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Contention Is Best Settled by Those Who Know the Players & Industry

Michael Berkens

Several posts have been made on the topic of contention resolution and private auctions around the new gTLD program over the last few weeks on CircleID. Many of the Applicants we spoke to thought it was appropriate to weigh in from the RightoftheDot.com perspective.

We want you to know that the RightOfTheDot auction offering for contention resolution for new gTLD's, unlike other offerings, remains unchanged from when it was first announced to the Domain Industry.

We think it should be up to the applicants, NOT the auction provider, to decide when and in what format the applicants in a particular contenting string want to settle their contention, whether it be by Private Auction or Mediation.

After speaking with almost every applicant who is in a string contention set, the vast majority of applicants do NOT believe that a "one solution fits all" model will work.

Applicants are from all over the world, some are the largest public companies on earth, while others just placed one single application in for a string. Some have been working for many years on their plans, others got a late start in the process. The overwhelming consensus seems to be that having choice on the timing, type of auction, funding and payment options, deposit amounts, percentages, etc., should be handled on a contention set by set basis.

So our offering remains unchanged.

We will hold the auction whenever all the applicants for a particular string are ready.

While the majority of applicants we spoke to prefers a single sealed bid auction where the highest bidder pays the second highest bid amount, we are happy to hold a traditional live/online, paddle up in the air auction or a ascending clock "ICANN" style auction. We can even customize an auction around a contending set's needs. We have over 15 years of domain industry auction experience, we have been properly and legally licensed, and can conduct any of these types of auctions when the applicants are ready.

After conducting our own research, testing our own auction theory over the past 15 years, both as a licensed auction services provider as well as an auction participant, we still believe that the single sealed bid auction option will produce the fairest results.

The opportunity for gaming the the system and artificially increasing the bid would be reduced.

Single sealed bid auctions backed by escrow deposits increase the risks for those who are in the auction for the sole purpose of profiting from winning bid.

Since no other bidders sees or knows what amount anyone else has bid, game players can't take the chance of placing bids just to raise the price paid by the winner.

The winner paying the 2nd highest bid in a sealed bid auction we believe will result in the winner paying less compared to other auction types.

We also believe that the fairest way of distributing the funds of the winning bidder is to do so proportionate to their bid amount compared to the winning bid rather than in equal amounts.

For example if the highest bid received in sealed bid auction is $10mm, the second highest bid was $5mm and the third was $1, if the proceeds were spilt equally then the applicant bidding $5M would get the same amount as the company bidding $1.

The consensus among applicants is that proportionate funds distribution based on bid amount to the highest bid is the fairer way to handle this scenario.

However, if the participants to a particular contention set agree to divide the winning bidders funds evenly, we will because we believe it should be up to the applicants in each of the contention set to decide, not the auction provider.

Transparent

The majority applicants we have spoken to feel that each contending set auction should stand on its own and not be tied to other contending string auctions.

Likewise, Applicants feel the timing of an auction should not depend on when other parties in other contention sets want to hold their auction, whether it be an applicant in contention with multiple strings or one other string.

Again, RightoftheDot is ready when you are ready.

Simple

The vast majority of applicants told us that the fee's that a participant in one auction pays should not be dependent on the results of other auctions they are not a participant in nor do they want to wait until all auctions are resolved to determine auction fee amounts. Applicants told us by in large they don't want to take the equivalent of a college course to learn how to participate in an auction.

Fair

Our fees are 4% and based on each individual auction held rather than all auctions having to be completed together.

The fees are deducted from the non winning bidders before funds are distributed.

We assume all applicants are "in it to win it" and everyone is planning to win.

The winner does not pay the auction fees.

The auction fees are not added to the winning bidder but comes out of the non-winning bidders share.

There is no floor or minimum to our fees.

If the auction produces a $10,000 winning bid, ROTD will receive $400

If the auction results in a $100,000 winning bid ROTD will receive $4,000.

...and yes if the auction results in a $1,000,000 winning bid, ROTD will receive $40,000.

