| IAC/INTERACTIVECORP Item 1A Risk Factors Cautionary Statement Regarding Forward-Looking Information This Annual Report on Form 10-K contains "e forward looking statements "e within the meaning of the Private Securities Litigation Reform Act of 1995 |
| The use of words such as "e anticipates, "e "e estimates, "e "e expects, "e "e projects, "e "e intends, "e "e plans "e and "e believes, "e among others, generally identify forward-looking statements |
| These forward-looking statements include, among others, statements relating to: IACapstas future financial performance, IACapstas business prospects and strategy, anticipated trends and prospects in the various industries in which IACapstas businesses operate, new products, services and related strategies and other similar matters |
| These forward looking statements are based on managementapstas current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict |
| Actual results could differ materially from those contained in the forward looking statements included in this report for a variety of reasons, including, among others, the risk factors set forth below |
| Other unknown or unpredictable factors that could also adversely affect IACapstas business, financial condition and results of operations may arise from time to time |
| In light of these risks and uncertainties, the forward looking statements discussed in this report may not prove to be accurate |
| Accordingly, you should not place undue reliance on these forward looking statements, which only reflect the views of IAC management as of the date of this report |
| Risk Factors You should carefully consider each of the following risks and uncertainties associated with IAC and the ownership of IAC securities |
| In addition, for more information you should review the specific description of IACapstas businesses under the caption "e Item 1—Business, "e "e Item 7—Managementapstas Discussion and Analysis of Financial Condition and Results of Operations "e and Consolidated Financial Statements and the Notes thereto |
| 17 _________________________________________________________________ Management—IAC depends on its key personnel |
| The future success of IAC will depend upon the continued contributions of its senior management, particularly Barry Diller, the Chairman and Chief Executive Officer of IAC If Mr |
| Diller no longer serves in, or serves in some lesser capacity than, his current role, IACapstas business, financial condition and results of operations, as well as the market price of IACapstas securities, could be adversely affected |
| While IAC has established programs to provide incentives for and retain its senior management, IAC cannot assure you that it will be able to retain the services of Mr |
| Diller, any other member of its senior management or any other key employees in the future |
| Diller does not have an employment agreement with IAC, though he owns approximately 5dtta4 million shares of IAC common stock, and holds options to purchase a substantial number of shares of IAC common stock, 70prca of which expire in October 2007 |
| Control of IAC—Mr |
| Diller currently controls IAC If Mr |
| Diller ceases to control IAC, Liberty Media Corporation may effectively control IAC Subject to the terms of an amended and restated stockholders agreement between Mr |
| Diller and Liberty, Mr |
| Diller has an irrevocable proxy to vote shares of IAC common stock and IAC Class B common stock held by Liberty |
| Accordingly, Mr |
| Diller effectively controls the outcome of all matters submitted to a vote or for the consent of IACapstas stockholders (other than with respect to the election by the holders of IACapstas common stock of 25prca of the members of IACapstas Board of Directors and matters as to which Delaware law requires a separate class vote) |
| Dillerapstas permanent departure from IAC, the irrevocable proxy terminates and, depending upon the capitalization of IAC at such time, Liberty may effectively control the voting power of the capital stock of IAC through its ownership of IAC common stock and IAC Class B common stock |
| Dillerapstas and Libertyapstas ownership interests in, and voting power with respect to, IAC common stock and IAC Class B common stock, see "e Item 1—Business—Equity Ownership and Voting Control "e |
| In addition, under an amended and restated governance agreement among IAC, Liberty and Mr |
| Diller and Liberty generally has the right to consent to limited matters in the event that IACapstas ratio of total debt to EBITDA, as defined in the governance agreement, equals or exceeds 4:1 over a continuous 12-month period |
| Diller nor Liberty may currently exercise this right, no assurances can be given that this right will not be triggered in the future, and if so, that Mr |
| Diller and Liberty will consent to any of the limited matters at such time, in which case IAC would not be able to engage in such transactions or take such actions |
| Dillerapstas ownership interests and voting power, and Libertyapstas ownership interests and voting power upon Mr |
| Dillerapstas permanent departure from IAC, Mr |
| Diller is currently, and in the future Liberty may be, in a position to control or influence significant corporate actions, including without limitation, corporate transactions such as mergers, business combinations or dispositions of assets and determinations with respect to IACapstas significant business direction and policies |
| This concentrated control could discourage others from initiating any potential merger, takeover or other change of control transaction that may otherwise be beneficial to IAC, which could adversely affect the market price of IAC securities |
| 18 _________________________________________________________________ Third Party Relationships—IACapstas businesses depend on their relationships with third party distribution channels, suppliers and advertisers and any adverse changes in these relationships could adversely affect IACapstas business, financial condition and results of operations |
