Expedia 2015 Annual Report Download - page 132

In addition, the Directorate General for Competition, Consumer Affairs and Repression of Fraud (the
“DGCCRF”), a directorate of the French Ministry of Economy and Finance with authority over unfair trading
practices, brought a lawsuit in France against Expedia entities objecting to certain parity clauses in contracts
between Expedia entities and French hotels. In May 2015, the French court ruled that certain of the parity
provisions in certain contracts that were the subject of the lawsuit were not in compliance with French
commercial law, but imposed no fine and no injunction. The DGCCRF has appealed the decision. A number of
competition authorities, such as those in Australia, Austria, Belgium, China, Czech Republic, Denmark, France,
Germany, Greece, Hungary, Ireland, Italy, New Zealand, Poland, Sweden and Switzerland, have also inquired or
initiated investigations into the travel industry and, in particular, in relation to parity provisions in contracts
between hotels and online travel companies, including Expedia.
While the ultimate outcomes of these lawsuits, inquiries or investigations are uncertain and our
circumstances are distinguishable from those of other online travel agencies subject to similar lawsuits, inquiries
or investigations, we note in this context that on April 21, 2015 the competition authorities in France, Italy and
Sweden announced a proposed set of commitments offered by Booking.com to resolve the parity clause cases
brought by these authorities against it. The German Federal Cartel Office (“FCO”) also has required another
online travel company, Hotel Reservation Service (“HRS”), to remove certain clauses from its contracts with
hotels. HRS appealed this decision, which the Higher Regional Court Düsseldorf rejected on January 9, 2015. On
December 23, 2015, the FCO announced that it had also required Booking.com to remove certain clauses from its
contracts with German hotels. Booking.com announced that it will appeal this decision. In addition, with effect
from August 1, 2015, Expedia waived certain rate, conditions and availability parity clauses in its agreements
with its European hotel partners for a period of five years. While Expedia maintains that its parity clauses have
always been lawful and in compliance with competition law, Expedia considers that this waiver is a positive step
towards facilitating the closure of the open investigations into such clauses on a harmonized pan-European basis.
It is not certain what the outcome will be of the competition authorities’ assessment of Expedia’s announcement.
Since Expedia’s waivers were implemented, the competition authorities in Denmark, United Kingdom, Greece,
Norway, Sweden, Poland and Ireland have announced either the closure of their investigation against Expedia or
a decision not to open an investigation against Expedia, in each case having had regard to the changes
implemented by Expedia. On November 6, 2015, the Swiss competition authority announced that it had issued a
final decision finding certain parity terms existing in previous versions of agreements between Swiss hotels and
each of Expedia, Booking.com and Hotel Reservation Service to be prohibited under Swiss law. The decision
explicitly notes that Expedia’s current contract terms with Swiss hotels are not subject to this prohibition. The
Swiss competition authority imposed no fines or other sanctions against Expedia and did not find an abuse of a
dominant market position by Expedia.
On July 9, 2015, the French National Assembly adopted Article 133 of the Loi Macron (“Article 133”) that
seeks to define the nature of the relationship between online reservation platforms and French hotels. Article 133
became effective on August 8, 2015. Expedia considers that Article 133 was drafted ambiguously and can be
interpreted in a way that violates both European Union and French legal principles. Therefore Expedia has
initiated a complaint with the European Commission relating to Article 133. However, following the effective
date, Expedia has been in contact with its hotel partners in France regarding the impact of Article 133.
NOTE 18 — Related Party Transactions
Mr. Diller, our Chairman of the Board of Directors and Senior Executive, through shares he owns beneficially
as well as those subject to an irrevocable proxy granted by Liberty Interactive Corporation (“Liberty”), controlled
approximately 54% of the combined voting power of the outstanding Expedia capital stock as of December 31,
2015. Mr. Diller effectively controls the outcome of all matters submitted to a vote or for the consent of our
stockholders (other than with respect to the election by the holders of common stock of 25% of the members of our
Board of Directors and matters as to which Delaware law requires a separate class vote). Upon Mr. Diller’s
permanent departure from Expedia, the irrevocable proxy would terminate and depending on the capitalization of
Expedia at such time, Liberty could effectively control the voting power of our capital stock.
F-47