Groupon 2011 Annual Report Download - page 24

the local currency; and
We are subject to complex foreign and U.S. laws and regulations that apply to our international operations, including data privacy and protection
requirements, the Foreign Corrupt Practices Act and similar local laws prohibiting certain payments to government officials, banking and payment processing
regulations, and anti-competition regulations, among others. The costs of complying with these various and sometimes conflicting laws and regulations could be
substantial. We have implemented policies and procedures to ensure compliance with these laws and regulations, however, we cannot assure you that our
employees, contractors, or agents will not violate our policies.
If, as we continue to expand internationally, we are unable to successfully replicate our business model due to these and other commercial and regulatory
constraints in our international markets, our business may be adversely affected.
The integration of our international operations with our North American technology platform may result in business interruptions.
We currently use a common technology platform in our North America segment to operate our business and are in the process of migrating our operations in
our International segment to the same platform. Such changes to our technology platform and related software carry risks such as cost overruns, project delays
and business interruptions and delays. If we experience a material business interruption as a result of this process, it could have a material adverse effect on our
business, financial position and results of operations and could cause the market value of our common stock to decline.
An increase in the costs associated with maintaining our international operations could adversely affect our results of operations.
Certain factors may cause our international costs of doing business to exceed our comparable costs in North America. For example, in some countries,
expansion of our business may require a close commercial relationship with one or more local banks, a shared ownership interest with a local entity or
registration as a bank under local law. Such requirements may reduce our revenue, increase our costs or limit the scope of our activities in particular countries.
Further, as we expand our international operations and have additional portions of our international revenue denominated in foreign currencies, we could
become subject to increased difficulties in collecting accounts receivable and repatriating money without adverse tax consequences and increased risks relating to
foreign currency exchange rate fluctuations. Further, we could be subject to the application of U.S. tax rules to acquired international operations and local
taxation of our fees or of transactions on our websites.
We conduct certain functions, including product development, customer support and other operations, in regions outside of North America. Any factors
which reduce the anticipated benefits, including cost efficiencies and productivity improvements, associated with providing these functions outside of North
America, including increased regulatory costs associated with our international operations, could adversely affect our business.
An increase in our refund rates could reduce our liquidity and profitability.
Our Groupon Promise states that we will provide our customers with a refund of the purchase price of a Groupon if they believe that we have let them down.
As we increase our revenue and expand our product offerings, our refund rates may exceed our historical levels. For example, as a result of the fourth quarter
2011 shift in our deal mix and higher price point offers, our refund rates in the first quarter of 2012 were higher than historical levels. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations- Critical Accounting Policies and Estimates-
Refunds." A downturn in general
economic conditions may also increase our refund rates. An increase in our refund rates could significantly reduce our liquidity and profitability.
Because we do not have control over our merchant partners and the quality of products or services they deliver, we rely on a combination of our historical
experience with each merchant partner and online and offline research of customer reviews of merchant partners for the development of our estimate for refund
claims. Our actual level of refund claims could prove to be greater than the level of refund claims we estimate. If our refund reserves are not adequate to cover
future refund claims, this inadequacy could have a material adverse effect on our liquidity and profitability.
Our standard agreements with our merchant partners generally limit the time period during which we may seek reimbursement for customer refunds or
claims. Our customers may make claims for refunds with respect to which we are unable to seek reimbursement from our merchant partners. Our inability to
seek reimbursement from our merchant partners for refund claims could have an adverse effect on our liquidity and profitability.
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differing intellectual property laws.