| An important component of the success of IACapstas various businesses depends on their ability to maintain their existing, as well as build new, relationships with third party distribution channels, suppliers and advertisers, among other parties |
| Any adverse changes in these relationships could adversely affect IACapstas business, financial condition and results of operations |
| Retailing Retailing US Retailing US is dependent upon the pay television operators with whom HSN enters into distribution and affiliation agreements to carry the HSN and Americaapstas Store television networks |
| See "e Item 1—Business—Description of Business—Retailing—Retailing US—Television Programming—Pay Television Distribution "e |
| Distribution and affiliation agreements with major pay television operators expire from time to time and agreements with certain major pay television operators are scheduled to expire over the course of 2006 |
| Sometimes renewals are not agreed upon prior to the expiration of a given agreement and the HSN and/or Americaapstas Store television networks continue to be carried by pay television operators without an effective affiliation agreement in place |
| In the case of distribution and affiliation agreements expiring over the course of 2006, HSN is currently engaged or intends to engage in the renewal and/or negotiation processes with the relevant pay television providers |
| No assurances can be given that HSN will be able to successfully pursue the renewal of, or negotiate new, distribution and affiliation agreements with pay television providers to carry the HSN and/or Americaapstas Store television networks on acceptable terms, if at all |
| While the cessation of carriage of the HSN and/or Americaapstas Store television networks by a major pay television operator or a significant number of smaller pay television operators could adversely affect IACapstas business, financial condition and results of operations, IAC believes that it will be able to continue to successfully manage the distribution process in the future, although certain changes in distribution levels could occur notwithstanding these efforts |
| Ticketing is dependent upon its clients for ticketing supply |
| Securing tickets depends, in part, on the ability of Ticketing to enter into and maintain client contracts on favorable terms |
| No assurances can be provided that Ticketing will continue to be able to enter into or maintain client contracts on acceptable terms, if at all, and its failure to do so could adversely affect its business, financial condition and results of operations |
| In addition, some facilities, promoters and other potential clients elect to distribute some of their tickets through supplier direct or other new channels |
| The increased and continued use of supplier direct and/or new distribution channels by clients could adversely affect the business, financial condition and results of operations of Ticketing |
| See "e Item 1—Business—Description of Business—Services—Ticketing "e |
| Lending and Real Estate |
| The ability of IACapstas Lending and Real Estate businesses to provide lending, real estate and related services depends, in significant part, on the quality and pricing of services provided by participating lenders and real estate professionals and access to real estate listings |
| The failure of a significant number of participating lenders and/or real estate professionals to participate on the exchanges operated by, or otherwise enter into relationships with or provide real estate listings to, IACapstas Lending and Real Estates businesses for any reason and/or provide quality services on competitive terms, could adversely affect the business, financial condition and results of operations of these businesses |
| See "e Item 1—Business—Description of Business—Services—Lending "e and "e —Real Estate "e |
| 19 _________________________________________________________________ Media & Advertising A material portion of the revenues of the Media & Advertising sector is derived from advertising |
| In the case of IAC Search & Media, the substantial majority of its advertising revenues are attributable to a paid listing supply agreement with Google, which expires, unless renewed by mutual agreement, on December 31, 2007 |
| Pursuant to this agreement, paid listings appear on search results generated on Ask websites in response to keywords selected by advertisers with which Google has entered into contracts |
| While IAC believes that, in the absence of the renewal of this paid listing agreement, IAC Search & Media could enter into similar arrangements with alternative paid listing providers, as well as continue to contract with advertisers directly through the introduction of new advertising products and services, no assurances can be given that this will be the case in the future, or if so, that these arrangements will be on equally favorable terms |
| The failure of IAC Search & Media or any of the other businesses within the Media & Advertising sector to retain existing, or attract new, advertisers and/or distribution partners, as well as generate traffic to their respective websites, could adversely affect the business, financial condition and results of operations of the Media & Advertising sector |
| Interval is dependent upon timeshare developers for new members |
| Intervalapstas failure to maintain existing or negotiate new arrangements with timeshare developers, as well as the continued creation and operation by timeshare developers of their own internal reservation and exchange systems, could result in decreases in Intervalapstas membership base, timeshare supply and/or related transactions, which could adversely affect IACapstas business, financial condition and results of operations |
| See "e Item 1—Business—Description of Business—Membership & Subscriptions—Vacations "e |
| Adverse Events and Trends—Adverse events or trends in the various industries in which IACapstas businesses operate could harm IACapstas business, financial condition and results of operations |
| IACapstas businesses in general are sensitive to trends or events that are outside of IACapstas control |
