Appeals court puts VeriSign and ICANN back on the antitrust hook

One of the better side stories of yesterday's Congressional hearing on ICANN concerned Congressman Dingell's 5-minute intervention (see ~1:49:00 into the video) during witness questioning. In addition to raising the expected inquires into the expiration of the JPA, he also asked the witnesses their opinions concerning the 2006 ICANN-VeriSign negotiation of the .com contract.

When the witnesses were asked if the contract “suffered from a lack of transparency,” he got the expected answers. ICANN's CEO Paul Twomey, pointing out the contract was publicly available, said “no.” Ken Silva of VeriSign agreed. Go Daddy, VeriSign's largest customer, argued to the contrary. Yes, Christine Jones said, the contract was publicly available, but it was the secrecy-shrouded process that led up to it that was cause for concern, and that Go Daddy didn't agree with the outcome.

Apparently this concern is justified. Today, a 9th Circuit Appeals Court ruling indirectly supported Go Daddy's suspicions in its reversal of an earlier decision made in Plaintiff Coalition for ICANN Transparency (“CFIT”) vs. VeriSign. In the 2005 case, the CFIT, an organization composed of participants in the Internet domain name system, including website owners, filed a complaint in the Northern District Court against VeriSign, the operator of the “.com” and “.net” domain name registries.

CFIT's complaint alleged the defendant engaged in conspiracy in restraint of trade in connection with the terms of the .com and .net contracts’ pricing and renewal provisions. In essence, CFIT sought to show that the .com and .net domain name prices were artificially high and that the contract renewal provisions VeriSign had negotiated with ICANN wrongfully restrained competition. In addition, CFIT alleged that VeriSign’s conduct in obtaining the anti-competitive provisions constituted monopolization or attempted monopolization of the .com and .net registration markets.

Despite the seriousness of the allegations, the District Court eventually dismissed the action with prejudice. However, today's Appeals Court reversal could be characterized as an almost complete affirmation of CFITs original allegations:

1. The Court concluded that CFIT adequately alleged a Section 1 violation of the Sherman Anti-trust Act. According to the Court, “CFIT has adequately pled the existence of a conspiracy between VeriSign and ICANN, and that VeriSign had the intent to restrain trade when it entered into the .com contract.” “VeriSign and ICANN undertook concerted action to restrain trade by imposing prices higher than market rate and under conditions hostile to competition.”

2. Furthermore, the Court concluded that “CFIT has adequately alleged that VeriSign’s improper coercion of ICANN and attempts to control ICANN’s operations in its own favor violated Section 2 [of the Sherman Anti-trust Act].”

Obviously, this is bad news for VeriSign, and only slightly better news for ICANN. Time will tell if the allegations prove out. But the successful application of antitrust arguments to regulation of the domain name industry is good news for the Internet.

6 comments

  1. Anonymous

    Verisign and ICANN must be laughing all the way to their next golf outing with Jones Day. They LOVE to be on the hook. That makes them essential and relevant. Verisign will now be able to RAISE domain name prices because of their rising legal fees to defend themselves. It is all theatre.
    As for those new TLDs ? Ah yes, well, forget those.
    Verisign and ICANN are now distracted by some horrible lawsuits and will not have time to encourage any competition. If any new TLDs do slip
    thru the cracks, Verisign and ICANN will of course be natural partners and the registry contract will of course go to Verisign to maintain stability, etc.
    Also, the JPA has the same impact. If it continues
    ICANN will argue they have to spend their time
    making sure their Report Card with the U.S. DOC
    has all A+ scores. ICANN will not have time to
    manage new registries. If there is no JPA, then
    Verisign and Jones Day can help ICANN make up
    a range of excuses why there is no time to have
    more .COMpetition. A rebid of the .COM contract
    will never be part of the plan. There is no time for
    that. Verisign and ICANN are too busy playing
    golf and laughing all the way to the bank.
    The Canadians behind CFIT and .XXX would be
    better off getting their government to face off
    against the U.S. Government by deploying a
    duplicate collection of .COM servers. That would
    increase the reliability and stability of .COM.
    That would also show that .COM domain names
    could be hosted for about 10 cents per year.
    The Registrars do all of the heavy lifting and
    make very little money. Verisign helped ICANN
    develop their bylaws to ensure that outcome.
    ICANN is a division of Verisign. It is all a sham.

  2. Anonymous

    While Verisign and ICANN's lawyers are laughing all the way to the bank. The Vixie Clique continues
    to play Whack-a-Mole games with people. It must
    be nice pulling millions each year out of the
    non-profit scams while playing all day on lists.
    Start here – A simple question is asked
    http://ops.ietf.org/lists/namedroppers/namedroppers.2009/msg01065.html
    If we're worried about overloading the root servers, why not advocate
    more caches download the root zone out of band?
    ===========
    > because it goes stale, and gets deliberately amended, leading to chaos.
    there are plans to significantly change the dynamic on/in
    the root zone. designing a stratagy that presumes a fairly
    small, static root zone might be short sighted.
    =====
    On Fri, Jun 5, 2009 at 5:48 PM, Paul Vixie wrote:
    > does iana want the rootops to start pulling the root zone from that server?
    No. Open source software distributors have figured out how to
    efficiently mirror files much, much larger than the root zone. The
    root zone operators should follow their model.
    =====
    Well, I'm told IANA doesn't exist, so it would be difficult for it to want anything. I'm also told the root servers were independent and thus, even if IANA were to exist, the root servers operators would do what they thought best for the communities they believe they serve regardless of what anyone else wants.

