Chegg 2014 Annual Report Download - page 63

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marketers. In this regard, there are a large number of legislative proposals before the United States Congress and various state
legislative bodies regarding privacy issues related to our business. It is not possible to predict whether or when such legislation
may be adopted, and certain proposals, if adopted, could harm our business through a decrease in student registrations and
revenue. These decreases could be caused by, among other possible provisions, the required use of disclaimers or other
requirements before students can utilize our services. We post our privacy policies and practices concerning the use and
disclosure of student data on our website. However, any failure by us to comply with our posted privacy policies, FTC
requirements or other privacy-related laws and regulations could result in proceedings by governmental or regulatory bodies or
by private litigants that could potentially harm our business, results of operations and financial condition.
Our business may also be subject to laws specific to students, such as the Family Educational Rights and Privacy Act,
the Delaware Higher Education Privacy Act and a California statute which restricts the access by postsecondary educational
institutions of prospective students’ social media account information. Compliance levels include disclosures, consents, transfer
restrictions, notice and access provisions for which we may in the future need to build further infrastructure to further support.
We cannot guarantee that we have been or will be fully compliant in every jurisdiction, as it is not entirely clear how existing
laws and regulations governing educational institutions affect our business. Moreover, as the education industry continues to
evolve, increasing regulation by federal, state and foreign agencies becomes more likely. Recently, California adopted the
Student Online Personal Information Protection Act which prohibits operators of online services used for K-12 school purposes
from using or sharing student personal information. This act does not apply to general audience Internet websites but it is not
clear how this Act will be interpreted and the breadth of services that will be restricted by it. Other states may adopt similar
statutes. The adoption of any laws or regulations that adversely affect the popularity or growth in use of the Internet particularly
for educational services, including laws limiting the content that we can offer, and the audiences that we can offer that content
to, may decrease demand for our service offerings and increase our cost of doing business. Future regulations, or changes in
laws and regulations or their existing interpretations or applications, could also hinder our operational flexibility, raise
compliance costs and result in additional historical or future liabilities for us, resulting in adverse impacts on our business and
our operating results.
While we expect and plan for new laws, regulations and standards to be adopted over time that will be directly
applicable to the Internet and to our student-focused activities, any existing or new legislation applicable to our business could
expose us to substantial liability, including significant expenses necessary to comply with such laws and regulations and
potential penalties or fees for non-compliance, and could negatively impact the growth in the use of the Internet for educational
purposes and for our services in particular. We may also run the risk of retroactive application of new laws to our business
practices that could result in liability or losses. Due to the global nature of the Internet, it is possible that the governments of
other states and foreign countries might attempt to change previous regulatory schemes or choose to regulate transmissions or
prosecute us for violations of their laws. We might unintentionally violate such laws, such laws may be modified and new laws
may be enacted in the future. Any such developments could harm our business, operating results and financial condition. We
may be subject to legal liability for our digital offerings.
We collect, process, store and use personal information and data, which subjects us to governmental regulation and other
legal obligations related to privacy, and our actual or perceived failure to comply with such obligations could harm our
business.
In the ordinary course of business, and in particular in connection with merchandising our service to students, we
collect, process, store and use personal information and data supplied by students. In the future, we may enable students to
share their personal information with each other and with third parties and to communicate and share information into and
across our platform. Other businesses have been criticized by privacy groups and governmental bodies for attempts to link
personal identities and other information to data collected on the Internet regarding users’ browsing and other habits. There are
numerous federal, state and local laws regarding privacy and the collection, storing, sharing, using, processing, disclosing and
protecting of personal information and other user data, the scope of which are changing, subject to differing interpretations, and
which may be costly to comply with and may be inconsistent between countries and jurisdictions or conflict with other rules.
We currently face certain legal obligations regarding the manner in which we treat such information. Increased
regulation of data utilization practices, including self-regulation or findings under existing laws, or new regulations restricting
the collection, use and sharing of information from minors under the age of 18, that limit our ability to use collected data could
have an adverse effect on our business. In addition, if unauthorized access to our students’ data were to occur or if we were to
disclose data about our student users in a manner that was objectionable to them, our business reputation and brand could be
adversely affected, and we could face legal claims that could impact our operating results. Our reputation and brand and
relationships with students would be harmed if our billing data were to be accessed by unauthorized persons.