| Adverse events and trends, including general economic downturns, decreases in consumer spending and borrowing and natural or other disasters, as well as adverse events or trends in the various industries in which IACapstas businesses operate, among other adverse events and trends, could adversely affect IACapstas business, financial condition and results of operations |
| Retailing Retailing US is dependent upon the continued ability of HSN to transmit the HSN and Americaapstas Store television networks to broadcast and pay television operators from its satellite uplink facilities |
| See "e Item 1—Business—Description of Business—Retailing—Retailing US—Television Programming—Reach "e |
| While HSN has designed business continuity and disaster recovery plans to ensure its continued satellite transmission capability on a temporary basis in the event of inclement weather or a natural or other disaster, the prolonged or permanent interruption of its satellite transmission capability for any reason and/or related costs incurred by HSN could adversely affect IACapstas business, financial condition and results of operations |
| Retailing US is also dependent upon the continued ability of HSN to secure channel capacity and placement for the HSN and/or Americaapstas Store television networks |
| While the advent of digital cable has resulted in increased channel capacity, this additional capacity has encouraged, and could continue to encourage, competitors to enter the marketplace |
| Changing laws, rules and regulations and legal uncertainties could also adversely affect of ability of HSN to secure channel capacity and placement for the HSN and/or Americaapstas Store television networks |
| For example, the Federal Communications Commission is considering the adoption of a modified cable television ownership rules and limits that could result in individual cable operators acquiring control over larger segments of US cable 20 _________________________________________________________________ customers and channels, in which case, HSN could be required to negotiate with fewer cable operators that would control larger portions of the market for the terms of and opportunity to secure channel capacity and placement |
| No assurances can be given that HSN will be able to secure channel capacity and/or placement for the HSN and/or Americaapstas Store television networks on attractive terms and its failure to do so could adversely affect IACapstas business, financial condition and results of operations |
| Retailing is also dependent, in part, upon the ability of the businesses within this sector to predict or respond to changes in consumer preferences and fashion and other trends in a timely manner |
| Accordingly, these businesses are continuously developing new retail concepts and adjusting its product mix in an effort to satisfy customer demand |
| The failure of the businesses within the Retailing segment to identify and respond to emerging trends that impact their respective business could adversely affect IACapstas business, financial condition and results of operations |
| Ticketing is sensitive to fluctuations in the number and pricing of entertainment, sporting and leisure events and activities offered by promoters and facilities, as well as general economic and business conditions generally and in these industries |
| Entertainment-related expenditures are sensitive to business and personal discretionary spending levels, which tend to decline during general economic downturns |
| Accordingly, adverse trends in the entertainment, sporting and leisure events industries or general economic or business conditions could adversely affect the business, financial condition and results of operations of Ticketing |
| The results of IACapstas Lending and Real Estate businesses are impacted by fluctuations in interest rates, as well as the number of homes available and/or listed for sale and the pricing of these homes (which is impacted by construction rates and related costs), as well as the reactions of consumers, lenders and others to these and other trends in the lending and real estate industries |
| See "e Item 1—Business—Description of Business—Lending—Overview, "e "e Item 7—Managementapstas Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates "e and "e Item 7A—Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk "e |
| Media & Advertising A material portion of the revenues of the Media & Advertising sector is derived from advertising |
| Accordingly, these businesses are sensitive to general economic downturns and decreases in consumer spending, among other events and trends, which generally result in decreased advertising expenditures, as well as the continued growth and/or acceptance of online advertising as an effective alternative to offline advertising media and its business model |
| Intervalapstas business depends, in significant part, upon the health of the timeshare and travel industries |
| Travel expenditures are sensitive to business and personal discretionary spending levels and tend to decline during general economic downturns |
| Also, inclement weather and/or natural disasters may result in the inability to travel to and vacation in certain regions in which Intervalapstas participating resorts operate, as well as significant damage to participating resorts, which would result in a decrease in timeshare accommodations and related travel |
| In addition, Intervalapstas business is sensitive to travel safety concerns related to terrorism and/or geopolitical conflicts |
| Accordingly, downturns or weaknesses in the travel industry, as well as inclement weather, natural disasters, terrorism and/or geopolitical conflicts could adversely affect IACapstas business, financial condition and results of operations |
| 21 _________________________________________________________________ Marketing—The failure of IACapstas businesses to attract and retain customers in a cost-effective manner could adversely affect IACapstas business, financial condition and results of operations |
