eBay 2010 Annual Report Download - page 29

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 under a number
of these theories have been brought against us, as well as other online service companies. In addition, domestic
and foreign legislation has been proposed that would prohibit or impose 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 not
removing content posted in the Feedback Forum.
Furthermore, several court decisions arguably have narrowed the scope of the immunity provided to Internet
service providers like us under the Communications Decency Act. For example, the Ninth Circuit has held that
certain immunity provisions under the Communications Decency Act might not apply to the extent that a website
owner materially contributes to the development of unlawful content on its website. As our websites evolve,
challenges to the applicability of these immunities can be expected to continue. In addition, the Paris Court of
Appeal has ruled in the Louis Vuitton Malletier and Christian Dior Couture cases that applicable laws protecting
passive internet “hosts” from liability are inapplicable to eBay given that eBay actively promotes bidding on its
sellers’ listings and receives a commission on successful transactions, and is therefore a broker. This trend, if
continued, may increase our potential liability to third parties for the user-provided content on our sites,
particularly 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, including expending substantial resources or discontinuing certain service offerings, which would
negatively affect our financial results. In addition, the increased attention focused upon liability issues as a result
of these lawsuits and legislative proposals could require us to incur additional costs and harm our reputation and
our business.
Government inquiries may lead to charges or penalties.
A large number of transactions occur on our websites on a daily basis. Government regulators have received
a significant number of consumer complaints about both eBay and PayPal, which, while small as a percentage of
our total transactions, are large in aggregate numbers. As a result, from time to time we have been contacted by
various foreign and domestic governmental regulatory agencies that have questions about our operations and the
steps we take to protect our users from fraud. PayPal has received inquiries regarding its restriction and
disclosure practices from the Federal Trade Commission and regarding these and other business practices from
the attorneys general of a number of states. In September 2006, PayPal entered into a settlement agreement with
the attorneys general of a number of states under which it agreed to pay $1.7 million to the attorneys general,
shorten and streamline its user agreement, increase educational messaging to users about funding choices, and
communicate more information regarding protection programs to users. We currently face inquiries from
government regulators in various jurisdictions related to actions that we have taken that are designed to improve
the security of transactions and the quality of the user experience on our websites and we may face similar
inquires from other government regulators in the future. For example, both the Australian Competition and
Consumer Commission and the Reserve Bank of Australia recently reviewed our policies requiring sellers to
offer PayPal as a payment alternative on most transactions on our localized Australian website and precluding
sellers from imposing a surcharge or any other fee for accepting PayPal or other payment methods. Other
regulators have requested information concerning PayPal’s limitations of customer accounts. Similarly, Bill Me
Later has from time to time received customer complaints that could result in investigations into Bill Me Later’s
business practices by state or federal regulators. As a result of the recent credit crisis, new laws have been passed,
and we expect additional new laws and regulations to be adopted that impose, among other requirements,
additional obligations and restrictions on the provision of credit. We are likely to receive additional inquiries
from regulatory agencies in the future, including under existing or new credit laws or regulations, which may
lead to action against us. We have responded to all inquiries from regulatory agencies by describing our current
24