Overstock.com 2010 Annual Report Download - page 31

Table of Contents
Attorneys for the California Counties of Alameda, Marin, Monterey, Napa, Santa Clara, Shasta and Sonoma filed a lawsuit seeking damages and an
injunction, alleging violations of California consumer protection laws, alleging we made untrue or misleading statements concerning our pricing, price
reductions, sources of products and shipping charges. The complaint asks for damages in the amount of not less than $15 million. We dispute the allegations
and intend to defend ourselves vigorously. However, an unfavorable resolution of this matter could materially affect our business, prospects, financial
condition and results of operations.
Risks Relating to our Auctions Service
Our auctions service is a developing business.
Our auctions service began operation in September 2004. Our auctions service remains in development, and we cannot ensure that it 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 we are 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 service, 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 service 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 service 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 on our auction site, or to the extent these laws discriminate against Internet auctions or apply in a
discriminatory fashion, they could harm our business.
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