| The long-term success of IAC depends on its continued ability to attract new visitors to its websites and other distribution channels, convert these visitors into paying customers and capture repeat business from existing customers, which involves the expenditure of considerable money and resources for advertising, marketing, infrastructure and other related efforts |
| Some of IACapstas businesses have spent and expect to continue to spend increasing amounts of money on, and devote greater resources to, these efforts, which may not be successful or cost-effective |
| The failure of IACapstas businesses to attract and acquire new, and retain existing, customers in a cost-effective manner could adversely affect IACapstas business, financial condition and results of operations |
| Changing Customer Requirements and Industry Standards—IACapstas businesses may not be able to adapt quickly enough to changing customer requirements and industry standards |
| The e-commerce industry is characterized by evolving industry standards, frequent new service and product introductions and enhancements, and changing customer demands |
| IACapstas businesses may not be able to adapt quickly enough and/or in a cost-effective manner to changes in industry standards and customer requirements and preferences, and their failure to do so could adversely affect the business, financial condition and results of operations of IAC In addition, the widespread adoption of new internet or telecommunications technologies or other technological changes could require IACapstas businesses to make substantial expenditures to modify or adapt their respective services or infrastructure |
| The failure of IACapstas businesses to do so could render their existing websites, services and proprietary technologies obsolete, which could adversely affect IACapstas business, financial condition and results of operations |
| Internet Usage and Online Migration—IACapstas future success depends upon the continued and widespread use and acceptance of the internet as a medium for commerce |
| IACapstas future success depends on the continued and widespread use and acceptance of the internet as a medium for commerce |
| While the practice of transacting business online in some of the industries in which IACapstas businesses operate, such as the retailing industry, is established and continuing to grow, use and acceptance of this practice in some other industries in which IACapstas businesses operate, such as the lending and real estate industries, are in early stages of development or have only recently begun |
| A number of factors may inhibit internet use and acceptance by consumers, including general privacy and security concerns regarding their personal information, as well as the acceptance of a new way of conducting business and exchanging information, particularly in the case of IACapstas Lending and Real Estate businesses, where consumers, more so than in other industries in which IACapstas business operate, continue to seek lending and real estate services through traditional offline methods |
| If consumer use and acceptance of online markets does not continue to increase, IACapstas business, financial condition and results of operations could be adversely affected |
| Acquisitions—IAC may experience operational and financial risks in connection with acquisitions |
| In addition, some of the businesses acquired by IAC may incur significant losses from operations or experience impairment of carrying value |
| IACapstas future growth may depend, in part, on acquisitions |
| IAC may experience operational and financial risks in connection with acquisitions |
| To the extent that IAC grows through acquisitions, it will need to: • successfully integrate the operations, as well as the accounting, financial controls, management information, technology, human resources and other administrative systems, of acquired businesses with IACapstas existing operations and systems; 22 _________________________________________________________________ • retain senior management and other key personnel at acquired businesses; and • successfully manage acquisition-related strain on the management, operations and financial resources of IAC and/or acquired businesses |
| IAC may not be successful in addressing these challenges or any other problems encountered in connection with historical and future acquisitions and the failure to do so could adversely affect IACapstas business, financial condition and results of operations |
| In addition, the anticipated benefits of one or more acquisitions may not be realized and future acquisitions could result in potentially dilutive issuances of equity securities, contingent liabilities or the impairment of goodwill and/or other intangible assets, any of which could adversely affect IACapstas business, financial condition and results of operations |
| International Presence—Some IAC businesses operate in international markets in which they have limited experience and are faced with additional risks |
| Some of IACapstas businesses operate in various jurisdictions abroad and may continue to expand their international presence |
| Some of these businesses have limited experience, and are faced with additional risks, in the international markets in which they operate |
| In order to achieve widespread acceptance in the countries and markets in which they have a presence, these businesses must continue to successfully tailor their services to the unique customs and cultures of such countries and markets |
| Learning the customs and cultures of various countries can be difficult and costly and the failure of these businesses to do so could slow their respective international growth |
| These businesses face, and expect to continue to face, additional risks in the case of their existing and future international operations |
| These risks include changes in regulatory requirements, increased risk and limits on its ability to enforce intellectual property rights, exchange rate fluctuations, potential delays in the development of the internet as an advertising and commerce medium in international markets and difficulties in managing operations due to distance, language and cultural differences, including issues associated with establishing management systems and infrastructures, and staffing and managing foreign operations |
