LifeLock 2013 Annual Report Download - page 24

our costs or impede our ability to provide our services to our customers, which could have a material adverse effect on our business, operating results,
financial condition, and prospects.
In addition, various governmental agencies have the authority to commence investigations and enforcement actions under these laws, regulations, and
consent decrees, and private citizens also may bring actions, including class action litigation and whistleblower claims, under some of these laws and
regulations. Responding to such investigations and actions may cause us to incur significant expenses and could divert our management and key personnel
from our business operations. Any determination that we have violated any of these laws, regulations, or consent decrees may result in liability for fines,
damages, or other penalties or require us to make changes to our services and business practices, and cause us to lose customers, any of which could have a
material adverse impact on our business, operating results, financial condition, and prospects. In addition, the media recently is increasingly covering
perceived noncompliance with consumer protection regulations and violations of notions of fair dealing with customers, and our industry is susceptible to
peremptory charges by the media and others of regulatory noncompliance and unfair dealing.
On December 26, 2012, ID Analytics, along with eight other companies, received an information request from the FTC in conjunction with the FTC’s
policy study of the operation of the data broker industry. ID Analytics was advised that this request is not an investigation of its business practices but will be
the basis of consideration by the FTC whether to recommend to the Congress a legislative extension of FCRA-based consumer safeguards and protections to the
use of consumer personal information in the n on-FCRA context. Although ID Analytics believes that it is not engaged in data broker activities in any manner,
ID Analytics has indicated to the FTC that it will cooperate with the FTC’s study efforts by responding fully to the FTC’s information requests, and has done
so to date. On December 17, 2013, we met with FTC Staff, at their request, to discuss the ID Analytics positions with regard to the FTC’s data broker study.
At the meeting, we discussed a wide ranging number of matters, including industry conditions, the changing landscape relating to identity theft and fraud,
technological developments to address identity theft and fraud, as well as recent security breaches. Responding to these information requests may cause us to
incur significant expenses and could divert our management and key personnel from our business operations. In addition, any determination that ID Analytics
is engaged in data broker activities, or any future legislation or additional regulation that is enacted as a result of the FTC’s study on data brokers, may result
in increased compliance costs or require us to make changes to our services and business practices, any of which could have a material adverse impact on our
business, operating results, financial condition, and prospects.
With the growing public concern regarding privacy and the collection, distribution, and use of consumer personal information, we believe we are in an
environment in which there is an increased regulatory scrutiny concerning data collection and use practices and the provision and marketing of services, like
ours, that seek to protect that information. We expect that kind of scrutiny to continue as the marketplace for services like ours continues to develop. In
addition, we believe there has been a recent i ncrease in whistleblower claims made to regulatory agencies, including whistleblower claims made by former
employees, which we believe will likely continue, in part because of the provisions enacted by the Dodd-Frank Act that may entitle persons who report alleged
wrongdoing to the SEC to cash rewards. Often, the allegations underlying such claims to regulatory agencies result in federal and state inquiries and
investigations. On January 17, 2014, we met with FTC Staff, at our request, to discuss issues regarding allegations that have been asserted in a whistleblower
claim against us relating to our compliance with the FTC Order. Following this meeting, we expect to receive either a formal or informal investigatory request
from the FTC for documents and information regarding our policies, procedures, and practices for our services and business activities. Given the heightened
public awareness of data breaches and well as attention to identity theft protection services like ours, it is also possible that the FTC, at any time, may
commence an unrelated inquiry or investigation of our business practices and our compliance with the FTC Order. We endeavor to comply with all applicable
laws and believe we are in compliance with the requirements of the FTC Order. We believe the increased regulatory scrutiny will continue in our industry for
the foreseeable future and could lead to additional meetings or inquiries or investigations by the agencies that regulate our business, including the FTC.
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We market our consumer services through a variety of marketing channels, including mass media, direct mail campaigns, online display advertising,
paid search and search-engine optimization, and inbound customer service and account activation calls. These channels are subject to both federal and state
laws and regulations. Over the past several years, there has been proposed legislation in several states that may interfere with our marketing practices. For
example, over the past several years many states have proposed legislation that would allow customers to limit the amount of unsolicited direct mail they
receive. Additionally, several bills have been proposed in Congress that could restrict the collection and dissemination of personal information for marketing
purposes. If such legislation is passed in one or more states or by Congress, it could limit our ability to market to new members or offer additional services to
existing members, which may have a material adverse effect on our ability to sell our services.
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In 2010, the Dodd-Frank Act was enacted to reform the practices in the financial services industry. Title X of the Dodd-Frank Act established the
Bureau of Consumer Financial Protection. or the CFPB, to protect consumers from abusive financial services practices. Among other things, the CFPB has
broad authority to write rules affecting the business of credit reporting companies as well as to supervise, conduct examinations of, and enforce compliance as
to federal consumer financial protection laws and regulations
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