large companies, including banks and credit card companies, are also beginning to
enter this space. Half.com competes directly with online retailers in its product categories such as
Amazon.com which oÅers a directly competitive service, as well as with traditional sellers of used books,
videos and CDs.
Employees
As of March 1, 2001, eBay had 1,927 full-time employees. eBay's future is substantially dependent on the
performance of its senior management and key technical personnel, and its continuing ability to Ñnd and retain
highly qualiÑed technical and managerial personnel. See ""Risk Factors Ì We are dependent on key
personnel.''
Issues Related to the Listing or Sale by Users of Unlawful Items
eBay has received in the past, and we anticipate we will receive in the future, communications alleging
that certain items listed or sold through our service by its users infringe third-party copyrights, trademarks and
tradenames or other intellectual property rights. Although eBay has actively sought to work with the content
community to eliminate infringing listings on its website, some content owners have expressed the view that
our eÅorts are insuÇcient. Content owners have been active in defending their rights against online companies,
including eBay. An allegation of infringement of third-party intellectual property rights may result in litigation
against eBay. Any such litigation could be costly for eBay, could result in increased costs of doing business
through adverse judgment or settlement, could require eBay to change its business practices in expensive ways,
or could otherwise harm its business. Litigation against other online companies could result in interpretations
of the law that could also require eBay to change its business practices or otherwise increase its costs. See
""Legal Proceedings'' and ""Risk Factors Ì We are subject to intellectual property and other litigation.''
Fraudulent Activities on the eBay Website
eBay's future success will depend largely upon sellers reliably delivering and accurately representing their
listed goods and buyers paying the agreed purchase price. eBay has received in the past, and anticipates that it
will receive in the future, communications from users who did not receive the purchase price or the goods that
were to have been exchanged. In some cases individuals have been arrested and convicted for fraudulent
activities using eBay's website. While eBay can suspend the accounts of users who fail to fulÑll their delivery
obligations to other users, eBay does not have the ability to require users to make payments or deliver goods or
otherwise make users whole other than through its limited insurance program. Other than through this
program, eBay does not compensate users who believe they have been defrauded by other users. eBay also
periodically receives complaints from buyers as to the quality of the goods purchased. Negative publicity
generated as a result of fraudulent or deceptive conduct by users of its service could damage our reputation
and diminish the value of our brand name. eBay expects to continue to receive requests from users requesting
reimbursement or threatening or commencing legal action against us if no reimbursement is made. This sort of
litigation could be costly for us, divert management attention, result in increased costs of doing business, lead
to adverse judgments or could otherwise harm its business. See ""Risk Factors Ì Our business may be harmed
by fraudulent activities on our website.''
Government Inquiries
On January 29, 1999, eBay received initial requests to produce certain records and information to the
federal government relating to an investigation of possible illegal transactions in connection with its website.
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