Overstock.com 2011 Annual Report Download - page 31

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Table of Contents
resolution of this matter could materially affect our business, prospects, financial condition and results of operations.
California District Attorneys have sued us for alleged violations of California law.
In April 2008, we received a letter from the Office of the District Attorney of Marin County, California, stating that the District Attorneys of Marin and
four other counties in Northern California had begun an investigation into the way we advertise products for sale. In November 2010, District 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.
Our car listing service 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 car sellers and public advertisement
for car sales. Generally, these regulations govern the conduct of those sellers advertising their automobiles for sale and are not directly applicable to those
providing the medium through which the advertisement is made available to the public. Sellers are often subject to regulations in the nature of "truth in
advertising laws." The application of these regulations to online car listing service providers is not clear. Although we do not expect these laws to have a
significant effect on our listing service, we will incur costs in complying with these laws, and we may from time to time be required to make changes in our
service that may increase our costs, reduce our revenues, cause us to prohibit certain listing or advertising practices, or make other changes that may adversely
affect our car listing service.
Current and future laws could affect our car listing business.
Like our shopping business, our car listing service is subject to most of the same laws and regulations that apply to other companies conducting business
on and off the Internet. In addition, our car listing service may be affected by other laws and regulations, such as those that expressly apply to advertising
automobiles for sale. To the extent that such current or future laws or regulations prevent users from selling items on our car listing site, they could harm our
business.
Our business may be harmed if our car listing site is used for unlawful transactions.
The law regarding the potential liability of an online listing service for automobile sales is not clear. The platforms of the listing services are accessible to
subscribers who have the ability to feature their cars listings for sale and supply the descriptions of the vehicles, including the general condition of the vehicle
and other important information. We have no ability to know whether the information sellers provide is correct. While our site terms and conditions of usage
prohibit unlawful acts, we cannot rule out the possibility that users of our car listing site will engage in unlawful transactions, or fail to comply with all laws
and regulations applicable to them and their transactions. We may be subject to allegations of civil or criminal liability for any unlawful activities conducted
by such users. Any costs we incur as a result of any such allegations, as a result of actual or alleged unlawful transactions using 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.
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