eBay (EBAY) Risk Analysis

Regulators and civil litigants have sought, and will likely continue to seek, to hold us liable when our sellers list or sell products on our platforms that they claim are regulated, unlawful, unsafe or infringing. For example, the Department of Justice ("DOJ") has sought to hold us liable for the third-party sales of products they claim violate federal law. Other third parties, including government regulators and law enforcement officials, have, at times, alleged that our services aid and abet violations of laws regarding the sale of counterfeit items, laws restricting or prohibiting the transferability (and by extension, the resale) of digital goods (e.g., books, music and software), the fencing of stolen goods, recalled item laws, selective distribution channel laws, customs laws, distance selling laws, and the sale of items outside of the U.S. that are regulated by U.S. export controls. Similarly, allegations of infringement of intellectual property rights, including but not limited to counterfeit items, have resulted and may continue to result in threatened and actual litigation, at times, by rights owners. Further, we are also subject to claims by consumers that products they purchased from third-party sellers caused them bodily injury or harmed their property. We believe we are protected from many of these claims because the statutes and common law theories under which they are brought have not been conclusively applied to our business model and/or because we are protected from liability under various laws, including 47 U.S.C. § 230 in the United States, the hosting defense under Art. 6 DSA in the EU and Reg.19 of the Electronic Commerce Regulations 2002 in the United Kingdom. However, this could change as our product and service offerings and our business model continue to evolve over time, and our history and these laws do not guarantee that we cannot experience losses from such claims. For example, pursuant to our 2024 settlement agreement with the DOJ, we paid $59 million and agreed to implement enhanced processes regarding our monitoring of listings that violate our terms of service to fully resolve the DOJ's allegations of noncompliance with the Controlled Substances Act. See "Note 11 - Commitments and Contingencies - Litigation and Other Legal Matters" for more details. Even where we succeed in limiting or avoiding regulatory liability for third party sales, we often face significant additional litigation costs as a result of additional civil litigation from users on our platforms, stockholders and other stakeholders. Laws vary by jurisdiction and the sentiment of regulators around the world changes over time based on factors that we cannot control. We have seen an increase in litigation challenging these protections and in legislative and regulatory proposals to reduce or eliminate many of the protections on which our business has relied. For example, there are several proposals to limit or eliminate 47 U.S.C. § 230 (the Communication Decency Act), which limits liability for third-party content posted on Internet platforms, under consideration in the United States. We have also seen legislative proposals in the U.S. seeking to make online marketplaces contributorily liable for the use of counterfeit marks by third-party sellers. In the UK, the DMCCA expands regulatory oversight authority over consumer protections. The EU has also adopted certain additional regulations relating to the safety and sustainability of products on its markets, which bring new obligations both on us directly and our sellers and vendors. The European Union General Product Safety Regulation imposes additional requirements on our business with regard to removing dangerous products from our marketplaces, enabling the traceability of products, and related matters. At times, we have been subject to inspection and investigation by regulators in certain EU-member states relating to whether products on our platforms meet their and EU labeling, documentation and product safety standards. We expect product safety regulatory efforts and investigations like these to continue in the future, and the outcomes of these efforts and investigations cannot be predicted with certainty. Regardless of any outcome, such efforts and investigations can have a material adverse impact on us because of legal costs, diversion of management resources, public perception, loss of consumers on our platforms and other similar factors. In recent years, the DSA has imposed legal obligations on online marketplaces operating in Europe, requiring them to verify the identity of business sellers and make best efforts to assess proper disclosure by traders of required information, as well as information on the safety and authenticity of products posted by third-party merchants. The DSA also enforces new content moderation obligations, notice obligations, advertising restrictions and other requirements on digital platforms that created additional operational burdens and compliance costs for us. We have received a request for information from a regulator in Germany for suspected potential non-compliance with provisions of the DSA. We cannot be sure whether this investigation will lead to any action or penalties, including fines or reputational damage. In any event, such investigation could divert management time and company resources. For online platforms like ours, noncompliance with the DSA could result in fines of up to 6% of annual global revenues, which would have an adverse effect on our business. Similarly, in the United Kingdom, the OSA created requirements around monitoring and handling harmful content and required us to expend resources to comply with the new regulations. Regulators around the world shift their focus from time to time, and we cannot control or always anticipate whether their latest area of focus will impact our marketplace platforms or a specific aspect thereof. Recently, regulators in certain EU-member countries have increased their activity challenging certain fast-fashion marketplaces. Certain EU-member countries have also enacted anti-waste regulations that create direct obligations on sellers and impose compliance verification obligations on us. These regulations vary by EU-member country, creating additional operational burdens and compliance costs on our sellers and us. Adverse changes in laws and regulations that protect us from liability for third-party sales, or adverse interpretations of or litigation involving such laws and regulations, could subject us to substantial civil or criminal damages, limit the items we could allow on our Marketplace platforms, require us to modify our business model, and impose substantial additional compliance costs and operational constraints on our business. Any one of these outcomes could reduce the attractiveness of our Marketplace platforms to consumers, reduce our profits or otherwise harm our business and results of operations.

