ICANN has been confronted with a new set of lawsuits invoking antitrust law.
One such lawsuit, from Youporn.com operator Manwin Licensing, targets the XXX domain. It claims that ICANN and ICM registry conspired to force it to pay too much for defensive registrations under .XXX and that ICM has monopolized the market for top level domains connoting pornography. The other lawsuit comes from name.space, an alternate root operator. It claims that ICANN’s new TLD program crushes its business model by appropriating TLD names that the company had already occupied and by keeping non-ICANN-approved TLDs out of the dominant root and thus segregated from the Internet as a whole.
Antitrust liability is a requirement of ICANN’s founding document. According to the 1998 Commerce Department White Paper laying out policy for what became ICANN,
The new corporation does not need any special grant of immunity from the antitrust laws so long as its policies and practices are reasonably based on, and no broader than necessary to promote the legitimate coordinating objectives of the new corporation. … antitrust law will provide accountability to and protection for the international Internet community. Legal challenges and lawsuits can be expected within the normal course of business for any enterprise and the new corporation [ICANN] should anticipate this reality.
On August 20, a District Court Judge refused to dismiss the antitrust-related pleadings of Youporn. A key premise of the Manwin case is that “there is no reasonable substitute for defensive registration in .XXX.” This is false. No one is required to register defensively in a new domain. The mere existence of a .XXX domain does not in itself attract significant traffic or inherently create problems for registrants in other domains. If such a site does divert traffic and mislead or confuse users, there are several ex post legal and procedural protections that can be invoked. Furthermore, it is likely that the need for defensive registration will diminish with the expansion of the TLD space, because with the massive expansion in the supply of names the intrinsic value of holding any given name will decline. In short, companies are not compelled to register defensively. That is a choice they make, a determination that the cost is worth the benefit.
The Manwin complaint also claims that there is an antitrust problem because there was no competitive process for the award of the .XXX registry contract. Not true; had Manwin or other adult content companies wanted to apply for a .XXX registry they could have done so under the 2004 round. As far as I know, ICM was the only applicant for that string. Had there been multiple applicants there would have been a comparative assessment by the ICANN board under their “beauty contest” approach at the time.
The complaint asserts that “ICM Chairman Stuart Lawley has announced that he expects to be able (and intends) to prevent the establishment of any other (potentially competing) adult-content TLDs, including through a contractual promise by ICANN not to approve such TLDs.” If that allegation proved to be true, it would indeed constitute a serious antitrust issue, especially if ICANN had made such a promise. However, there is no evidence of such a promise. There are in fact three applications for .sex, only one of which comes from ICM.
The complaint says that ICANN “conspired” with ICM to approve XXX; yet it also claims that ICM used “coercive tactics” to get it to approve XXX. These claims are obviously contradictory. In truth, ICANN received massive pressure – including from adult content providers such as Manwin – to kill the .xxx domain. It was apparent from 2005 – 2008 that ICANN did not want to approve the domain and only approved it due to an adverse ruling of its independent review tribunal and the threat of litigation from ICM.
The complaint implies that ICANN was a co-conspirator with ICM because of the financial remuneration it will receive from .xxx. But the financial remuneration ICANN will receive from the XXX domain is no different in structure or quantity from that which it receives from any other registry. So either the complainants must assert that ALL new TLDs from the 2004 round constitute an anti-competitive conspiracy, or else none of them do.
Complaint that “the contract imposes no price restrictions of any kind on ICM (despite such price restrictions in the contracts between ICANN and the registries for other TLDs which host adult-content as well as other websites). It also grants ICM a 10-year contract term which “shall be perpetually renewed, absent narrow exceptions…” But both of these contractual provisions are common to most of the other registries. Only a few older registries such as .com still operate under price caps. Presumptive renewal is a legitimate and justifiable policy that allows registry operators to realize long term benefits from creating quality service and a good reputation.
The absence of price caps per se is not an “anti-competitive and monopolistic provision”: deregulated registry pricing does not prevent competition from other registries. On the contrary, if ICM charges prices that are too high, new registrants will be less likely to register in their name space and there will be room for competitors to undercut their prices. ICANN refrained from imposing price caps on new registries because there are, in fact, several competitive alternatives to registering in the .xxx domain. Indeed, most of the complainants already have .com domains. Further, any attempts by xxx registrants to register and use names in a way that violates Manwin’s trademarks would be actionable under both ICANN’s UDRP and the federal ACPA law.