Vistaprint 2008 Annual Report Download - page 36

services of the third party merchants we offer to our customers on our website, which we collectively
refer to as referral fees. Some of these third party referral-based offers are for memberships in
discount programs or similar promotions made to customers who have purchased products from us, in
which we receive a payment from the third party merchants for every customer that accepts the
promotion. Certain of these third party membership discount programs have been the subject of
consumer complaints, litigation, and regulatory actions alleging that the enrollment and billing practices
involved in the programs violate various consumer protection laws or are otherwise deceptive. For
example, various state attorneys general have brought similar consumer fraud lawsuits against certain
of the third party merchants asserting that they have not adequately disclosed the terms of their offers
and have not obtained proper approval from consumers before debiting the consumers’ bank account
or billing the consumers’ credit card. We have in the past from time to time received complaints from
our customers regarding certain of the membership discount programs offered on our websites.
On July 29, 2008, July 31, 2008, August 25, 2008 and August 28, 2008, purported class action
lawsuits were filed against VistaPrint USA, Inc., VistaPrint Corp. and/or VistaPrint Ltd., and two third
party merchants in U.S. Federal District Court in Texas, New Jersey, Alabama and Massachusetts,
asserting substantially identical claims alleging that the defendants violated certain Federal and state
consumer protection laws in connection with the offer of membership discount programs on our
vistaprint.com website. The plaintiffs allege, among other things, that after ordering products on our
vistaprint.com website they were enrolled in certain membership discount programs and that monthly
subscription fees for the programs were subsequently charged directly to their credit or debit cards, in
each case purportedly without their knowledge or authorization. The plaintiffs are seeking recovery of
an unspecified amount of damages, including statutory and punitive damages, together with interest
and legal costs, and are also seeking to prevent us and the merchants from engaging in similar
practices in the future.
We and the third party merchants may receive other complaints in the future regarding these
types of membership discount programs. Governmental authorities also may institute proceedings
alleging similar alleged misconduct. The purported class action lawsuits or any other private or
governmental claims or actions that may be brought against us in the future relating to these third party
membership programs 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. Even if we are successful in defending against these claims, such a defense may result
in distraction of management. In addition, customer dissatisfaction or a significant reduction in or
termination of the membership discount offers on our website as a result of these claims could have a
negative impact on our brand, revenues and profitability.
We expect that revenues we derive from third party referral programs, particularly membership
discount programs, will decrease in the future, which could adversely affect our results of
operations.
For the fiscal years ended June 30, 2008, 2007 and 2006, we derived approximately 6.9%, 8.0%
and 8.6%, respectively, of our total revenues from referral fees generated from all sources. In each of
those fiscal years, the majority of the referral fee revenue was derived from membership discount
programs. Over the next several fiscal years, we expect referral fee revenue to decline as a percent of
total revenues and possibly in absolute dollars. We expect that referral fee revenue from all sources
will account for between 2% and 5% of our total revenues by the end of calendar year 2010. Of that
amount, we expect that referral fee revenue from membership discount programs will decline in
absolute dollar terms over that period of time, including possibly to as low as zero. Actual referral fees,
including membership discount programs, could generate more or less of our total revenues than we
currently expect due to a variety of factors, including, among others, strategic operating decisions. We
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