Kayak is engaged in a contract dispute with one of its largest customers, Orbitz Worldwide.
Orbitz brought the matter to an arbitration panel in New York in August, alleging that Kayak violated the companies' 2009 promotion agreement as it relates to exclusivity provisions in the way Kayak displays core query results.
Kayak, which disclosed the dispute in the registration statement it filed in connection with its proposed IPO, says Orbitz began the arbitration proceedings after Kayak notified Orbitz that it allegedly breached their agreement "for failing to accurately report and account for Net Revenues under the agreement."
Orbitz contends that Kayak owes it $2.5 million in overpayments over several years, and Orbitz allegedly has failed to document the overpayments, Kayak states.
Kayak states it expects arbitrators to decide the matter by the end of January 2011.
Neither side has publicly detailed which exclusivity provisions are in question.
There has been speculation that the dispute may involve the way Kayak displays domestic airline fares by online travel agencies. Take a look at a typical display:
Notice that in the above display, among the online travel agencies only airfares from Orbitz and sister brand CheapTickets are displayed. For Expedia, the consumer must "click to see rates."
One Kayak competitor posits that Orbitz may have expected to be the only OTA in these displays while Kayak may believe that Expedia's "click to see rates" feature maintains Orbitz exclusivity because only Orbitz and CheapTickets pricing is displayed.
Kayak only states that it "provides exclusivity to OWW relating to the display of certain core query results" in exchange for full access to Orbitz travel information and transaction payments for Kayak leads to OWW websites.
The Kayak-Orbitz agreement runs through Dec. 31, 2013.
For the first nine months of 2010, Orbitz provided Kayak with 41.4% of Kayak's distribution revenue and 18.8% of total revenue.
Expedia and its sister brands, including Hotwire and hotels.com, have become even larger Kayak customers than Orbitz, accounting for 24.9% of Kayak's total revenue through the first three quarters of 2010.
Kayak, which is fighting Google on its proposed acquisition of ITA Software, is currently negotiating a new contract with Google. The search engine giant, Google, provides Kayak with sponsored link advertisements and was responsible for 8.1% of Kayak's revenue for the first nine months of 2010. The existing contract expires at the end of 2010.
In other news from Kayak's registration statement:
- Kayak spent $28.9 million through the first nine months of 2010 on TV and billboard brand advertising. Kayak began this offline brand advertising in late 2009; the $28.9 million includes only the monies that Kayak spent on brand advertising in the first three quarters of 2010. [If only HomeAway were getting ready for an IPO, then perhaps it would have to detail how much it spent on Super Bowl advertising early this year.]
- A Feb. 13, 2011, trial date has been set in a patent infringement complaint against Kayak brought by Parallel Networks in the U.S. District Court for the Eastern District of Texas. Kayak says the dispute revolves around a Parallel Networks patent covering a "Method And Apparatus for Client-Server Communication Using a Limited Capability Client Over A Low-Speed Communication Link (U.S. Patent No. 6,446,111 B1." Kayak denies the allegations and states it is not infringing on the patent.