| Compliance—The failure of IACapstas businesses to comply with existing laws, rules and regulations, or to obtain required licenses and rights, could adversely affect IACapstas business, financial condition and results of operations |
| The failure of IACapstas businesses to comply with existing laws, rules and regulations, or to obtain required licenses or rights, could adversely affect IACapstas business, financial condition and results of operations |
| IACapstas businesses market and provide a broad range of goods and services through a number of different online and offline channels |
| As a result, IACapstas businesses are subject to a wide variety of statutes, rules, regulations, policies and procedures in various jurisdictions in the US and abroad, which are subject to change at any time |
| IAC businesses with an online component must comply with laws and regulations applicable to the internet and businesses engaged in online commerce, including those regulating the sending of unsolicited, commercial electronic mail |
| Moreover, there are federal, state and international laws regarding privacy and protection of user data |
| The privacy policies and practices concerning the use and disclosure of user data of IAC businesses are posted on the websites of these businesses |
| The failure of IAC and/or any of its businesses to comply with posted privacy policies, Federal Trade Commission requirements or other federal, state or international privacy-related laws and regulations could result in proceedings against IAC and/or its businesses by governmental agencies, which could adversely affect IACapstas business, financial condition and results of operations |
| Many of IACapstas businesses require licenses from various federal, state and/or local regulatory authorities in order to conduct their respective businesses and operations |
| For example, HSN must have 23 _________________________________________________________________ a broadcast license from the Federal Communications Commission in order to broadcast its programming and HSE-Germany generally must obtain the right to broadcast its programming in a given state on a given cable channel from state media authorities in each of Germanyapstas 16 states on a periodic basis |
| In the case of IACapstas Lending and Real Estate businesses, most states require licenses to solicit, broker or make loans secured by residential mortgages and other consumer loans to residents of those states, as well as to operate real estate referral and brokerage services |
| No assurances can be given that any of the licenses or rights currently held by IACapstas businesses will not be revoked prior to, or will be renewed upon, their expiration |
| In addition, no assurances can be given that IACapstas businesses will be granted new licenses or rights for which they may required to apply from time to time in the future |
| Many of IACapstas businesses are also subject to various state, federal and/or local laws, rules and regulations that regulate the amount and nature of fees that may be charged for their products and services and related incentives, such as rebates, that may be offered to consumers, as well as the manner in which they may offer their products or services, including advertising and other consumer disclosures |
| For example, in the case of IACapstas Lending and Real Estate businesses, federal law, such as the Real Estate Settlement Procedures Act, or RESPA, generally prohibits the payment or receipt of referral fees and fee shares or splits in connection with residential mortgage loan transactions, subject to certain exceptions |
| The applicability of referral fee and fee sharing prohibitions to lenders, including online exchanges, and real estate services and related initiatives, may have the effect of reducing the types and amounts of fees that may be charged or paid in connection with real estate-secured loan products, including mortgage brokerage, lending and real estate brokerage services |
| Although IAC believes that its mortgage, lending and real estate referral operations have been structured in such a way so as to comply with RESPA, there can be no assurances that the relevant regulatory agency will not take a contrary position |
| In addition, some states have regulations that prohibit real estate brokers from providing consumers with rebates or other incentives in connection with real estate transactions |
| Additional states could promulgate similar regulations or interpret existing regulations in a way that limits the ability of online exchanges to offer consumer incentives in connection with real estate services, thereby limiting the attractiveness of the services offered by IACapstas Real Estate businesses to consumers |
| Additional federal, state and in some instances, local, laws regulate residential lending and real estate brokerage activities |
| These laws generally regulate the manner in which lending, lending-related and real estate brokerage services are made available, including advertising and other consumer disclosures, payments for services and record keeping requirements, and include the Fair Credit Reporting Act, the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Housing Act |
| Although IAC believes that its mortgage and real estate referral operations have been structured in such a way so as to generally comply with these federal laws, there can be no assurances that the relevant regulatory agency will not take a contrary position |
| Federal, state and in some instances, local, laws also prohibit predatory lending practices, unfair and deceptive trade practices and require companies to adopt appropriate policies and practices to protect consumer privacy |
