Overstock.com 2004 Annual Report Download - page 27

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Current and future laws could affect our auctions business.
Like our shopping site business, our auction site business is subject to the same laws and regulations as apply to other companies conducting business on
and off the Internet. In addition, our auction site business may be affected by other laws and regulations, such as those that expressly apply to online auction
site services. Further, because of the wide range of items that users of our auctions service may choose to list on the site, a variety of additional laws and
regulations may apply to transactions between users of our site, such as those requiring a license to sell or purchase certain items or mandating particular
disclosures in connection with an offer or sale of an item. To the extent that such current or future laws or regulations prevent users from selling items on our
auction site, they could harm our business.
Our business may be harmed if our auction site is used for unlawful transactions.
The law regarding the potential liability of an online auction service for the activities of its users is not clear. We prohibit the listing of numerous
categories of items in an effort to reduce the possibility that users of our auction site will engage in an unlawful transaction. However, we cannot assure that
users of the site will comply with all laws and regulations applicable to them and their transactions, and we may be subject to allegations of civil or criminal
liability for any unlawful activities conducted by them. Any costs we incur as a result of any such allegations, or as a result of actual or alleged unlawful
transactions utilizing our site, or in our efforts to prevent any such transactions, may harm our business. In addition, any negative publicity we receive
regarding any such transactions or allegations may damage our reputation, our ability to attract new customers to our main shopping site, and the
Overstock.com brand name generally.
Fraudulent activities using our auctions site and disputes between users of our auctions site may harm our business.
We are aware that other companies operating online auction services have periodically received complaints from users alleging that they have not
received the purchase price or the goods they expected to receive, and that in some cases users have been arrested and convicted for engaging in fraudulent
activities using those companies' auction sites. We may receive similar complaints. We do not have the ability to require users of our services to fulfill their
obligations to make payments or to deliver items. We are aware that other companies periodically receive complaints from buyers about the quality of the
items they purchase, requests for reimbursement of amounts paid, and communications threatening or commencing legal actions against them. We may
receive similar complaints, requests and communications in connection with our auctions site business.
We are subject to risks associated with information transmitted through our service.
The law relating to the liability of online services companies for information carried on or disseminated through their services is currently unsettled.
Claims could be made against online services companies under both U.S. and foreign law for defamation, libel, invasion of privacy, negligence, copyright or
trademark infringement, or other theories based on the nature and content of the materials disseminated through their services. We are aware that private
lawsuits seeking to impose liability under a number of these theories have been brought against other companies operating auction sites. In addition, domestic
and foreign legislation has been proposed that would prohibit or impose liability for the transmission over the Internet of certain types of information. Our
service permits users to make comments regarding other users. Although all such comments are generated by users and not by us, we are aware that claims of
defamation or other injury have been made against other companies operating auction services in the past and could be made in the future against us for
comments made by users. Recent court decisions have narrowed the scope of the immunity provided to Internet service providers like us under the
Communications Decency Act. This trend, if continued, may increase our potential liability to third parties for the user-provided content on our site.
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