eBay 2011 Annual Report Download - page 25

large retailers have sought new U.S. federal and state legislation regarding stolen goods that could limit our ability to allow sellers to use our sites
without confirming the source of, and their legal rights to sell, the underlying goods. In addition, from time to time we have received significant
media attention relating to the listing or sale of illegal goods and stolen goods using our services. This negative publicity could damage our
reputation, diminish the value of our brand names and make users reluctant to use our services.
PayPal's payment system is also susceptible to potentially illegal or improper uses, including illegal online gambling, fraudulent sales of
goods or services, illicit sales of prescription medications or controlled substances, piracy of software, movies, music and other copyrighted or
trademarked goods, money laundering, terrorist financing, bank fraud, child pornography trafficking, prohibited sales of alcoholic beverages or
tobacco products, online securities fraud and encouraging, promoting, facilitating or instructing others to engage in illegal activities. There has
been an increased focus by rights owners and U.S. government officials on the role that payments systems play in the sale of, and payment for,
pirated digital goods on the Internet. Recent changes in law have increased the penalties for intermediaries providing payment services for certain
illegal activities and additional payments-related proposals are under active consideration by government policymakers. Despite measures PayPal
has taken to detect and lessen the risk of this kind of conduct, illegal activities could still be funded using PayPal. Any resulting claims, liabilities
or loss of transaction volume could harm our business.
If our GSI business is unable to enhance its platform and migrate clients to its new platform in a timely and cost-effective manner, it would
be substantially harmed.
Our GSI business is in the process of enhancing and unbundling the components of its ecommerce and payments platform and migrating its
existing customers to its new platform. This project is very expensive and time consuming and involves significant technical risk. Previously
planned migrations of certain clients to the new platform have been delayed into 2012 and beyond. If client migrations to the new platform
continue to be delayed, the functionality of the new platform is not accepted by GSI's existing clients or prospective clients targeted by GSI, the
new platform contains an unacceptable amount of design flaws or does not perform or operate as expected, or GSI fails to meet client
commitments and services level agreements, GSI could be subject to substantial penalties under its agreements with its clients (including
significant financial penalties and termination rights for its affected clients), our relationships with its clients and their respective businesses could
be substantially harmed, and GSI clients may seek to terminate their contracts with GSI early based on actual or proposed breach. Any of these
events or circumstances could materially and adversely affect our GSI business. Even if accomplished successfully, this development and
migration project may cost more than expected or take longer than currently planned, which could harm our GSI business.
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 remains
unsettled in many jurisdictions. 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 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 Marketplaces 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 in the
U.S. 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. The ECJ decision in the L'Oreal case (see “Item 3: Legal Proceedings” below) gave broad discretion to
national courts in Europe to determine if Internet hosting immunity applies to eBay. Accordingly, 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, may
increase. 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
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