  3. Anonymous

    Here come the NEW JPA Rules….
    TERM LIMITS ON ICANN STAFF JOBS
    Anyone that has been on the ICANN Staff for more than
    4 years had better be looking for a new .JOB. The U.S.
    Government is now going to be asking why so many
    ICANN staffers seem to be retired in place. ICANN .JOBS.
    will also go with new elected administrations in Washington
    and Sacramento. They will become part of the DOC, NIST
    and FCC patronage positions.
    NEW AMERICAN ICANN CEO WITH INTERNATIONAL ROOTS
    The Ex-Gov of CaleeForNeeAh Arnold Da Terminator is slated
    to become the new CEO of ICANN. He will be adding more
    Danish Pastry to the ICANN Staff.
    NEW ICANN BUDGET TO ATTRACT MORE DC OVERSIGHT
    According to Twomey, the U.S. Government wants the ICANN
    budget to double to about $200 million per year, to handle
    the Staff they want to appoint. Until the budget reaches one
    billion dollars, they will not be able to get the Senate's
    attention. Order more Danish Pastry.
    IANA TO MOVE TO THE FCC FOR PROPER SPECTRUM MANAGEMENT
    Many /8s remain to be allocated. The U.S. FCC will be helping
    to auction that SPECTRUM. SPECTRUM is SPECTRUM. People
    may finally see what a /8 is really worth. The telcos and
    cablecos get their /8s directly from ICANN, the FCC's contractor. The swamp will be drained. RIPE.NET will no
    longer be the ASO mailing list manager at ICANN. The FCC
    will manage the run on the /8s which will be /12s. With /12s
    the IANA pie will be cut into more pieces. Canada may get
    a slice of the pie AFTER Cuba, Iran, and North Korea.

  4. Anonymous

    MORE NEW JPA RULES
    LIST ALL ICANN STAFFER SALARIES AND STATUS
    The ICANN CEO is not even an employee. He is
    paid via his off-shore tax haven. President Obama
    pledged to shut those down for Americans. Ah,
    the ICANN CEO is not even an American citizen.
    How many other ICANN Staffers are contractors ?
    Local school systems in the U.S. post all teacher's salaries. Since ICANN exists to serve the U.S.
    Government, why doesn't it follow the same rules?
    ALL FOIA REQUESTS JUST LIKE THE U.S. GOVERNMENT
    Why can't people do FOIA requests to obtain any
    ICANN documents and emails ?
    FOIA – Freedom Of Information Act
    DOCUMENT ON-LINE WHAT EVERY ICANN STAFFER DOES ALL DAY
    What do all of the ICANN staffers do when “working at home” ?
    Are they really at the local health club ?
    Where are the time-records ?
    HAVE AN ON-LINE ICANN ORGANIZATION CHART
    Who reports to who at ICANN ?
    What do all those people do ? [Very Little ?]
    LIST CONFLICTS OF INTEREST OF ICANN BOARD MEMBERS
    As an example, Steve Crocker's company is
    contracted by the U.S. Government to deploy
    DNSSEC. Does that influence ICANN to do that ?
    ICANN Claims to be Open and Transparent but
    ICANN itself is not that way, only the groupies
    that surround ICANN. The people in the ICANN
    clubs and cliques are not open and transparent.

  5. Anonymous

    http://domainnamewire.com/2009/06/07/dennis-carlton-agrees-with-dennis-carlton-about-new-domain-names/
    Dennis Carlton Agrees with Dennis Carlton About New Domain Names
    Sunday, June 7th, 2009
    ICANN releases two new papers from Professor Dennis Carlton regarding the economic consequences of releasing new top level domain names.
    Surprise! When you pay the same person to evaluate critical comments about his original work, he decides that his original work was correct.
    That’s what happened when Internet Corporation for Assigned Names and Numbers (ICANN) paid Professor Dennis Carlton to evaluate (defend) critiques of his original papers. ICANN just released two new papers by Carlton that refute critiques of his original reports.

  6. Anonymous

    JULY 2010 – Another YEAR wasted?
    The Canadians behind CFIT and .XXX would be
    better off getting their government to face off
    against the U.S. Government by deploying a
    duplicate collection of .COM servers. That would
    increase the reliability and stability of .COM.
    The Canadians behind CFIT and .XXX would be
    better off getting their government to face off
    against the U.S. Government by deploying a
    duplicate collection of .COM servers. That would
    increase the reliability and stability of .COM.