Digital River 2002 Annual Report Download - page 26

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Changes in government regulation could limit our Internet activities or result in additional costs of doing business over the Internet.
We are subject to the same federal, state and local laws as other companies conducting business on the Internet. Today there are relatively few
laws specifically directed towards conducting business on the Internet. The adoption or modification of laws related to the Internet could harm
our business, operating results and financial condition by increasing our costs and administrative burdens. Due to the increasing popularity and
use of the Internet, many laws and regulations relating to the Internet are being debated at the international, federal and state levels. These laws
and regulations could cover issues such as:
• user privacy with respect to adults and minors;
• export compliance;
• pricing and taxation;
• fraud;
• advertising;
• intellectual property rights;
• information security; and
• quality of products and services.
Applicability to the Internet of existing laws governing issues such as property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy could also harm our operating results and substantially increase the cost to us of doing business.
For example, numerous state legislatures have proposed that tax rules for Internet retailing and catalog sales correspond to enacted tax rules for
sales from physical stores. Any requirement that we collect sales tax for each online purchase and remit the tax to the appropriate state authority
would be a significant administrative burden to us and possibly depress online sales. This and any other change in laws applicable to the
Internet might also require significant management resources to respond appropriately. The vast majority of these laws were adopted prior to the
advent of the Internet, and do not contemplate or address the unique issues raised thereby. Those laws that do reference the Internet, such as the
Digital Millennium Copyright Act, are only beginning to be interpreted by the courts and their applicability and reach are therefore uncertain.
Laws relating to user information and online privacy may limit the collection of end-user data for our clients.
We collect and maintain end-user data for our clients, which subject us to increasing international, federal and state regulation related to online
privacy and the use of personal user information. Several states have proposed legislation that would limit the use of personal user information
gathered online or require online services to establish privacy policies. In addition, the U.S. Federal Trade Commission, or FTC, has urged
Congress to adopt legislation regarding the collection and use of personal identifying information obtained from individuals when accessing
Web sites. In the past, the emphasis has been on information obtained from minors. Focus has now shifted to include online privacy protections
for adults. These regulations may include requirements that companies establish procedures to, among other things:
• give adequate notice to users regarding information collection and disclosure practices;
• provide users with the ability to have personal information deleted from a company’ s database;
• provide users with access to their collected personal information and the ability to correct inaccuracies;
• clearly identify affiliations with third parties that may collect information or sponsor activities on another company’ s Web site; and
• obtain express parental consent prior to collecting and using personal information from children under 13 years of age.
Bills are also pending in Congress that address online privacy protections. Laws of this kind require that we establish procedures to disclose and
notify users of privacy and security policies, obtain consent from users for collection and use of information, or provide