Expedia 2014 Annual Report Download - page 122

San Francisco. During 2009, we paid $48 million in advance of litigation relating to occupancy tax
proceedings with the city of San Francisco. The city of San Francisco subsequently issued additional assessments
of tax, penalties and interest for the time period from the fourth quarter of 2007 through the fourth quarter of
2011 against the online travel companies, including against Expedia, Hotels.com and Hotwire. The additional
assessments, including the prepayment of such assessments, were contested by the Expedia companies on the
basis that the court has already ruled that taxes are not due from the online travel companies and that binding
precedent by the California Court of Appeals precludes the city’s claim for taxes. Although the city initially
agreed, subject to documentation, that the additional assessments need not be paid and could be placed under a
bond, it subsequently sought to collect the additional assessment against the Expedia companies. On May 14,
2014, the court heard oral argument on the Expedia companies’ contest of the prepayment requirement for the
additional assessments and held that the Expedia companies were required to prepay in order to litigate the
legality of the assessments. On May 26, 2014, the Expedia companies paid $25.5 million under protest in order to
contest the additional assessments. The additional assessments were expensed during the second quarter of 2014.
On August 6, 2014, the California Court of Appeals stayed this case pending review and decision by the
California Supreme Court of the City of San Diego, California Litigation.
Other Jurisdictions. In December 2014, the City of Portland and Multnomah County, Oregon assessed
certain online travel companies, including Expedia, Hotels.com and Hotwire, for hotel occupancy taxes for the
period October 7, 2013 to December 31, 2014 based on recent amendments to state legislation. On January 9,
2015, as a pre-condition to challenging the assessments, the Expedia companies paid $2.3 million under protest
in alleged taxes, penalties and interest. We are also in various stages of inquiry or audit with domestic and
foreign tax authorities, some of which impose a pay-to-play requirement to challenge an adverse inquiry or audit
result in court.
The ultimate resolution of these contingencies may be greater or less than the pay-to-play payments made
and our estimates of additional assessments mentioned above.
Matters Relating to Hotel Booking Practices. On July 31, 2012, the United Kingdom Office of Fair Trading
(“OFT”) issued a Statement of Objections alleging that Expedia, Booking.com B.V. and InterContinental Hotels
Group PLC (“IHG”) have infringed European Union and United Kingdom competition law in relation to the
online supply of hotel room accommodations. The parties voluntarily proposed to address the OFT’s
investigation by offering formal commitments. On January 31, 2014, the OFT announced that it had formally
accepted the commitments offered by the parties, with no finding of fault or liability. On March 31, 2014,
Skyscanner Limited filed a judicial review application challenging the OFT’s January 31, 2014 decision. On
September 26, 2014, the United Kingdom’s Competition Appeal Tribunal (“CAT”) granted Skyscanner
Limited’s appeal, quashing the OFT commitments decision and removing the legally binding effect of the
commitments on Expedia and the other two parties. This judgment further requires the Competition & Markets
Authority (“CMA”), the United Kingdom’s competition authority, to review the decision of its predecessor body,
the OFT. The CMA did not appeal the CAT’s decision. The CMA is currently considering what further action it
may take in this case and the outcome of this assessment is uncertain. Expedia continues to believe the
commitments it voluntarily gave to the OFT, and which specify certain hotel room discounting rights for online
travel companies, represent a sensible and balanced outcome to the OFT’s three year investigation. We therefore
intend to continue to apply these commitments pending further developments.
The Directorate General for Competition, Consumer Affairs and Repression of Fraud, a directorate of the
French Ministry of Economy and Finance with authority over unfair trading practices, also has brought a lawsuit
in France against the Expedia entities objecting to certain most favored nations clauses in contracts with French
hotels. This case is scheduled to go to trial in April 2015. In addition, a number of competition authorities, such
as those in Austria, China, Czech Republic, Denmark, France, Germany, Hungary, Ireland, Italy, Sweden and
Switzerland, have initiated sector inquiries or investigations into competitive practices within the hotel online
booking sector and, in particular, in relation to most favored nation clauses and other contractual arrangements
between hotels and online travel companies, including Expedia. These investigations differ from the OFT
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