Groupon 2011 Annual Report Download - page 27

laws governing gift cards and that the defendants have violated these laws by issuing Groupons with expiration dates and other restrictions. We are also the
defendant to a purported class action in the Canadian province of Ontario in which similar violations of provincial legislation governing gift cards are alleged. In
the event that it is determined that Groupons are subject to the CARD Act or any similar state or foreign law or regulation, and are not within various exemptions
that may be available to Groupon under the CARD Act or under some of the various state or foreign jurisdictions, our liabilities with respect to unredeemed
Groupons may be materially higher than the amounts shown in our financial statements and we may be subject to additional fines and penalties. In addition, if
federal or state laws require that the face value of Groupons have a minimum expiration period beyond the period desired by a merchant partner for its
promotional program, or no expiration period, this may affect the willingness of merchant partners to issue Groupons in jurisdictions where these laws apply. If
we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed gift cards, our net income could be
materially and adversely affected.
If we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed Groupons, our net income
could be materially and adversely affected.
In certain states and foreign jurisdictions, Groupons may be considered a gift card. Some of these states and foreign jurisdictions include gift cards under
their unclaimed and abandoned property laws which require companies to remit to the government the value of the unredeemed balance on the gift cards after a
specified period of time (generally between one and five years) and impose certain reporting and recordkeeping obligations. We do not remit any amounts
relating to unredeemed Groupons based on our assessment of applicable laws. The analysis of the potential application of the unclaimed and abandoned property
laws to Groupons is complex, involving an analysis of constitutional and statutory provisions and factual issues, including our relationship with customers and
merchant partners and our role as it relates to the issuance and delivery of a Groupon. In the event that one or more states or foreign jurisdictions successfully
challenges our position on the application of its unclaimed and abandoned property laws to Groupons, or if the estimates that we use in projecting the likelihood
of Groupons being redeemed prove to be inaccurate, our liabilities with respect to unredeemed Groupons may be materially higher than the amounts shown in
our financial statements. If we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed gift
cards, our net income could be materially and adversely affected. Moreover, a successful challenge to our position could subject us to penalties or interest on
unreported and unremitted sums, and any such penalties or interest would have a further material adverse impact on our net income.
Government regulation of the Internet and e-
commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could
substantially harm our business and results of operations.
We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-
commerce. Existing and
future regulations and laws could impede the growth of the Internet or other online services. These regulations and laws may involve taxation, tariffs, subscriber
privacy, anti-
spam, data protection, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online
payment services and the characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales and other
taxes, libel and personal privacy apply to the Internet as 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 by the Internet or e-
commerce. In addition, it is possible that governments of one or more countries may seek to censor content
available on our websites and applications or may even attempt to completely block access to our websites. Adverse legal or regulatory developments could
substantially harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain
or increase our customer base may be adversely affected and we may not be able to maintain or grow our revenue as anticipated.
New tax treatment of companies engaged in Internet commerce may adversely affect the commercial use of our services and our financial results.
Due to the global nature of the Internet, it is possible that various states or foreign countries might attempt to regulate our transmissions or levy sales,
income or other taxes relating to our activities. Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment
of companies engaged in Internet commerce. New or revised international, federal, state or local tax regulations may subject us or our customers to additional
sales, income and other taxes. We cannot predict the effect of current attempts to impose sales, income or other taxes on commerce over the Internet. New or
revised taxes and, in particular, sales taxes, VAT and similar taxes would likely increase the cost of doing business online and decrease the attractiveness of
advertising and selling goods and services over the Internet. New taxes could also create significant increases in internal costs necessary to capture data, and
collect and remit taxes. Any of these events could have an adverse effect on our business and results of operations.
Failure to comply with federal, state and international privacy laws and regulations, or the expansion of current or the enactment of new privacy laws or
regulations, could adversely affect our business.
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