eBay 2010 Annual Report Download - page 35

defamation, obscenity, and personal privacy apply to online businesses such as ours. The majority of these laws
were 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 U.S. Digital Millennium Copyright Act and the European Union’s Directives on Distance Selling and
Electronic Commerce, are being interpreted by the courts, but their applicability and scope remain uncertain.
Furthermore, as our activities and the types of goods and services listed on our websites expand, including
through acquisitions such as Bill Me Later and StubHub, regulatory agencies or courts may claim or hold that we
or our users are subject to licensure or prohibited from conducting our business in their jurisdiction, either
generally or with respect to certain actions (e.g., the sale of real estate, event tickets, cultural goods, boats and
automobiles). Recent financial and political events may increase the level of regulatory scrutiny on large
companies in general and financial services companies in particular.
Our success and increased visibility has driven some existing businesses that perceive our business model to
be a threat to their business to raise concerns about our business models to policymakers and regulators. These
established businesses and their trade association groups employ significant resources in their efforts to shape the
legal and regulatory regimes in countries where we have significant operations. They may employ these
resources in an effort to change the legal and regulatory regimes in ways intended to reduce the effectiveness of
our businesses and the ability of users to use our products and services. In particular, these established businesses
have raised concerns relating to pricing, parallel imports, professional seller obligations, selective distribution
networks, stolen goods, copyrights, trademarks and other intellectual property rights, and the liability of the
provider of an Internet marketplace for the conduct of its users related to those and other issues. In addition,
regulatory agencies may view matters or interpret laws and regulations differently than they have in the past.
Changing the legal or regulatory regimes in a manner that would increase our liability for third-party listings
could negatively impact our business.
Over the last few years some large retailers and their trade associations have sought legislation in a number
of states and the U.S. Congress that would make eBay liable for the sale of stolen property or would ban certain
categories of goods from sale on our platform, including gift cards and health and beauty products. No such
legislation has passed. Nonetheless, the proponents continue to seek passage of such legislation, and if any of
these laws are adopted they could harm our business.
Numerous states and foreign jurisdictions, including the State of California, where our headquarters are
located, have regulations regarding “auctions” and the handling of property by “secondhand dealers” or
“pawnbrokers.” Several states and some foreign jurisdictions, including France, have attempted, and may attempt
in the future, to impose such regulations upon us or our users. Attempted enforcement of these laws against some
of our users appears to be increasing and such attempted enforcements could harm our business. In France, we
have been sued by Conseil des Ventes, the French auction regulatory authority. The authority alleges that sales
on our French website constitute illegal auctions that cannot be performed without its consent. Although we have
won this lawsuit in the lower court, this decision is being appealed. A lawsuit alleging similar claims has been
brought against us by two associations of French antique dealers. We intend to vigorously defend against these
lawsuits. However, these and other regulatory and licensure claims could result in costly litigation and, if
successful, could require us to change the way we or our users do business in ways that increase costs or reduce
revenues (for example, by forcing us to prohibit listings of certain items for some locations). We could also be
subject to fines or other penalties, and any of these outcomes could harm our business.
A number of the lawsuits against us relating to trademark issues seek to have our websites subject to
unfavorable local laws. For example, “trademark exhaustion” principles provide trademark owners with certain
rights to control the sale of a branded authentic product until it has been placed on the market by the trademark
holder or with the holder’s consent. The application of “trademark exhaustion” principles is largely unsettled in
the context of the Internet, and if trademark owners are able to force us to prohibit listings of certain items in one
or more locations, our business could be harmed.
30