Expedia 2010 Annual Report Download - page 104

In connection with various occupancy tax audits and assessments, certain jurisdictions may assert that
taxpayers are required to pay any assessed taxes prior to being allowed to contest or litigate the applicability of
the ordinances, which is referred to as “pay-to-play.” These jurisdictions may attempt to require that we pay any
assessed taxes prior to being allowed to contest or litigate the applicability of the tax ordinance. Payment of these
amounts is not an admission that we believe we are subject to such taxes and, even when such payments are
made, we continue to defend our position vigorously. During 2009, we expensed and paid approximately $48
million to the City of San Francisco for amounts assessed for hotel occupancy tax, including penalties and
interest, from January 2000 to March 2009. During 2010, we expensed and paid approximately $3 million to the
City of Santa Monica for amounts assessed for hotel occupancy tax. In each case, we paid such amounts in order
to be allowed to pursue litigation challenging whether we are required to pay hotel occupancy tax on the portion
of the customer payment we retain as compensation and, if so, the actual amounts owed. We do not believe that
the amounts we retain as compensation are subject to the cities’ hotel occupancy tax ordinances. If we prevail in
the litigation, the cities will be required to repay these amounts, plus interest. During the first quarter of 2009, the
California Superior Court for Orange County determined we are not required to make a payment in order to
litigate in Anaheim, California. That decision was affirmed by the California Court of Appeals on March 24,
2010 and the California Supreme Court denied the city’s petition for review.
Class Action Lawsuit. We were a defendant in a class action lawsuit filed in Seattle, Washington alleging
that certain practices related to our service fees breached our Terms of Use and violated Washington’s Consumer
Protection Act from 2001 through 2008. In May 2009, the court granted the plaintiffs’ motion for summary
judgment on their breach of contract claim, without the benefit of an actual trial on the merits, and denied the
plaintiffs’ motion for summary judgment on their Consumer Protection Act claim. We entered into a Settlement
Agreement providing for the settlement of all claims alleged in the lawsuit, which was approved by the court on
December 1, 2009. The court’s order approving the Settlement Agreement was appealed by third parties but
dismissed by the court on April 14, 2010. We have denied and continue to deny all of the allegations and claims
asserted in the lawsuit, including claims that the plaintiffs have suffered any harm or damages. We do not admit
liability or the truth of any of the allegations in the lawsuit and settled the case to avoid costly and time-consuming
litigation. The terms of the Settlement Agreement provided the class members the option to elect settlement in cash.
For those not electing cash, amounts were settled in coupons. As of December 31, 2009, we had accrued $19
million related to this matter. As of December 31, 2010, the majority of the estimated settlement accrual was settled
with either cash payments or coupon redemptions. The remaining settlement liability, which was increased during
2010 by approximately $3 million, includes an estimated coupon redemption rate. Any future difference between
our estimated redemption rate and the actual redemption rate we experience will impact the final settlement amount;
however, we do not expect material differences from the current amounts accrued.
NOTE 16 — Related Party Transactions
In connection with and following the Spin-Off, we entered into various commercial agreements with IAC, a
related party due to common ownership. On August 20, 2008, IAC completed its plan to separate into five
publicly traded companies. With this separation, our related party transactions with the newly constituted IAC
have been immaterial and we expect this trend to continue on a go-forward basis.
In addition, in conjunction with the Spin-Off, we entered into a joint ownership and cost sharing agreement
with IAC, under which IAC transferred to us 50% ownership in an airplane, which is available for use by both
companies. We share equally in capital costs; operating costs are pro-rated based on actual usage. In May 2006,
the airplane was placed in service and is being depreciated over 10 years. As of December 31, 2010 and 2009, the
net basis in our ownership interest was $17 million for both periods recorded in long-term investments and other
assets. In 2010 and 2009, operating and maintenance costs paid directly to the jointly-owned subsidiary for the
airplane were nominal.
NOTE 17 — Segment Information
We have three reportable segments: Leisure, the TripAdvisor Media Network and Egencia. We determined
our segments based on how our chief operating decision makers manage our business, make operating decisions
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