| The failure of IACapstas Lending and Real Estate business to comply with applicable laws and regulatory requirements may result in, among other things, revocation of required licenses or registrations, loss of approval status, termination of contracts without compensation, administrative enforcement actions and fines, class action lawsuits, cease and desist orders and civil and criminal liability, any of which could adversely affect the business, financial condition and results of operations of these businesses |
| 24 _________________________________________________________________ Changing Laws, Rules and Regulations—Changing laws, rules and regulations and legal uncertainties could adversely affect IACapstas business, financial condition and results of operations |
| Unfavorable changes in existing, or the promulgation of new, laws, rules and regulations applicable to IAC and its businesses, including those relating to the internet, online commerce, the regulation of adware and other downloadable applications, broadband and telephony services, consumer protection and privacy, including requirements for criminal background checks for subscribers to online dating services, and sales, use, value-added and other taxes, could decrease demand for products and services, increase costs and/or subject IAC to additional liabilities, which could adversely affect its business |
| There is, and will likely continue to be, an increasing number of laws and regulations pertaining to the internet, online commerce and broadband and telephony services, which may relate to carriage and distribution of online content over broadband networks, liability for information retrieved from or transmitted over the internet, user privacy, taxation and the quality of products and services |
| Broadband network operators are not currently subject to common carrier regulations, which prohibit the discriminatory operation of communications networks generally, including broadband networks |
| Broadband network discrimination involves the interference by broadband network operators with customer access to, and the distribution of content and provision of services over, the internet, all of which involve the access and use of their networks |
| While broadband network operators have generally operated their networks in a non-discriminatory manner to date, certain operators have engaged in discriminatory practices in limited instances, and absent changes to the existing regulatory regime, these and other broadband network operators could engage in discriminatory practices in the future |
| Interference with customer access to the internet could result in the loss of existing customers and impair the ability of IACapstas various businesses to attract new customers, which could adversely affect IACapstas business, financial condition and results of operations |
| In addition, if broadband network operators were to charge third parties for distribution and carriage over their networks, this would result in increased costs for IACapstas various businesses, which could adversely affect IACapstas business, financial condition and results of operations |
| The US Congress is currently considering changes to the existing regulatory regime, including bills to prohibit broadband network discrimination |
| This proposed legislation would prevent broadband network operators from interfering with the ability of consumers to access the internet, as well as from charging businesses for the distribution and carriage of online content and services over their networks |
| No assurances can be given that this or any other legislation prohibiting or otherwise limiting broadband network discrimination will be adopted |
| There are also legislative proposals pending before the US Congress and various state legislative bodies regarding online privacy, data security and regulation of adware and other downloadable applications, and the continued growth and development of online commerce may continue to prompt calls for more stringent consumer protection laws, which may impose additional burdens on IAC and online businesses generally |
| In addition, the application of various domestic and international sales, use, value-added and other tax laws, rules and regulations to the historical and new products and services of IAC is subject to interpretation by the applicable taxing authorities |
| While IAC believes that it is compliant with these tax provisions, there can be no assurances that taxing authorities will not take a contrary position, or that such positions will not adversely affect IACapstas business, financial condition and results of operations |
| Lastly, some of IACapstas businesses have structured their business, operations and relationships with third parties in ways to ensure compliance with various state, federal and/or local laws, rules and regulations that regulate the amount and nature of fees that may be charged for their products or services |
| For example, Ticketmaster has structured its business, operations and client relationships in ways to ensure compliance with certain state and local regulations in several states that establish 25 _________________________________________________________________ maximum charges on tickets |
| Other legislation that could further regulate convenience charges and order-processing fees is introduced from time to time in federal, state and local legislative bodies in the United States and abroad |
| Changes in existing, or the promulgation of new, laws, rules and regulations of this nature could require Ticketmaster to change certain aspects of its business, operations and client relationships to ensure compliance |
| Ticketmaster is unable to predict whether any such legislation will be adopted and, if so, the effect on its business and results of operations |
| Intellectual Property—IAC and its businesses may fail to adequately protect their intellectual property rights or may be accused of infringing intellectual property rights of third parties |
| IAC and its businesses may fail to adequately protect their intellectual property rights or may be accused of infringing intellectual property rights of third parties |
