eBay 2011 Annual Report Download - page 26

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 eBay, PayPal and GSI, 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 U.S. and foreign 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.
From time to time, we 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 inquiries from
other government regulators in the future. For example, in 2008, the Australian Competition and Consumer Commission and the Reserve Bank of
Australia 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, and additional new laws and regulations are expected to be, adopted that impose additional obligations and restrictions
on the provision of credit, among other requirements. 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 and planned antifraud efforts, customer support procedures, operating procedures and disclosures of
the relevant business. If one or more of these agencies is not satisfied with our response to current or future inquiries, we could be subject to
enforcement actions, fines or other penalties, or forced to change our operating practices in ways that could harm our business.
We are subject to general litigation and regulatory disputes.
From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary course of business. The number and
significance of these disputes and inquiries have increased as our company has grown larger and the scope and complexity of our businesses has
expanded (e.g., our local, social, mobile and digital initiatives). We have in the past been forced to litigate such claims. We may also become more
vulnerable to third-party claims as laws such as the Digital Millennium Copyright Act, the Lanham Act and the Communications Decency Act are
interpreted by the courts as our services to users continues to expand and as we expand geographically into jurisdictions where the underlying
laws with respect to the potential liability of online intermediaries such as ourselves are either unclear or less favorable. We are also subject to
federal, state, local and foreign laws of general applicability, including laws regulating working conditions. Any claims or regulatory actions
against us, whether meritorious or not, could be time consuming, result in costly litigation, damage awards (including statutory damages for
certain causes of action in certain jurisdictions), injunctive relief, or increased costs of doing business through adverse judgment or settlement,
require us to change our business practices in expensive ways, require significant amounts of management time, result in the diversion of
significant operational resources, or otherwise harm our business.
Changes to our dispute resolution process could increase our costs and loss rate.
Beginning in 2009, we have transitioned buyers in the U.S., U.K. and Germany to a dispute resolution (“resolutions”) process provided by
eBay customer support, which now serves as the primary entry point for buyers in these countries if they are unable to resolve their disputes with
eBay sellers. Among other things, the resolutions process provides that eBay will generally reimburse the buyer for the full amount of an item's
purchase price (including original shipping costs), in cases where the item was not received or the item they received was different from that
described in the listing, and the seller does not provide adequate resolution to the buyer. eBay then attempts to recoup amounts paid to the buyer
from the seller's PayPal accounts or through other collection methods. Our costs associated with resolutions have increased as a result of these
changes to our resolutions policies and process, in part because eBay may not have the same level of rights of recoupment against sellers as
PayPal, resulting in higher costs to operate the program. These changes, together with any further changes that we may make to our resolutions
process in the future, may be negatively received by, and lead to dissatisfaction on the part of, some of our sellers, and may also result in an
increase in buyer fraud and associated transaction losses.
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