A superior court judge in Seattle ordered Expedia to pay consumers $184 million for hotel bookings made from Feb. 18, 2003 to Dec. 11, 2006.
Judge Monica Benton ruled that Expedia's collection of taxes and service fees violated the company's terms of use on its website. She granted the consumers' motion for summary judgment against Expedia, headquartered in Bellevue, Wash.
From February 2003 through December 2006, Expedia's terms of use stated that its service fees cover costs.
The plaintiffs successfully argued that the fees also include Expedia's mark-up of net hotel rates, while Expedia countered that covering costs could include a wide array of elements.
Benton ruled that the plaintiffs "correctly concluded that profits, not costs, are the subject matter of these service fees."
Expedia's terms and conditions no longer contain the disputed language. Instead, it states: "We retain our service fees as compensation in servicing your travel reservation."
Expedia will appeal the ruling.
"We believe that the court’s decision is wrong on the law and wrong on the facts," said Expedia spokeswoman Katie Deines. "Expedia.com charged its customers a service fee for certain transactions ... fully disclosing those fees to each customer before a booking was completed.
"We are confident that we have fulfilled all applicable obligations to our customers. Because we believe that the court's decision is inconsistent with both the facts and the law, we will vigorously pursue our rights on appeal."
The ruling, although subject to appeal, is a blow to Expedia and its merchant hotel model, in which Expedia acquires wholesale rates from hotels and marks them up.
The court has yet to rule whether Expedia violated the state's Consumer Protection Act by bundling "taxes and fees" without breaking them out on a line-item basis. This second part of the consumer class action is slated to go to trial in July, according to the plaintiff's law firm, Hagens, Berman, Sobol, Shapiro.
A spokeswoman for the Seattle law firm said that the $184 million judgment is the largest in Washington State for a consumer class action.