A class action has been filed against IAC/Interactive, a company which acts as intermediary between suppliers and consumers, aggregating large blocks of consumer goods and services (primarily travel-related products such as hotel rooms and airline tickets) from suppliers and selling them to consumers over the Internet (NASDAQ: IACI) and certain of its officers and directors by stockholders who purchased the company’s common stock between March 19, 2003 and August 4, 2004. The action claims that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company’s securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.

Specifically, the complaint alleges that defendants' statements made in connection with the announcement of the acquisitions of Expedia.com, Hotels.com and LearningTree.com, were materially false and misleading because they did not disclose that:

• Certain of the Company's online customers were being double-billed for hotel rooms, leading to great customer dissatisfaction;
• Certain hotel chains were contesting the Company's slow payment for hotel room sales made on its Web site and were threatening to stop doing business with the Company;
• Certain of the Company's Web site customers were being charged rates exceeding the hotel's public prices, leading to further customer dissatisfaction;
• Certain IAC hotel customers were dissatisfied with the Company's practice of displaying a message on its Web sites that all of a particular hotel's rooms were sold out when the hotel was not actually sold out;
• The Company had previously been selling a large number of hotel rooms and airline seats through more than 24,000 affiliate Web sites, but since October 2002, many of these Web sites were either privately threatening and/or actually pursuing litigation against the Company, alleging among other things copyright infringement and predatory advertising;
• One substantial business partner of Hotels.com, Metroguide, had commenced a lawsuit against Hotels.com alleging violations of federal copyright law and unfair business practices;
• The Company was under-reporting its state and local sales tax expenses for some locations; and
• Certain hotels and airlines were decreasing the Company's allotment of rooms and seats because of the Company's bad business practices.

On August 4, 2004, the Company issued its Q2 2004 earnings release disclosing that its Q2 2004 net income fell 24% from the same quarter in 2003 and that it was cutting its forecast for full-year operating profits, admitting that it was being provided less airline seats and hotel rooms to sell. On this news, IAC’s stock dropped from $42.74 per share on July 7, 2003 to close at $22.80 per share on August 4, 2004.