| IAC and its businesses regard their intellectual property rights, including their patents, service marks, trademarks and domain names, copyrights, trade secrets and similar intellectual property, as critical to IACapstas success |
| IACapstas businesses also rely heavily upon software codes, informational databases and other components that make up their products and services |
| IAC and its businesses rely on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others to establish and protect these proprietary rights |
| Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use trade secret or copyrighted intellectual property of IAC or any of its businesses without authorization which, if discovered, might require the uncertainty of legal action to correct |
| In addition, no assurances can be given that third parties will not independently and lawfully develop substantially similar intellectual properties |
| IAC and its businesses have registered and continue to apply to register, or secure by contract when appropriate, their respective trademarks and service marks as they are developed and used, and reserve and register domain names as they deem appropriate |
| While IAC and its businesses vigorously protect their respective trade and service marks and domain names, effective trademark protection may not be available or may not be sought in every country in which products and services are made available, and contractual disputes may affect the use of marks governed by private contract |
| Similarly, not every variation of a domain name may be available or be registered, even if available |
| The failure of IAC and its businesses to protect their intellectual property rights in a meaningful manner or challenges to related contractual rights could result in erosion of brand names and limit the ability of IAC and its businesses to control marketing on or through the internet using their various domain names, which could adversely affect IACapstas business, financial condition and results of operations |
| Some of IACapstas businesses have been granted United States patents and/or have patent applications pending with the United States Patent and Trademark Office for various proprietary technologies and other inventions |
| IAC and its businesses generally seek to apply for patents or for other appropriate statutory protection when they develop valuable new or improved proprietary technologies or inventions, and will continue to consider the appropriateness of filing for patents to protect future proprietary technologies and inventions as circumstances may warrant |
| The status of any patent involves complex legal and factual questions, and the breadth of claims allowed is uncertain |
| Accordingly, no assurances can be given that any patent application filed by IAC and/or its businesses will result in a patent being issued, or that any existing or future patents will afford adequate protection against competitors with similar technology |
| In addition, no assurances can be given that third parties will not create new products or methods that achieve similar result without infringing upon patents owned by IAC and its businesses |
| From time to time, IAC and its businesses are subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of the trademarks, copyrights, patents and other intellectual property rights of third parties |
| In addition, litigation may be necessary in the future to enforce the intellectual property rights of IAC and its businesses, protect their respective 26 _________________________________________________________________ trade secrets or to determine the validity and scope of proprietary rights claimed by others |
| Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect IACapstas business, financial condition and results of operations |
| Patent litigation tends to be particularly protracted and expensive |
| Maintenance of Systems and Infrastructure—The success of IAC will depend on maintaining the integrity of its systems and infrastructure |
| System interruption and the lack of integration and redundancy in IACapstas information systems may affect its businesses |
| The success of IAC will depend on maintaining the integrity of its systems and infrastructure |
| System interruption and the lack of integration and redundancy in IACapstas information systems may affect its businesses |
| A fundamental requirement for online commerce and communications is the secure transmission of confidential information, such as credit card numbers or other personal information, over public networks in a timely manner |
| IACapstas security measures may prove to be inadequate and, if any compromise of security were to occur, it could have a detrimental effect on IACapstas reputation and adversely affect its ability to attract customers |
| At times, IACapstas businesses may experience occasional system interruptions that make some or all of their respective systems unavailable or prevent these businesses from efficiently fulfilling orders or providing services to third parties |
| IAC and its businesses rely on affiliate and third party computer systems and service providers to facilitate and process a portion of their transactions |
| Any interruptions, outages or delays in the systems of IAC, its affiliates and/or third party providers, or a deterioration in the performance of these systems, could impair the ability of IACapstas businesses to process transactions for its customers and the quality of service offered to these customers |
| Fire, flood, power loss, telecommunications failure, break-ins, earthquakes, acts of war or terrorism, acts of God, computer viruses and similar events or disruptions may damage or interrupt computer or communications systems at any time |
| Any of these events could cause system interruption, delays and loss of critical data, and could prevent IACapstas businesses from providing services to third parties |
| While IAC has backup systems for certain aspects of operations, the systems are not fully redundant and disaster recovery planning is not sufficient for all eventualities |
| In addition, IAC may not have adequate insurance coverage to compensate for losses from a major interruption |