Hertz 2008 Annual Report Download - page 65

ITEM 1A. RISK FACTORS (Continued)
border data flows could have a material adverse effect on our business, primarily through the impairment
of our marketing and transaction processing activities.
Further, the substantive regulation of the rates we charge car renters, either through direct price
regulation or a requirement that we disregard a customer’s source market (location or place of
residence) for rate purposes, could reduce our revenues or increase our expenses. We set rates based
on a variety of factors including the sources of rental reservations geographically and the means through
which the reservations were made, all of which are in response to various market factors and costs. The
European Commission had issued, but has since withdrawn, a directive that could have restricted our
ability to take into account the country of residence of European Union residents for rate purposes, and
bills have periodically been introduced into the New York State legislature that would seek to prohibit us
from charging higher rates to renters residing in certain boroughs of New York City. The adoption of any
such measures could have a material adverse impact on our revenues and results of operations.
In most places where we operate, we pass through various expenses, including the recovery of vehicle
licensing costs and airport concession fees, to our rental customers as separate charges. In the last five
years, such pass-throughs have been questioned by several State Attorneys General and class actions
had previously been filed in four states challenging the propriety of certain pass-throughs. We believe
that our expense pass-throughs, where imposed, are properly disclosed and are lawful, and expense
pass-throughs have, when challenged, been upheld in court. Nonetheless, we cannot offer assurances
that other State Attorneys General will not take enforcement action against us with respect to our car
rental expense pass-throughs, or that our pass-throughs will not be the subject of other class action
litigation. If such action were taken and an Attorney General or class action plaintiff were to prevail, it
could have a material adverse impact on our revenues and results of operations. In the United States,
our revenues from car rental expense pass-throughs for the years ended December 31, 2008 and 2007,
were approximately $336.9 million and $353.9 million, respectively.
The Sponsors currently control us and may have conflicts of interest with us in the future.
Clayton, Dubilier & Rice Fund VII, L.P. and related funds, Carlyle Partners IV, L.P. and related funds and
ML Global Private Equity Fund, L.P. and related funds (together with certain of their affiliates) currently
beneficially own approximately 18.6%, 18.3% and 18.1%, respectively, of the outstanding shares of the
common stock of Hertz Holdings. In September 2008, Bank of America announced it was acquiring
Merrill Lynch & Co., the parent company of Merrill Lynch Global Private Equity. This transaction closed
on January 1, 2009. Accordingly, Bank of America is now an indirect beneficial owner of our common
stock held by Merrill Lynch Global Private Equity and certain of its affiliates. These funds and Hertz
Holdings are parties to a Stockholders Agreement, pursuant to which the funds have agreed to vote in
favor of nominees to our board of directors nominated by the other funds. As a result, the Sponsors
control us, and will continue to have significant influence over matters requiring stockholder approval
and our policy and affairs so long as they continue to hold a significant amount of our common stock.
The Sponsors therefore have the ability to prevent any transaction that requires the approval of
stockholders, regardless of whether or not our other stockholders believe that such a transaction is in
their own best interests. See ‘‘Item 13—Certain Relationships and Related Transactions, and Director
Independence.’’
Additionally, the Sponsors are in the business of making investments in companies and may from time to
time acquire and hold interests in businesses that compete directly or indirectly with us. One or more of
the Sponsors may also pursue acquisition opportunities and other corporate opportunities that may be
complementary to our business and, as a result, those opportunities may not be available to us. Any
competition could intensify if an affiliate or subsidiary of one or more of the Sponsors were to enter into or
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