Vistaprint 2007 Annual Report Download - page 36

membership discount programs have been the subject of consumer complaints and litigation alleging
that their enrollment and billing practices violate various consumer protection laws or are otherwise
deceptive. For example, various state attorney generals have brought consumer fraud lawsuits against
certain of these parties asserting that the parties have not adequately disclosed the terms of their
offers and have not obtained proper approval from consumers before billing the consumers’ bank
account or credit card. Some consumers have brought individual or class action complaints alleging
similar misconduct. We have from time to time received complaints from customers regarding these
programs. Claims or actions that may be brought against us in the future related to these relationships
could result in our being obligated to pay substantial damages or incurring substantial legal fees in
defending claims. These damages and fees could be disproportionate to the revenues we generate
through these relationships, which would have an adverse affect on our results of operations. In
addition, through these relationships, we offer promotions and memberships that are branded as
VistaPrint promotions and memberships which could result in an increased likelihood of our becoming
involved in litigation or claims brought against these third parties. Even if we were successful in
defending against these claims, such a defense may result in distraction of management. In addition,
customer dissatisfaction or a termination of these relationships could have a negative impact on our
brand, revenues and profitability.
Our practice of offering free products and services could be subject to judicial or regulatory
challenge which, if successful, would hinder our ability to attract customers and generate
revenue.
We regularly offer free products and services as an inducement for customers to try our products
and services. Although we believe that we conspicuously and clearly communicate all details and
conditions of these offers—for example, that customers are required to pay shipping and processing
charges to take advantage of a free product offer—we have in the past, and may in the future, be
subject to claims from individuals or governmental regulators in the United States and other countries
that our free offers are misleading or do not comply with applicable legislation or regulation. For
example, one of our subsidiaries and our predecessor corporation were named as defendants in a
class action lawsuit alleging that the shipping and handling fees we charged in connection with our free
business card offer violated sections of the California Business and Professions Code that limit the
amount that may be charged for shipping and handling in connection with a prize or gift. In addition,
customers and competitors have filed complaints with governmental and standards bodies in other
jurisdictions claiming that customers were misled by the terms of our free offers. Our free product
offers could be subject to additional challenges in the future. If we are subject to further actions in the
future, or if we are compelled or determine to curtail or eliminate our use of free offers as the result of
any such actions, our business prospects and results of operations could be materially harmed.
Our failure to protect confidential information of our customers and our network against
security breaches and to address risks associated with credit card fraud could damage our
reputation and brand and substantially harm our business and results of operations.
A significant prerequisite to online commerce and communications is the secure transmission of
confidential information over public networks. Our failure to prevent security breaches could damage
our reputation and brand and substantially harm our business and results of operations. Currently, a
majority of our sales are billed to our customers’ credit card accounts directly. We retain our customers’
credit card information for a limited time following a purchase of products for the purpose of issuing
refunds. We rely on encryption and authentication technology licensed from third parties to effect
secure transmission of confidential information, including credit card numbers. Advances in computer
capabilities, new discoveries in the field of cryptography or other developments, among other factors,
may result in a compromise or breach of the technology used by us to protect customer transaction
data. Any such compromise of our security could damage our reputation and brand and expose us to a
32