Amazon.com 2000 Annual Report Download - page 62

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Legal Proceedings
Certain federal class action lawsuits were filed against the Company and its wholly owned subsidiary,
Alexa. The lawsuits allege that Alexa tracking and storage of Internet Web usage paths violates federal and
state statutes prohibiting computer fraud, unfair competition, and unauthorized interception of private electronic
communications, as well as common law proscriptions against trespass and invasion of privacy. The complaints
seek actual, statutory, and punitive damages, as well as restitution, on behalf of all users of Alexa Web
navigation service, along with injunctive relief prohibiting Alexa from tracking and storing such information or
disclosing it to third parties. Although the Company disputes the allegations of wrongdoing in these complaints,
there can be no assurance that the Company will prevail in these lawsuits.
In addition, the Federal Trade Commission has requested information and documents regarding Alexa
practices and has opened a formal investigative file in connection with its inquiry. The Company is cooperating
voluntarily with the Federal Trade Commission’s investigation. An unfavorable resolution of some or all of
these matters could materially affect the Company’s business, future results of operations or cash flows in a
particular period, depending on the amount and timing.
As previously disclosed in the Company’s Quarterly Report on Form 10-Q for the third quarter of 2000,
the Company has received informal inquiries from the SEC staff with respect to accounting treatment and
disclosures for some of its initial strategic partner transactions and has responded to those questions. Members
of the Company’s management have reviewed the Company’s accounting for the transactions with the
Company’s auditors and the SEC staff. The Company believes that its accounting treatment and disclosures
were appropriate and will continue to cooperate with the SEC staff if they have further questions.
From time to time, the Company is subject to other legal proceedings and claims in the ordinary course of
business, including claims of alleged infringement of trademarks, copyrights and other intellectual property
rights. The Company currently is not aware of any such legal proceedings or claims that it believes will have,
individually or in the aggregate, a material adverse effect on its business, prospects, financial condition or
operating results.
Inventory Suppliers
During 2000, approximately 27% of all inventory purchases were made from three major vendors. The
Company does not have long-term contracts or arrangements with most of its vendors to guarantee the
availability of merchandise, particular payment terms or the extension of credit limits.
Letters of Credit
The Company is contingently liable under unused letters of credit of approximately $57 million as of
December 31, 2000.
AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
54