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Letter From IAC/InterActiveCorp to The New York Times

Sunday, August 10, 2003 - 19:39

To the Editor:

It is unfortunate that newspapers - unlike public companies - appear not to be bound by the material misstatement and omission requirements of the federal securities laws. Gretchen Morgenson's two articles regarding IAC/InterActiveCorp (Money & Business Section, August 10, 2003) contain numerous inaccuracies, as well as some apparent confusion regarding my statements to her in a conversation we had on August 6, 2003. In a world where markets react to headlines in newspapers, reporters need to be more vigilant to ensure they print accurate rather than misleading information. This letter will address only a few of the glaring inaccuracies in Ms. Morgenson's articles, as we do not believe that your newspaper is the appropriate forum for engaging in a point-by-point dialogue about our business. However, we do intend to correct the record on certain of the main issues raised...thus by way of example only:

- We object to the entire premise of the articles to the extent they question the sufficiency of IAC/InterActiveCorp's public disclosures. IAC has been a leader on disclosure. We publicly release our budget. We were one of the first companies to stop providing quarterly "guidance." We are a prolific filer of information under Regulation FD to ensure that our shareholders have all up-to-date information that is important and relevant to them. Not many companies include their Principles of Financial Reporting so that investors can see with precision a detailed explanation for each of our actions. It is irresponsible to present a one-sided, ill-informed article that does not at a minimum note the company's consistent policy of open disclosure. We are also mystified by the characterization of our use of pro formas as "spin." As reflected in our various public documents, we use pro formas only to clarify and to add information - and we have done so even when their use makes our results look less favorable.

- The main article states that some government authorities are considering whether and Expedia are required to collect and remit room occupancy taxes on the amount of the customers' payment that is retained by and Expedia. Unfortunately, the article then recklessly jumps to the conclusion that if such occupancy taxes were found to be owed on all of the companies' revenue, from all jurisdictions, the companies' liability could be substantial. But while a limited number of jurisdictions have raised this issue (and the companies are engaged in ongoing dialogue with those jurisdictions), there is simply no basis for the supposition that the companies will face liability in all jurisdictions. The applicable tax provisions vary among the jurisdictions, and many of the jurisdictions, including certain high-revenue states, limit the obligation to collect occupancy taxes to businesses that are hotel "operators" (or similar language), a category that we do not believe includes Expedia and While statutes in some jurisdictions do not specifically limit occupancy tax collection responsibilities to hotel operators, the companies believe they have sound additional arguments as to why they are not required to collect and remit occupancy taxes in those jurisdictions (the companies do not presently collect or remit taxes on the portion of the customer payment that they retain). We are engaged in what we believe are productive discussions with the tax authorities in various jurisdictions to resolve this issue. The company has disclosed this issue in its prior public filings and has taken appropriate reserves (less than $10 million) in accordance with applicable accounting rules.

- The second article suggests that I received a 1.5% interest in Vivendi Universal Entertainment (VUE) in exchange for agreeing to vote in favor of the VUE transaction. That is mistaken. I received my stake in VUE in exchange for various personal rights that I gave up, including entering into a non-compete agreement and a standstill agreement, and my agreement to serve as Chairman and CEO of VUE. It had nothing to do with any agreement to vote in favor of the transaction. To the contrary, my vote not only was not required under Delaware law, it was not even permitted, as Delaware law required the vote of 2/3 of the disinterested shareholders. That public vote was obtained, and overwhelmingly so - more than 90% of the disinterested shareholders voted in favor of the transaction.

- The article also states that Institutional Shareholder Services recommended that shareholders withhold their votes for three directors because of the company's supposed "failure to maintain an independent audit committee." Again, that statement is mistaken. In the ISS report referred to, ISS actually "commend(ed) the company for its high degree of board independence." And, in fact, IAC does maintain an independent audit committee, consisting of Donald Keough, the non-executive Chairman of Allen & Company and former President, COO and Director of Coca-Cola Corp., General Norman Schwarzkopf, and Alan Spoon, a managing general partner at Polaris Venture Partners. Contrary to Ms. Morgenson's suggestion, Mr. Keough meets every regulatory requirement for director independence and audit committee membership. ISS has never contended otherwise, as to Mr. Keough or the other members of the audit committee. ISS, despite its general praise of IAC's corporate governance, did recommend that shareholders withhold their votes because InterActiveCorp did not have a nominating committee, something it is not required to have under Nasdaq rules because it is a controlled company.

Our public disclosures have, and will continue to, accurately describe material matters relating to the company. We would hope that your reporters would do the same.

Barry Diller Chairman and CEO IAC/InterActiveCorp NASDAQ: IACI

CONTACT: IAC Corporate Communications Deborah Roth, 212-314-7254 Investor Relations Roger Clark/Lauren Rosenfield, 212-314-7400.

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