Expedia 2015 Annual Report Download - page 44

duplicative assessment for Expedia and Hotels.com totaling $9.3 million and thus are overstated, and (iii) non-
commissioned travel agency services relating to hotel reservations and car rental for the tax year 2013 totaling
$34 million, which includes $5 million for Orbitz. Similar assessments also have been issued against other online
travel companies. These assessments are currently under review in tax court.
The Department of Taxation has issued final assessments for general excise taxes against the Expedia
companies, including Orbitz, dated December 23, 2015 for the time period 2000 to 2014 for hotel and car rental
revenue for “agency model” transactions, and hotel and car rental revenue for “merchant model” transactions for
2014. These assessments total $12 million, including tax, interest and penalties.
Non-Tax Litigation and Other Legal Proceedings
Derivative Litigation
In Re Orbitz Worldwide, Inc. Consolidated Stockholder Litigation, Case No. 10711-VCP (Court of
Chancery of the State of Delaware). On April 8, 2015, an amended class action complaint was brought against
Expedia, Inc. and Orbitz Worldwide, Inc. relating to the merger agreement signed by the parties. Plaintiffs assert
claims for breach of fiduciary duty by the Orbitz Board of Directors and claims against Expedia for aiding and
abetting in the Orbitz directors’ breach of their duties. Plaintiffs specifically claim that the Orbitz Board breached
their fiduciary duties by agreeing to an inadequate price for the transaction and unreasonable deal protection
devices. On May 20, 2015, Orbitz, Orbitz Board of Directors, and the plaintiffs entered into an agreement in
principle to settle the lawsuit.
Hotel Booking Practices Proceedings and Litigation
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 Statement of Objections alleged that Expedia and Booking.com entered into separate
agreements with IHG that restricted each online travel company’s ability to discount the price of IHG hotel
rooms. The parties proposed to address the OFT’s concerns by offering commitments, and 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. The commitments were intended to be binding on the parties through January 31, 2016. On April 2,
2014, Skyscanner Limited filed an appeal challenging the OFT’s January 31, 2014 decision to accept the parties’
commitments. On September 26, 2014, the United Kingdom’s Competition Appeal Tribunal (“CAT”) granted
Skyscanner Limited’s appeal. This judgment required 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 and subsequently announced that it is considering next steps in the investigation in
light of the CAT judgment and market developments, including developments relating to the investigations of
other European competition authorities described below. On September 16, 2015, the CMA announced that it has
closed its investigation without a finding of infringement on grounds of administrative priority and also that it is
not opening a distinct new case into parity provisions in contracts between hotels and online travel companies,
including Expedia.
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.
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