eBay 2003 Annual Report Download - page 58

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doing business through adverse judgment or settlement, could require us to change our business practices
in expensive ways, or could otherwise harm our business. Litigation against other online companies could
result in interpretations of the law that could also require us to change our business practices or otherwise
increase our costs.
We are subject to risks associated with information disseminated through our service.
The law relating to the liability of online services companies for information carried on or
disseminated through their services is currently unsettled. Claims could be made against online services
companies under both U.S. and foreign law for defamation, libel, invasion of privacy, negligence, copyright
or trademark infringement, or other theories based on the nature and content of the materials disseminated
through their services. Several private lawsuits seeking to impose liability upon us under a number of these
theories have been brought against us. In addition, domestic and foreign legislation has been proposed that
prohibits or imposes liability for the transmission over the Internet of certain types of information. Our
service features a Feedback Forum, which includes information from users regarding other users. Although
all such feedback is generated by users and not by us, claims of defamation or other injury have been
made in the past and could be made in the future against us for content posted in the Feedback Forum.
Claims like these are more likely and may have a higher probability of success in jurisdictions outside the
U.S. where laws governing Internet transactions are unsettled. If we become liable for information
provided by our users and carried on our service in any jurisdiction in which we operate, 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 discontinue certain service oÅerings, which
would negatively aÅect our Ñnancial results. In addition, the increased attention focused upon liability
issues as a result of these 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.
Customer complaints or negative publicity about our customer service could diminish use of our services
adversely and, as a result, our business could suÅer.
Customer complaints or negative publicity about our customer service could severely diminish
consumer conÑdence in and use of our services. Breaches of our customers' privacy and our security
measures could have the same eÅect. Measures we sometimes take to combat risks of fraud and breaches
of privacy and security can damage relations with our customers. These measures heighten the need for
prompt and accurate customer service to resolve irregularities and disputes. EÅective customer service
requires signiÑcant personnel expense, and this expense, if not managed properly, could impact our
proÑtability signiÑcantly. Any inability by us to manage or train our customer service representatives
properly could compromise our ability to handle customer complaints eÅectively. If we do not handle
customer complaints eÅectively, our reputation may suÅer and we may lose our customers' conÑdence.
Because it is providing a Ñnancial service and operating in a more regulated environment, PayPal,
unlike eBay, must provide telephone as well as email customer service and must resolve certain customer
contacts within shorter time frames. PayPal has received negative publicity with respect to its customer
service and is the subject of purported class action lawsuits and state attorney general inquiries alleging,
among other things, failure to resolve promptly certain account restrictions. If PayPal is unable to provide
quality customer support operations in a cost-eÅective manner, its users may have negative experiences,
PayPal may receive additional negative publicity and its ability to attract new customers may be damaged.
Current and future revenues could suÅer, or its operating margins may decrease. In addition, negative
publicity about or experiences with PayPal's customer support could cause eBay's reputation to suÅer or
aÅect consumer conÑdence in eBay as a whole.
Acquisitions could result in operating diÇculties, dilution and other harmful consequences.
We have acquired a number of businesses, including our acquisitions of Half.com, Internet Auction,
iBazar, NeoCom, PayPal, CARad, EachNet, and FairMarket. We recently announced that we have agreed
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