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security rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or
impossible for us to comply. Failure to comply with these rules or requirements, as well as any breach, compromise, or failure to otherwise detect or prevent
fraudulent activity involving our data security systems, could result in our being liable for card issuing banks’ costs, subject to fines and higher transaction fees,
and loss of our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online
payments, and our business and operating results could be adversely affected.
In addition, we provide regulated services in certain jurisdictions because we enable customers to keep account balances with us and transfer money to
third parties, and because we provide services to third parties to facilitate payments on their behalf. Jurisdictions subject us to requirements for licensing,
regulatory inspection, bonding and capital maintenance, the use, handling, and segregation of transferred funds, consumer disclosures, maintaining or
processing data, and authentication. We are also subject to or voluntarily comply with a number of other laws and regulations relating to payments, money
laundering, international money transfers, privacy, data use, data protection, data security, data localization, network security, consumer protection, and
electronic fund transfers. If we were found to be in violation of applicable laws or regulations, we could be subject to additional requirements and civil and
criminal penalties, or forced to cease providing certain services.
We Have a Rapidly Evolving Business Model and Our Stock Price Is Highly Volatile
We have a rapidly evolving business model. The trading price of our common stock fluctuates significantly in response to, among other risks, the risks
described elsewhere in this Item 1A, as well as:
• changes in interest rates;
• conditions or trends in the internet and the industry segments we operate in;
• quarterly variations in operating results;
• fluctuations in the stock market in general and market prices for internet-related companies in particular;
• changes in financial estimates by us or decisions to increase or decrease future spending or investment levels;
• changes in financial estimates and recommendations by securities analysts;
• changes in our capital structure, including issuance of additional debt or equity to the public;
• changes in the valuation methodology of, or performance by, other e-commerce or technology companies; and
• transactions in our common stock by major investors and certain analyst reports, news, and speculation.
Volatility in our stock price could adversely affect our business and financing opportunities and force us to increase our cash compensation to employees
or grant larger stock awards than we have historically, which could hurt our operating results or reduce the percentage ownership of our existing stockholders,
or both.
Legal and Regulatory Risks
Government Regulation Is Evolving and Unfavorable Changes Could Harm Our Business
We are subject to general business regulations and laws, as well as regulations and laws specifically governing the internet, physical, e-commerce, and
omnichannel retail, digital content, web services, electronic devices, advertising, artificial intelligence technologies and services, and other products and
services that we offer or sell. These regulations and laws cover taxation, privacy, data use, data protection, data security, data localization, network security,
consumer protection, pricing, content, copyrights, distribution, transportation, mobile communications, electronic device certification, electronic waste, energy
consumption, environmental and climate-related regulation, electronic contracts and other communications, competition, employment, trade and protectionist
measures, web services, the provision of online payment services, registration, licensing, and information reporting requirements, unencumbered internet
access to our services or access to our facilities, the design and operation of websites, health, safety, and sanitation standards, the characteristics, legality, and
quality of products and services, product labeling, the commercial operation of unmanned aircraft systems, healthcare, and other matters. It is not clear how
existing laws governing issues such as property ownership, libel, privacy, data use, data protection, data security, data localization, network security, and
consumer protection apply to aspects of our operations such as the internet, e-commerce, digital content, web services, electronic devices, advertising, and
artificial intelligence technologies and services. A large number of jurisdictions regulate our operations, and the extent, nature, and scope of such regulations is
evolving and expanding as the scope of our businesses expand. We are regularly subject to formal and informal reviews, investigations, and other proceedings
by governments and regulatory authorities under existing laws, regulations, or interpretations or pursuing new and novel approaches to regulate our operations.
For example, we face a number of open investigations based on claims that aspects of our operations infringe competition or consumer protection rules,
including aspects of Amazon’s operation of its stores including its fulfillment network and Prime, Amazon’s acquisitions, and certain aspects of AWS’s offering
of cloud services.
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