Amazon.com 2007 Annual Report Download - page 25

such jurisdictions may assess additional income tax against us. Although we believe our tax estimates are
reasonable, the final determination of tax audits and any related litigation could be materially different from our
historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on
our operating results or cash flows in the period or periods for which that determination is made.
Our Vendor Relationships Subject Us to a Number of Risks
We have significant vendors that are important to our sourcing, manufacturing and any related ongoing
servicing of merchandise and content. We do not have long-term arrangements with most of our vendors to
guarantee availability of merchandise, content, components or services, particular payment terms, or the
extension of credit limits. If our current vendors were to stop selling merchandise, content, components or
services to us on acceptable terms, we may be unable to procure from other vendors in a timely and efficient
manner and on acceptable terms, or at all.
We May Be Subject to Product Liability Claims if People or Property Are Harmed by the Products We Sell
Some of the products we sell or manufacture may expose us to product liability claims relating to personal
injury, death, or property damage, and may require product recalls or other actions. Certain third parties also sell
products using our e-commerce platform that may increase our exposure to product liability claims, such as if
these sellers do not have sufficient protection from such claims. Although we maintain liability insurance, we
cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will
continue to be available to us on economically reasonable terms, or at all. In addition, some of our agreements
with our vendors and sellers do not indemnify us from product liability.
We Are Subject to Payments-Related Risks
We accept payments using a variety of methods, including credit card, debit card, credit accounts (including
promotional financing), gift certificates, direct debit from a customer’s bank account, physical bank check and
payment upon delivery. As we offer new payment options to our customers, we may be subject to additional
regulations, compliance requirements, and fraud. For certain payment methods, including credit and debit cards,
we pay interchange and other fees, which may increase over time and raise our operating costs and lower our
profit margins. We rely on third parties to provide payment processing services, including the processing of
credit cards, debit cards, electronic checks, and promotional financing, and it could disrupt our business if these
companies become unwilling or unable to provide these services to us. We are also subject to payment card
association operating rules, certification requirements and rules governing electronic funds transfers, which could
change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these
rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit
and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online
payments, and our business and operating results could be adversely affected. We also offer co-branded credit
card programs that represent a significant component of our services revenue and generate high margins. If one
or more of these agreements are terminated and we are unable to replace them on similar terms, or at all, it could
adversely affect our operating results.
In addition, we qualify as a money services business in certain jurisdictions because we enable customers to
keep account balances with us and transfer money to third parties, and because we provide services to third
parties to facilitate payments on their behalf. In these jurisdictions, we may be subject to requirements for
licensing, regulatory inspection, bonding, the handling of transferred funds and consumer disclosures. We are
also subject to or voluntarily comply with a number of other laws and regulations relating to money laundering,
international money transfers, privacy and information security and electronic fund transfers. If we were found to
be in violation of applicable laws or regulations, we could be subject to civil and criminal penalties or forced to
cease our payments services business.
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