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Commitments and Contingencies | 6 Months Ended
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Jun. 30, 2019
Commitments and Contingencies [Abstract] |
Commitments and Contingencies | 7. Commitments and Contingencies Litigation and Other Legal Matters The Company is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues liabilities when it considers probable that future costs will be incurred and such costs can be reasonably estimated. Proceeding-related liabilities are based on developments to date and historical information related to actions filed against the Company. As of June 30, 2019, the Company had accounted for estimated liabilities involving proceeding-related contingencies and other estimated contingencies of $5,320 thousands to cover legal actions against the Company in which its Management has assessed the likelihood of a final adverse outcome as probable. Expected legal costs related to litigations are accrued when the legal service is actually provided. In addition, as of June 30, 2019 the Company and its subsidiaries are subject to certain legal actions considered by the Company’s Management and its legal counsels to be reasonably possible for an estimated aggregate amount up to $11,249 thousands. No loss amounts have been accrued for such reasonably possible legal actions. Other third parties have from time to time claimed, and others may claim in the future, that the Company was responsible for fraud committed against them, or that the Company has infringed their intellectual property rights. The underlying laws with respect to the potential liability of online intermediaries like the Company are unclear in the jurisdictions where the Company operates. Management believes that additional lawsuits alleging that the Company has violated copyright or trademark laws will be filed against the Company in the future. Intellectual property and regulatory claims, whether meritorious or not, are time consuming and costly to resolve, require significant amounts of management time, could require expensive changes in the Company’s methods of doing business, or could require the Company to enter into costly royalty or licensing agreements. The Company may be subject to patent disputes, and be subject to patent infringement claims as the Company’s services expand in scope and complexity. In particular, the Company may face additional patent infringement claims involving various aspects of the payments businesses. From time to time, the Company is involved in other disputes or regulatory inquiries that arise in the ordinary course of business. The number and significance of these disputes and inquiries are increasing as the Company’s business expands and the Company grows larger. Buyer protection program The Company provides consumers with a buyer protection program (“BPP”) for all transactions completed through the Company’s online payment solution (“Mercado Pago”). This program is designed to protect buyers in the Marketplace from losses due primarily to fraud or counterparty non-performance. The Company’s BPP provides protection to consumers by reimbursing them for the total value of a purchased item and the value of any shipping service paid if it does not arrive or does not match the seller’s description. The Company is entitled to recover from the third-party carrier companies performing the shipping service certain amounts paid under the BPP. Furthermore, in some specific circumstances (i.e. Black Friday, Hot Sale), the Company enters into insurance contracts with third-party insurance companies in order to cover contingencies that may arise from the BPP. The maximum potential exposure under this program is estimated to be the volume of payments on the Marketplace, for which claims may be made under the terms and conditions of the Company’s BPP. Based on historical losses to date, the Company does not believe that the maximum potential exposure is representative of the actual potential exposure. The Company records a liability with respect to losses under this program when they are probable and the amount can be reasonably estimated. As of June 30, 2019 and December 31, 2018, Management’s estimate of the maximum potential exposure related to the Company’s buyer protection program is $1,051,292 thousands and $988,664 thousands, respectively, for which the Company recorded an allowance of $4,313 thousands and $4,146 thousands, respectively. Loans payable and other financial liabilities During the last quarter of 2018, the Company, through its Chilean subsidiary, obtained two lines of credit from Scotiabank Chile denominated in Chilean Pesos, to be applied to working capital needs. As of June 30, 2019, the amount outstanding under these lines of credit is $4,428 thousands and $2,952 thousands matured in July 2019 (and were renewed upon maturity) and both bear interest at a fixed rate of 3.66%. During the second quarter of 2019, the Company obtained two additional lines of credit from Scotiabank Chile denominated in Chilean Pesos, to be applied to working capital needs. As of June 30, 2019, the amount outstanding under these lines of credit is $14,745 thousands and $7,366 thousands matured in July 2019 (and were renewed upon maturity) and bear interest at a fixed rate of 3.20% and 3.24%, respectively. In addition, the Chilean subsidiary, obtained two lines of credit from Banco de Chile denominated in Chilean pesos, to be applied to working capital needs. As of June 30, 2019, the amount outstanding under these lines of credit is $8,858 thousands and $7,365 thousands matured in July 2019 (and were renewed upon maturity) and bear interest at a fixed rate of 3.60% and 3.24% per annum, respectively. During the second quarter of 2019, the Company, through its Argentine subsidiary, maintained finance lease contracts denominated in local currency. The outstanding amount is $3,455 thousands which bears interest at a weighted average rate of 68.5% per annum and will mature within the next 4 years. In addition, the Argentine subsidiary obtained an unsecured line of credit denominated in local currency for an amount of $11,987 thousands, which bears fixed interest at a weighted average rate of 60.7% per annum and will mature within the next three months. Lastly, the Argentine subsidiary obtained an unsecured line of credit from Citibank N.A. denominated in local currency for an amount of $6,583 thousands, which bears interest at a fixed rate of 85.00% per annum and was fully paid off in July 2019. As of June 30, 2019 the Company, through its Mexican subsidiary, had three finance leases contracts related to facilities for its fulfillment center. The outstanding amounts are $5,469 thousands, which bears interest at a fixed rate of 6.17% per annum and will mature within the next 5 years, $1,022 thousands which bears interest at a fixed rate of 9.00% per annum and will mature within the next 3.75 years and $134 thousands which bears interest at a fixed rate of 10.78% per annum and will mature within the next 9 months. During the second quarter of 2019, the Company, through its Uruguayan subsidiary obtained two lines of credit from Citibank, N.A, denominated in local currency, to be applied to working capital needs. As of June 30, 2019, the amount outstanding under these lines of credit is $859 thousands and $2,282 thousands. These lines of credit mature in July 2019 and bear interest at a fixed rate of 11.39% per annum. The first line of credit was fully paid off in July 2019 and the second line of credit was renewed upon maturity. In addition, the Uruguayan subsidiary obtained an unsecured line of credit denominated in local currency for an amount of $11,222 thousands, which bears interest at a fixed rate of 9.11% per annum. See Notes 9 and 11 to these interim condensed consolidated financial statements for details regarding the Company’s 2019 Notes and 2028 Notes and collateralized debt securitization transactions, respectively. Commitments As of June 30, 2019, the Company entered into a purchase commitment with a Brazilian supplier in relation to the purchase of mobile point of sale devices. This agreement refers to the acquisition of 1,290,000 units for a total amount of $54,720 thousands with partial deliveries between May and October 2019. ‎

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