Chegg 2014 Annual Report Download - page 64

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We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to
privacy and data protection. However, state and other laws regarding privacy and data protection are rapidly evolving and may
be inconsistent, and we could be deemed out of compliance as such laws and their interpretation change. Any failure or
perceived failure by us to comply with our privacy policies, our privacy or data-protection obligations to students or other third
parties, or our privacy or data-protection legal obligations, or any compromise of security that results in the unauthorized
release or transfer of sensitive information, which may include personally identifiable information or other data, may result in
governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could
cause students to lose trust in us, which could have an adverse effect on our business. Additionally, if third parties we work
with, such as colleges and brands, violate applicable laws or our policies, such violations may also put our student users’
information at risk and could in turn have an adverse effect on our business.
Public scrutiny of Internet privacy issues may result in increased regulation and different industry standards, which could
deter or prevent us from providing our current products and services to students, thereby harming our business.
The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the
foreseeable future. Practices regarding the collection, use, storage, display, processing, transmission and security of personal
information by companies offering online services have recently come under increased public scrutiny. The U.S. government,
including the White House, the Federal Trade Commission and the Department of Commerce, are reviewing the need for
greater regulation of the collection and use of information concerning consumer behavior with respect to online services,
including regulation aimed at restricting certain targeted advertising practices. The FTC in particular has approved consent
decrees resolving complaints and their resulting investigations into the privacy and security practices of a number of on-line,
social media companies. Similar actions may also impact us directly, particularly because high school students who use our
College Admissions, College Counseling and Scholarship Services are typically under the age of 18, which subjects our
business to laws covering the protection of minors. For example, various U.S. and international laws restrict the distribution of
materials considered harmful to children and impose additional restrictions on the ability of online services to collect
information from minors. The FTC has also revised the rules under the Children’s Online Privacy Protection Act effective
July 1, 2013. Although, our services are not directed to children under 13, the FTC could decide that our site now or in the
future has taken inadequate precautions to prevent children under 13 from accessing our site and providing us information.
The White House published a report calling for a consumer privacy Bill of Rights that could impact the collection of
data, and the Department of Commerce seeks to establish a consensus-driven Do-Not-Track standard that could impact on-line
and mobile advertising. The State of California and several other states have adopted privacy guidelines with respect to mobile
applications. Our business, including our ability to operate internationally, could be adversely affected if legislation or
regulations are adopted, interpreted, or implemented in a manner that is inconsistent with our current business practices and that
require changes to these practices, the design of our websites, mobile applications, products, features or our privacy policy. In
particular, the success of our business has been, and we expect will continue to be, driven by our ability to responsibly use the
data that students share with us. Therefore, our business could be harmed by any significant change to applicable laws,
regulations or industry standards or practices regarding the use or disclosure of data that students choose to share with us, or
regarding the manner in which the express or implied consent of consumers for such use and disclosure is obtained. Such
changes may require us to modify our products and services, possibly in a material manner, and may limit our ability to develop
new products and services that make use of the data that we collect about our student users.
Our reputation and relationships with students would be harmed if our student users’ data, particularly billing data, were to
be accessed by unauthorized persons.
We maintain personal data regarding students who use our platform, including names and, in many cases, mailing
addresses. We take measures to protect against unauthorized intrusion into our student users’ data. If, despite these measures,
we or our payment processing services experience any unauthorized intrusion into our student users’ data, current and potential
student users may become unwilling to provide the information to us necessary for them to engage with our platform, we could
face legal claims and our business could be adversely affected. The breach of a third-party’s website, resulting in theft of user
names and passwords, could result in the fraudulent use of that user login information on our platform. Similarly, if a well-
publicized breach of the consumer data security of any other major consumer website were to occur, there could be a general
public loss of confidence in the use of the Internet for commerce transactions which could adversely affect our business. In
addition, we do not obtain signatures from students in connection with the use of credit cards by them. Under current credit card
practices, to the extent we do not obtain cardholders’ signatures, we are liable for fraudulent credit card transactions, even when
the associated financial institution approves payment of the orders. From time to time, fraudulent credit cards may be used. We
may experience some loss from these fraudulent transactions. As an example, we discovered in 2014 that certain individuals
fraudulently obtained several thousand textbooks from us. While we do have safeguards in place, we cannot be certain that