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legislation. If we were ever found to be in violation of these laws and regulations, or any other laws or regulations, our business, financial condition, operating results and cash flows
could be materially adversely affected.
Many third parties are examining whether the Americans with Disabilities Act (“ADA”) concept of public accommodations also extends to the Internet as well. The
Company is assessing the requirements of the ADA to determine what impact this could have on our websites. If the Internet is found to be a place of public accommodation and the
ADA is found to apply, then any adjustments or requirements to implement any changes prescribed by the ADA could result in increased costs to our business.
Native advertising is an increasing part of our Digital Media segment’s online advertising revenue. On December 22, 2015 the FTC issued Guidelines and an Enforcement
Policy Statement on native advertising, described by the FTC as, in part, ads which often ‘resemble the design, style, and functionality of the media in which they are disseminated’.
The Company, as well as trade groups and our consultants, are assessing the requirements of these guidelines on our current practices and industry practices and what, if any, effect
this could have on our native advertising business. In addition, the timing and extent of any enforcement by the FTC with regard to the native advertising practices by the Company,
or others, could reduce the revenue we generate from this line of business.
For certain data transfers between the European Union (“EU”) and the U.S., j2, like many other companies, relies on what is referred to as the “EU-U.S. Safe Harbor,” in
order to comply with privacy obligations imposed by EU countries. Recently, the European Court of Justice invalidated the EU-U.S. Safe Harbor. Subsequently, a group comprised
of the majority of EU data protection regulators issued a statement that it would further consider the decision issued by the European Court of Justice and coordinate any potential
enforcement actions after January 31, 2016. But some individual data protection regulators located in EU countries have threatened to begin enforcement actions independently of
this larger representative group of such entities. Meantime, U.S. and EU policymakers continue efforts to create a different framework that would allow companies like us to continue
to rely on some form of a safe harbor for the transfer of certain data from the EU to the U.S. Additionally, other countries that relied on the EU-U.S. Safe Harbor that were not part of
the EU have also found that data transfers to the U.S. are no longer valid based on the European Court of Justice ruling. We cannot predict how or if this issue will be resolved nor
can we evaluate any potential liability at this time.
The Company is working to put into place various alternative grounds on which to rely in order to be in compliance with relevant law for the transfer of data from overseas
locations to the U.S. which have not been invalidated by the European Court of Justice. Some independent data regulators have adopted the position that other forms of compliance
are also invalid though the legal grounds for these findings remain unclear at this time. We cannot predict at this time whether the alternative grounds that j2 continues to implement
will be found to be consistent with relevant laws nor what any potential liability may be at this time.
Further, failure or perceived failure by us to comply with our policies, applicable requirements, or industry self-regulatory principles related to the collection, use, sharing
or security of personal information, or other privacy, data-retention or data-protection matters could result in a loss of user confidence in us, damage to our brands, and ultimately in a
loss of users and advertising partners, which could adversely affect our business. Changes in these or any other laws and regulations or the interpretation of them could increase our
future compliance costs, make our products and services less attractive to our users, or cause us to change or limit our business practices. Further, any failure on our part to comply
with any relevant laws or regulations may subject us to significant civil or criminal liabilities.
Government and private actions or self-regulatory developments regarding Internet privacy matters could adversely affect our ability to conduct our business.
Our Digital Media business collects and sells data about its users’ online behavior and the revenue associated with this activity could be impacted by government regulation
and enforcement, industry trends, self-regulation, technology changes, consumer behavior and attitude, and private action. We also use such information to work with our advertisers
to more effectively target ads to relevant users and consumers, which ads command a higher rate.
The use of such consumer data by online service providers and advertising networks is a topic of active interest among federal, state, and international regulatory bodies,
and the regulatory environment is unsettled. Federal, state, and international laws and regulations govern the collection, use, retention, disclosure, sharing and security of data that we
receive from and about our users. Our privacy policies and practices concerning the collection, use, and disclosure of user data are posted on our websites.
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