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We may be subject to claims for representations made in connection with the sale and promotion of merchandise or for harm
experienced by customers who purchase merchandise from us.
The manner in which we sell and promote merchandise and related claims and representations made in connection with these efforts is
regulated by federal, state and local law. We may be exposed to potential liability from claims by purchasers or from federal, state and local
regulators and law enforcement agencies, including, but not limited to, for personal injury, product safety, wrongful death and damage to
personal property relating to merchandise sold and misrepresentation of merchandise features and benefits. In certain instances, we have the right
to seek indemnification for related liabilities from our vendors and may require such vendors to carry minimum levels of product liability and
errors and omissions insurance. These vendors, however, may be unable to obtain suitable coverage or maintain this coverage on acceptable
terms, or this insurance may provide inadequate coverage against all potential claims or may not even be available with respect to a particular
claim.
Failure to effectively manage our Flexpay program could result in unplanned losses.
HSN offers Flexpay, pursuant to which customers may pay for certain merchandise in two to six interest-free, monthly credit or debit card
payments. This is an effective tool for driving sales, primarily for higher-priced items. We maintain allowances for estimated losses resulting
from the inability of customers to make required payments. While actual losses due to the inability of customers to make required payments have
historically been within estimates, we may not continue to experience these losses at the same rate as we have historically or our actual losses in
any given period may exceed related estimates. As Flexpay usage continues to grow, we may experience these losses at greater rates, which will
require us to maintain greater allowances for doubtful accounts of estimated losses than we have historically.
We may fail to protect our intellectual property rights within the full scope and manner available to us under applicable law or statute
or may be accused of infringing upon the intellectual property rights of third parties.
We regard our intellectual property rights, including patents, service marks, trademarks and domain names, copyrights and trade secrets, as
critical to our success. We rely heavily upon software codes, informational databases and other systemic components that are necessary to
manage and support our business operations.
From time to time, we are subject to legal proceedings and claims in the ordinary course of business, including claims of alleged
infringement of the trademarks, copyrights, patents and other intellectual property rights of third parties. In addition, litigation may be necessary
in the future to enforce our intellectual property rights, protect trade secrets or to determine the validity and scope of proprietary rights claimed
by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and
technical resources, any of which could adversely affect our business, financial condition and results of operations. Patent litigation tends to be
particularly protracted and expensive. Our failure to protect our intellectual property rights in a meaningful manner or challenges to related
contractual rights could result in erosion of brand names and limit our ability to control marketing on or through the internet using our various
domain names or otherwise, which could adversely affect our business, financial condition and results of operations.
Failure to comply with existing laws, rules and regulations, or to obtain and maintain required licenses and rights could subject us to
additional liabilities.
We market and provide a broad range of merchandise through television, online, catalogs and other channels. As a result, we are subject to
a wide variety of statutes, rules, regulations, policies and procedures in various jurisdictions which are subject to change at any time, including
laws regarding product safety, consumer protection, privacy, the regulation of retailers generally, the importation, sale and promotion of
merchandise and the operation of retail stores and warehouse facilities, as well as laws and regulations applicable to the internet and businesses
engaged in digital commerce, such as those regulating the sending of unsolicited, commercial electronic mail. Our failure to comply with these
laws and regulations could result in fines and/or proceedings against us by governmental agencies and/or consumers, which could adversely
affect our business, financial condition and results of operations. Moreover, unfavorable changes in the laws, rules and regulations applicable to
us could decrease demand for merchandise offered by us, increase costs, subject us to additional liabilities and/or otherwise adversely affect our
businesses. Finally, certain of these regulations impact the marketing efforts of our businesses and brands.
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