Overstock.com 2009 Annual Report Download - page 36

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Table of Contents
counties in Northern California have begun an investigation into the way we advertise products for sale, together with an administrative subpoena seeking
related information and documents. The subpoena requested a range of documents, including documents relating to pricing methodologies, definitions of core
and partner product, as well as other site-defined terms, and the methods of internal and external pricing of products, as well as documents related to the
pricing of a list of product items identified in the subpoena. We have responded to the subpoena. In January 2010 attorneys for the Company received
correspondence from the Office of the District Attorney of County of Santa Clara in which the respective offices of the various district attorneys have made a
collective proposal to resolve the dispute by the Company's payment of $8,500,000 in penalties and reimbursement. The Company disagrees with the proposal
and continues to discuss this matter with the authorities involved. We believe that we follow industry advertising practices and intend to continue to cooperate
with the investigation. However, an unfavorable resolution of this matter could materially affect our business, results of operations, financial position or cash
flow.
Risks Relating to our Auctions Site Business
Our auctions business is a developing business.
Our auctions business began operation in September 2004. The online auctions business is a business in development, and we cannot ensure that our
online auctions business will succeed. Our auctions business exposes us to additional risks, including legal and regulatory risks, and requires us to compete
with established businesses having substantially greater experience in the online auctions business and substantially greater resources than we have.
Our auctions business may be subject to a variety of regulatory requirements.
Many states and other jurisdictions, including Utah, where our company is located, have regulations governing the conduct of traditional "auctions" and
the liability of traditional "auctioneers" in conducting auctions. Although the vast majority of these regulations contemplated only traditional auctions, not
online auctions, the potential application of these types of regulations to online auction sites is not clear. We are aware that several states and some foreign
jurisdictions have attempted to impose such regulations on other companies operating online auction sites or on the users of those sites. In addition, certain
states have laws or regulations that do expressly apply to online auction site services. Although we do not expect these laws to have a significant effect on our
auction site business, we will incur costs in complying with these laws, and we may from time to time be required to make changes in our business that may
increase our costs, reduce our revenues, cause us to prohibit the listing of certain items in certain locations, or make other changes that may adversely affect
our auctions business.
Current and future laws could affect our auctions business.
Like our shopping site business, our auction site business is subject to many of the same laws and regulations that 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. Periodically, states have targeted online auction business as sites used for disposal of
stolen, or past-date merchandise, like expired baby formula, and have cited these concerns in proposing legislation to broadly prohibit the sale of many types
of items through internet auction and imposing onerous recordkeeping requirements, without similar application of these laws to traditional retail
establishments, online or printed classified advertising publications, or other types of sales list services. To the extent that such current or future laws or
regulations prevent or inhibit users from selling items
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