The determination of our worldwide provision for income taxes and other tax liabilities requires estimation and significant judgment, and from time to time there can be transactions and calculations where the ultimate tax determination is uncertain. Like many other multinational corporations, we are subject to tax in the United States and multiple foreign jurisdictions and have structured our operations to reduce our effective tax rate. Our determination of our tax liability is always subject to audit and review by applicable domestic and foreign tax authorities, and we are currently undergoing a number of investigations, audits and reviews by taxing authorities throughout the world, including with respect to our business structure. Any adverse outcome of any such audit or review could harm our business, and the ultimate tax outcome may differ from the amounts recorded on our financial statements and may materially affect our financial results in the period or periods for which such determination is made. While we have established reserves based on assumptions and estimates that we believe are reasonable to cover such eventualities, these reserves may prove to be insufficient. In addition, our future income taxes could be adversely affected by a shift in our jurisdictional earnings mix, by changes in the valuation of our deferred tax assets and liabilities, changes in the valuation of our investments, as a result of gains on our foreign exchange risk management program, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items.

We have voluntarily established and publicly disclosed certain environmental, social and governance ("ESG") goals, such as targets for waste avoidance and positive economic impacts associated with recommerce and reduced greenhouse gas emissions, including our net-zero target. These statements reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Stakeholder and regulator expectations regarding ESG matters continue to evolve and are becoming increasingly divergent among and within stakeholders, and ESG matters have been the subject of increased regulatory and stakeholder attention and emerging and evolving regulatory requirements and frameworks. The imposition of new laws, changes in laws, regulatory requirements, policies, international accords or changing interpretations thereof, changes in the enforcement priorities of regulators, and differing or competing regulations and standards across the markets in which we operate, as well as relating to matters beyond our core products and services, including environmental sustainability, climate change, human capital and employment matters, could result in higher compliance and other costs, resulting in adverse effects on our business. Our failure to accomplish or accurately track and report on any of our stated goals, or otherwise meet evolving and varied stakeholder and regulatory expectations, could adversely affect our reputation, financial performance and growth, and expose us to increased scrutiny from the investment community, regulatory authorities and other stakeholders. If our ESG goals or performance are perceived to be inadequate or worse than those of our competitors, if we are targeted by those who disagree with our public positions on ESG issues, or if we do not otherwise successfully manage ESG-related expectations across investors and other stakeholders, it could erode stakeholder trust, impact our reputation, subject us to litigation or shareholder activism, which could adversely affect our business and reputation. Our costs to comply with ESG reporting requirements, including new ESG standards and initiatives in the EU, such as the Corporate Sustainability Reporting Directive, and new California climate disclosure requirements, such as the Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act, the future scope and implementation of which remains uncertain, could be significant, and any failure to comply or negative reaction to the information that we disclose could expose us to liability or harm our business and reputation. Stakeholder expectations surrounding the responsible use of AI continue to grow as data center growth associated with new AI technologies can create negative environmental and social impacts. This includes increased use of natural resources such as electricity and water, as well as impacts to communities located near AI data center operations. Failure to identify and address these stakeholder concerns and evolve corporate policies regarding the responsible use of AI may create reputational harm for eBay or otherwise damage brand value, which could negatively impact our business.