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Appeals Court Revives the CFIT Anti-Trust Suit Against VeriSign

John Levine

Back in 2005 an organization called the Coalition for Internet Transparency (CFIT) burst upon the scene at the Vancouver ICANN meeting, and filed an anti-trust suit against VeriSign for their monopoly control of the .COM registry and of the market in expiring .COM domains. They didn't do very well in the trial court, which granted Verisign's motion to dismiss the case. But yesterday the Ninth Circuit reversed the trial court and put the suit back on track.

In the decision [PDF], a three judge panel told the district court that the suit has enough basis to proceed. CFIT claims that VeriSign engaged in a variety of predatory conduct including financial pressure, astroturf lobbying, and vexatious lawsuits to get ICANN to renew the .COM agreement on very favorable terms, including what is in practice eternal renewal of the contract with annual price increases. As part of that process, VeriSign settled the suit, paid ICANN several million dollars, and promised never to lobby against ICANN again.

In the 20 page decision, the appeals court basically said that CFIT's claims about the .COM renewal, the domain market, and the expiring domain market were plausible, crediting a brief from the Internet Commerce Association for explaining the expiring domain market to them. They note that an earlier case from 2001 that didn't find a separate market in expiring domains appears no longer relevant, since the domain market has evolved a lot since then.

CFIT made similar claims about the .NET market, which the appeals court found less persuasive, so they instructed the trial court to look at them again and decide whether they should be dismissed or continue. But the case with respect to .COM definitely is going ahead.

This suit could have a huge effect on the domain market, since there were credible bidders who said they could run the .COM registry for $3 per name, under half of what VeriSign charges. It is also a huge embarassment for ICANN, since it shows them to be inept, corrupt, or both when managing the .COM domain which, due to its dominance, is the most important thing they do. In the original version of the suit ICANN was a defendant, but they were dropped a few years ago so now they're just an uncomfortable observer.

Perversely, if CFIT gets its way, ICANN could come out ahead. They get a fixed 20 cents per domain, unrelated to the $6.42 that VeriSign currently charges. If the price were to drop to $3, ICANN would still get their 20 cents, and presumably if the price were a lot lower, there'd be a lot more registrations.

CFIT's attorney is Bret Fausett, who's been an active ICANN observer just about since the beginning, and gets great credit for this surprising reversal. CFIT themselves, despite their name, is about as opaque an organization as there is, having a broken web site and no other public presence I can find. A 2005 article in The Register by Kieren McCarthy (back when he was a journalist) claims it's funded by Rob Hall, founder of momentous.ca/pool.com, a large registrar that does a lot of business with domain speculators and provides a popular domain sniping service to grab expiring domains. Although I am not a great fan of the speculators, I'm no fan of VeriSign either, and I look forward to the progress of this suit, not the least for the interesting documents that are likely to appear in the discovery stage.

By John Levine, Author, Consultant & Speaker. More blog posts from John Levine can also be read here.

Related topics: Domain Names, Registry Services, ICANN, Internet Governance, Law, Top-Level Domains

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Comments

Conspiricy is not a dance done alone Karl Auerbach  –  Jun 06, 2009 1:47 PM PDT

I read the decision.  A significant part of it is based on section 1 of the Sherman Act which requires a conspiracy or combination.  The decision said that the case can go forward at the trial level to find whether Verisign is part of such a conspiracy or combination.

Conspiracy or combination is not something that one can do alone; it takes two (or more).  The obvious elephant in the room is the identity of the other party - ICANN.

One has to wonder how much longer ICANN can avoid facing this question squarely and forcefully asked in a legal forum.  To date that question has only been an ancillary and indirect issue in various cases.

And to date few have wanted to risk asking that question as long as the hand of the Department of Commerce is resting on ICANN's shoulder creating a threshold (and expensive) legal question whether ICANN is an instrumentality of the US Government or not.  But if ICANN is successful in its demands for release from the agreements it has with the US government then that threshold question vanishes.  With the disappearance of that initial hurdle it would not be surprising to see the appearance of anti-trust/monopoly actions against ICANN in the US and in other countries, particularly in Europe which seems to have a much stronger anti-monopoly stance than does the US.

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