Priceline 2014 Annual Report Download - page 32

Our business is exposed to risks associated with processing credit card transactions.
Our results have been negatively impacted by purchases made using fraudulent credit cards. Because we act as the merchant of record
in a majority of our priceline.com transactions as well as those of agoda.com and rentalcars.com, we may be held liable for accepting fraudulent
credit cards on our websites as well as other payment disputes with our customers. Additionally, we may be held liable for accepting fraudulent
credit cards in certain retail transactions when we do not act as merchant of record. Accordingly, we calculate and record an allowance for the
resulting credit card chargebacks. If we are unable to combat the use of fraudulent credit cards on our websites, our business, results of
operations and financial condition could be materially adversely affected.
In addition, in the event that one of our major travel service providers voluntarily or involuntarily declares bankruptcy, we could
experience an increase in credit card chargebacks from customers with travel reservations with such travel service provider. For example,
airlines that participate in our services and declare bankruptcy or cease operations may be unable or unwilling to honor tickets sold for their
flights. Our policy in such event is to direct customers seeking a refund or exchange to the airline, and not to provide a remedy ourselves.
Because we are the merchant-of-record on sales of Name Your Own Price
®
and Express Deals
®
airline tickets to our customers, however, we
could experience a significant increase in demands for refunds or credit card chargebacks from customers, which could materially adversely
affect our results of operations and financial condition. For example, in April 2008, Aloha Airlines and ATA Airlines each ceased operations,
and we experienced an increase in credit card chargebacks from customers with tickets on those airlines. Agoda.com and rentalcars.com process
credit card transactions and operate in numerous currencies. Credit card costs are typically higher for foreign currency transactions and in
instances where cancellations occur.
The success of our acquisition of OpenTable is subject to numerous risks and uncertainties.
On July 24, 2014, we acquired OpenTable, a leading brand for booking online restaurant reservations. We believe that the online
restaurant reservation business is complementary to our online travel businesses, and that both OpenTable and our travel businesses will benefit
from adding OpenTable to The Priceline Group. As a result of our acquisition of OpenTable, we are subject to risks associated with OpenTable's
business, many of which are the same risks that our other businesses face. Other risks include: OpenTable's ability to increase the number of
restaurants and diners using its products and services and retain existing restaurants and diners; competition both to provide reservation
management services to restaurants and to attract diners to make reservations through OpenTable's websites and apps; OpenTable's ability to
expand internationally; OpenTable's ability to effectively and efficiently market to new restaurants and diners; and any risks that cause people to
refrain from dining at restaurants, such as economic downturns, severe weather, outbreaks of pandemic or contagious diseases, or threats of
terrorist attacks. If OpenTable is unsuccessful in profitably growing its global online restaurant reservation business or it experiences a
significant reduction in revenues due to factors such as competition, increased capital expenditures or investments we make in growing
OpenTable's business, in particular internationally, or any other reason, the value of our investment in OpenTable may be adversely affected and
we may incur an impairment charge related to goodwill.
Investment in new business strategies and acquisitions could disrupt our ongoing business and present risks not originally
contemplated.
We have invested, and in the future may invest, in new business strategies and acquisitions. Such endeavors may involve significant
risks and uncertainties, including distraction of management from current operations, greater than expected liabilities and expenses, inadequate
return on capital, and unidentified issues not discovered in our investigations and evaluations of those strategies and acquisitions. We may decide
to make minority investments, including through joint ventures, in which we have limited or no management or operational control. The
controlling person in such a case may have business interests, strategies or goals that are inconsistent with ours, and decisions of the company or
venture in which we invested may result in harm to our reputation or adversely affect the value of our investment. Further, we may issue shares
of our common stock in these transactions, which could result in dilution to our stockholders.
Item 1B. Unresolved Staff Comments
None.
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