eBay 2001 Annual Report Download - page 50

conventional valuation standards such as price-to-earnings and price-to-sales ratios. The trading price of
our common stock has increased enormously from the initial public oÅering price. This trading price and
valuation may not be sustained. Negative changes in the public's perception of the prospects of Internet or
e-commerce companies have in the past and may in future depress our stock price regardless of our
results. Other broad market and industry factors may decrease the market price of our common stock,
regardless of our operating performance. Market Öuctuations, as well as general political and economic
conditions, such as recession or interest rate or currency rate Öuctuations, also may decrease the market
price of our common stock. In the past, following declines in the market price of a company's securities,
securities class-action litigation often has been instituted. Litigation of this type, if instituted, could result
in substantial costs and a diversion of management's attention and resources.
New and existing regulations could harm our business.
We are subject to the same foreign, federal, state and local laws as other companies conducting
business on the Internet. Today there are relatively few laws speciÑcally directed towards online services.
However, due to the increasing popularity and use of the Internet and online services, many laws relating
to the Internet are being debated at the state and federal levels (both in the U.S. and abroad) and 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 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.
The vast majority of these laws was adopted prior to the advent of the Internet and related technologies
and, as a result, do not contemplate or address the unique issues of the Internet and related technologies.
Those laws that do reference the Internet, such as the Digital Millennium Copyright Act and the
European Union's Directive on Distance Selling, are only beginning to be interpreted by the courts and
their applicability and scope are, therefore, uncertain. In addition, numerous states and foreign
jurisdictions, including the State of California, where our headquarters is located, have regulations
regarding how ""auctions'' may be conducted and the liability of ""auctioneers'' in conducting such auctions.
No Ñnal legal determination has been made with respect to the applicability of the California regulations
to our business to date and little precedent exists in this area. Several states are considering imposing these
regulations upon us or our users, which could harm our business. We are currently subject to potential
regulation under the OÇce of Banks and Real Estate, or OBRE, in Illinois concerning the applicability of
the Illinois Auction law to our services. We are working with OBRE to determine the scope of its
regulatory eÅorts. In addition, as the nature of the products listed by our users change, we may become
subject to new regulatory restrictions, such as licensure as an auto dealer or real estate broker.
Several states have proposed legislation that would limit the uses of personal user information
gathered online or require online services to establish privacy policies. The Federal Trade Commission also
has settled several proceedings regarding the manner in which personal information is collected from users
and provided to third parties. SpeciÑc statutes intended to protect user privacy have been passed in many
non-U.S. jurisdictions, including virtually every non-U.S. jurisdiction where we currently have a website.
Compliance with these laws, given the tight integration of our systems across diÅerent countries and the
need to move data to facilitate transactions amongst our users (e.g., to payment companies, shipping
companies, etc.), is both necessary and diÇcult. Failure to comply could subject us to lawsuits, Ñnes,
statutory damages, adverse publicity and other losses that could harm our business. Changes to existing
laws or the passage of new laws intended to address these issues could directly aÅect the way we do
business or could create uncertainty on the Internet. This could reduce demand for our services, increase
the cost of doing business as a result of litigation costs or increased service delivery costs, or otherwise
harm our business. In addition, because our services are accessible worldwide, and we facilitate sales of
goods to users worldwide, foreign jurisdictions may claim that we are required to comply with their laws.
For example, a French court has recently ruled that a U.S. website must comply with French laws
regarding content. As we have expanded our international activities, we have become obligated to comply
with the laws of the countries in which we operate. Laws regulating Internet companies outside of the
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