Expedia 2005 Annual Report Download - page 25

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Our certificate of incorporation provides that no officer or director of Expedia who is also an officer or
director of IAC will be liable to Expedia or its stockholders for breach of any fiduciary duty by reason of
the fact that any such individual directs a corporate opportunity to IAC instead of Expedia, or does not
communicate information regarding a corporate opportunity to Expedia because the officer or director has
directed the corporate opportunity to IAC. This corporate opportunity provision may have the effect of
exacerbating the risk of conflicts of interest between IAC and Expedia because the provision effectively
shields an overlapping director/executive officer from liability for breach of fiduciary duty in the event that
such director or officer chooses to direct a corporate opportunity to IAC instead of Expedia.
Changing laws, rules and regulations and legal uncertainties may adversely affect our business,
financial condition and results of operations.
Our business, financial condition and results of operations could be adversely affected by unfavorable
changes in or interpretations of existing, or the promulgation of new laws, rules and regulations applicable
to us and our businesses, including those relating to the internet and online commerce, consumer
protection and privacy, escheat and sales, use, occupancy, value-added and other taxes, could decrease
demand for products and services, increase costs and/or subject us to additional liabilities. For example,
there is, and will likely continue to be, an increasing number of laws and regulations pertaining to the
internet and online commerce, which may relate to liability for information retrieved from or transmitted
over the internet, user privacy, taxation and the quality of products and services. Furthermore, the growth
and development of online commerce may prompt calls for more stringent consumer protection laws that
may impose additional burdens on online businesses generally.
In addition, the application of various domestic and international sales, use, occupancy, value-added
and other tax laws, rules and regulations to our historical and new products and services is subject to
interpretation by the applicable taxing authorities. While we believe that we are 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 have an adverse effect on our businesses, financial condition and results of operations. If
the tax laws, rules and regulations were amended or if current interpretations of the laws were to change
adversely to us, particularly with respect to occupancy or value-added taxes, the results could have an
adverse affect on our businesses, financial condition and results of operations.
Our international opportunities and investments involve risks relating to travel patterns, practices,
Internet-based commerce, regulations and exchange rate fluctuations.
We operate in a number of jurisdictions abroad and intend to continue to expand our international
presence. In order to achieve widespread acceptance in the countries and markets we enter, we must
continue to tailor our services to the unique customs and cultures of such countries and markets. Learning
the customs and cultures of various countries, particularly with respect to travel patterns and practices, can
be difficult, costly and divert management and personnel resources. Our failure to learn such customs and
cultures successfully could slow our international growth.
We expect to continue to face additional risks in international operations. These risks include political
instability, acts of terrorism, unexpected changes in regulatory requirements, our ability to comply with
local laws and regulations, increased risk and limits on our ability to enforce intellectual property rights,
slower adoption of the internet as an advertising and commerce medium in those markets as compared to
the United States 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.
Through our international operations, we also have exposure to different economic climates, political
arenas, tax systems and regulations that could negatively affect foreign exchange rates. Because we
transact in foreign currency and record the activity in U.S. dollars, changes in exchange rates between the
U.S. dollar and these other currencies could have a negative effect on our results of operations. Our
exchange rate risk will increase as we increase our operations in international markets.
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