Expedia Ordered to Pay $184 Million Settlement

A King County Superior Court judge ruled on May 28 that Expedia, the world's leading online travel booking site, must pay $184 million for repeatedly breaching its contractual obligations to consumers by charging service fees under false pretenses in millions of hotel transactions. The judgment is the largest in Washington state history for a consumer class action.

Filed in 2005, the suit claimed that the travel giant paid taxes based on the wholesale price, but collected taxes from consumers based the higher retail price, pocketing the difference. Further investigation revealed the there was also a 'service fee' to each transaction, purporting to cover the company's expenses incurred in servicing a reservation.

According to court documents, Expedia bundled the service-fee charges with taxes into a single line item, failing to disclose the separate amounts of each to consumers. Because Expedia only remits taxes based on the wholesale price -- which it never disclosed to consumers -- the taxes appear higher to consumers than they actually are, and Expedia is able to mask the considerable size of its service fees.

In its Terms of Use agreement, which governs every hotel transaction, Expedia promised that it would collect service fees only to "cover the costs" of servicing a given hotel reservation. The Court found that Expedia breached that promise by collecting service fees as pure profit.

Superior Court Judge Monica Benton ruled that Expedia collected a total of $184,470,452 in service fees, which she is ordering the company return to consumers who purchased hotel or travel packages including a hotel stay from Feb. 18, 2003 to Dec. 11, 2006.