Orbitz 2011 Annual Report Download - page 23

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We and other providers of travel in the online travel industry are currently subject to various lawsuits related to hotel
occupancy tax in numerous jurisdictions in the United States, and other jurisdictions may be considering similar lawsuits. An
adverse ruling in the existing hotel occupancy tax cases could require us to pay tax retroactively and prospectively, and possibly
penalties, interest and/or fees. We have also been contacted by several municipalities or other taxing bodies concerning our
possible obligation with respect to local hotel occupancy or related taxes, and certain municipalities have begun audit
proceedings and some have issued assessments against us. If we are found to be subject to the hotel occupancy tax ordinance
by a taxing authority and we appeal the decision in court, certain jurisdictions may attempt to require us to provide financial
security or pay the assessment to the municipality in order to challenge the tax assessment in court. The proliferation of new
hotel occupancy tax cases or audit proceedings could result in substantial additional defense costs. These events could also
adversely impact our business and financial performance. See Item 3, “Legal Proceedings.”
Our businesses are highly regulated, and any failure to comply with applicable regulations or any changes in those
regulations could adversely affect us.
We operate in a highly regulated industry both in the United States and internationally. Our business, financial condition
and results of operations could be adversely affected by unfavorable changes in or the enactment of new laws, rules and
regulations applicable to us, which could decrease demand for our products and services, increase costs or subject us to
additional liabilities. Moreover, regulatory authorities have relatively broad discretion to grant, renew and revoke licenses and
approvals and to implement regulations. Accordingly, these regulatory authorities could prevent or temporarily suspend us from
carrying on some or all of our activities or otherwise penalize us if our practices were found not to comply with the then current
regulatory or licensing requirements or any interpretation of such requirements by the regulatory authority. Our failure to
comply with any of these requirements or interpretations could have a material adverse effect on our operations. In addition, the
various regulatory regimes to which we are subject may conflict so that compliance with the regulatory requirements in one
jurisdiction may create regulatory issues in another.
Our business is subject to laws and regulations relating to our revenue generating and marketing activities, including
those prohibiting unfair and deceptive advertising or practices. Our travel services are subject to regulation and laws governing
the offer of travel products and services, including laws requiring us to register as a “seller of travel” in various jurisdictions
and to comply with certain disclosure requirements. As an OTC that offers customers the ability to book air travel in the United
States, we are also subject to regulation by the Department of Transportation, which has authority to enforce economic
regulations and may assess civil penalties or challenge our operating authority.
Our failure to comply with these laws and regulations may subject us to fines, penalties and potential criminal violations.
Any changes to these laws or regulations or any new laws or regulations may make it more difficult for us to operate our
businesses and may have a material adverse effect on our operations.
We are exposed to risks associated with online commerce security and credit card fraud.
The secure transmission of confidential information over the Internet is essential in maintaining customer and supplier
confidence in our services. Substantial or ongoing security breaches, whether instigated internally or externally on our system
or other Internet-based systems, could significantly harm our business. We currently require customers to guarantee their
transactions with their credit cards online. We rely on licensed encryption and authentication technology to effect secure
transmission of confidential customer information, including credit card numbers. It is possible that advances in computer
capabilities, new discoveries or other developments could result in a compromise or breach of the technology that we use to
protect customer transaction data.
We incur substantial expense to protect against and remedy security breaches and their consequences. However, our
security measures may not prevent security breaches. We may be unsuccessful in implementing our remediation plan to address
these potential exposures. A party (whether internal, external, an affiliate or unrelated third party) that is able to circumvent our
security systems could steal proprietary information or cause significant interruptions in our operations. Security breaches
could damage our reputation and expose us to a risk of loss or litigation and possible liability. Security breaches could also
cause customers and potential customers to lose confidence in our security, which would have a negative effect on the demand
for our products and services.
Moreover, public perception concerning security and privacy on the Internet could adversely affect customers'
willingness to use our websites. A publicized breach of security, even if it only affects other companies conducting business
over the Internet, could inhibit the growth of the Internet and, therefore, our services as a means of conducting commercial
transactions.