eBay 2002 Annual Report Download - page 64

In addition, although we generally have been able to renew or extend the terms of contractual
arrangements with our third party service providers on acceptable terms, there can be no assurance that we
will continue to be able to do so in the future. Our contractual arrangement with our third-party photo
hosting service provider is scheduled to expire on September 30, 2003, subject to certain post-termination
obligations. If we are unable either to renegotiate the contract on terms acceptable to us, to build
equivalent functionality ourselves or to Ñnd an alternative supplier, our business would be adversely
aÅected.
Third parties or governmental agencies may view our behavior as anti-competitive.
Third parties, including PayPal before its acquisition by us, have in the past and may in the future
allege that actions taken by us violate the antitrust or competition laws of the U.S. or other countries, or
otherwise constitute unfair competition. Such claims typically are very expensive to defend, involve
negative publicity and diversion of management time and eÅort and could result in signiÑcant judgments
against us, all of which would adversely aÅect us.
We have provided information to the Antitrust Division of the Department of Justice in connection
with an inquiry into our conduct with respect to ""auction aggregators'' including our licensing program and
a previously settled lawsuit against Bidder's Edge. Although the Antitrust Division has closed this inquiry,
if the Department of Justice or any other antitrust agency were to open other investigations of our
activities, we would likely be harmed by negative publicity, the costs of the action, possible private
antitrust lawsuits, the diversion of management time and eÅort and penalties we might suÅer if we
ultimately were not to prevail.
Some of our businesses are subject to regulation and others may be in the future.
As our activities and the types of goods listed on our site expand, state regulatory agencies may claim
that we are subject to licensure in their jurisdiction, either with respect to our services in general, or in
order to allow the sale of certain items (e.g., real estate, boats, automobiles). 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. In August 2002, Illinois amended the Illinois
auction law to provide for a special regulatory regime for ""Internet auction listing services.'' We expect to
register as an Internet auction listing service in Illinois following the adoption of regulations under the
amended statute. Although we do not expect this registration to have a negative impact on our business,
other regulatory and licensure claims could result in costly litigation or could require us to change our
manner of doing business in ways that increase our costs or reduce our revenues or force us to prohibit
listings of certain items for some locations. We could also be subject to Ñnes or other penalties. Any of
these outcomes could harm our business.
As we have expanded internationally, we have become subject to additional regulations, including
regulations on the transmission of personal information. These laws may require costly changes to our
business practices. If we are found to have violated any of these laws, we could be subject to Ñnes or
penalties, and our business could be harmed.
Our revenues from third-party advertising and end-to-end services are subject to factors beyond our control
and are expected to decrease.
We recognize revenues from end-to-end service providers and direct advertising promotions. These
revenues may be aÅected by the Ñnancial condition of the parties with whom we have these relationships
and by the success of online promotions generally. Recently, the pricing of online advertisements has
deteriorated. Our direct advertising revenues historically have been dependent in signiÑcant part on the
performance of AOL's sales force. Our advertising sales relationship with AOL has not been extended or
renewed and is scheduled to terminate on March 31, 2003, after which time we will be dependent on the
eÅorts of our existing internal sales staÅ. Reduction in these revenues would adversely aÅect our results.
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