Secure

Our fees include escrow which will be provided by Escrow.com the largest online Escrow company in the world.

Escrow.com is a fully licensed and insured escrow provider and is the domain industry leader in escrow transactions worldwide. Beyond the security of having your funds held by a company that has processing over $1 Billion dollars in transactions, Escrow.com gives us the ability to conduct auctions with participants from anywhere around the world (including China and Russia) and in any currency. We believe it is very important for applicants to know and trust the company holding millions, tens or millions or more of their money in escrow.

Unfortunately we have all seen over the last few years that not every brokerage company, lawyer or entity is trustworthy or properly licensed when it comes to holding money of this amount.

All of our document preparation and other legal fees from our side are also included in our 4% fee.

There are no hidden fees or additional charges.

Unlike others who have expressed a different opinion, we think that when someone is trying to bring several competing parties together to resolve conflict, it is important that the intermediary has a good and trusted personal and/or business relationship with those they are trying to bring together. We have been told by most applicants that this is a huge advantage as contention cannot be resolved unless everyone in the contention set participates.

In the past several months, instead of holding seminars trying to explain auction theories and methods that are so complicated that practice auctions were needed, we have spent our time meeting and speaking with almost every applicant and/or their representative(s), including those we have known for years and those we have never met in the past. We have asked the right questions and have been provided input from each before we mapped out our contention resolution plans.

It has become clear that a "one solution to fit all" approach is highly unlikely to bring together enough parties to resolve a meaningful amount of contention sets.

In addition, well capitalized companies have expressed a desire not to fund their competitors and many have expressed they would prefer an auction where funds go to a third party charity to better advance third world and poor countries, Internet access and usage, or the Internet in general.

Our model also supports this outcome.

Most applicants still do not like the auction provider picking a fixed set of dates into which all auctions must fall.

Our model also supports this outcome.

Most applicants do not like having to conduct an auction with only one choice of auction type, where the benefit of that one type provides an greater advantage to parties with a high number of applications.

Our model also supports this outcome.

Most applicants do not like having to conduct an online auction dependent on reliability of auction software, internet connectivity, and access. A single sealed bid auction eliminates the reliance of software and internet connectivity as bids are delivered by courier or certified mail with a scheduled bid opening date, in a secure location under video surveillance and recorded for accuracy and supervised by one of the largest law firms in the United States.

Our model supports this outcome.

Most applicants like the flexibility in when, where and to whom winning funds would be distributed.

Our model supports this outcome.

The academic auction theory described previously continues to focus on known well-established commodities being auctioned such as electricity, gas, oil, coal, diamonds, etc.. We all know that new TLDs are a new and unknown commodities/assets and the value of the same TLD may vary drastically between applicants depending on how each applicant plans operating it. These auctions are going to be between well known and unknown organizations, entrepreneurs, along with those who have never been in the domain business before. Everyone has a different value and opinion of what a new string will be worth.

This is the exact reason applicants have told us they want to have a few choices around type of auction and options on flexibility, timing and funding of the auction.

If one thing has been consistent through this long and exhausting new gTLD process, there will continue to be delays and constant change, as demonstrated just days ago via ICANN's deadline for determining what strings are in what contention sets.

Setting hard dates and rigid auction rules is a mistake and shows a lack of knowledge and experience this industry.

If you don't understand the industry, you're going to make mistakes, your going to keep changing timeframes, rules, fees, etc. Auction theory that has worked in other industries where the commodity has known value and the participants are well known international companies, may not work in this particular environment and industry.

We believe and have been told that the RightOfTheDot.com contention resolution service would be a better choice. One applicant should not be dictating who to use and when to resolve contention. Applicants with multiple string should in good faith, be willing to participate and resolve contention using the auction provider that the majority of the applicants in a contention set choose. Those threatening last resort ICANN auctions demonstrate a lack of willingness to resolve contention when ICANN is allowing plenty of time to resolve contention among applicants in their time lines.

At RightoftheDot.com we will hold auctions when and how those in each contention set want to.

We continue to move forward and planning on helping you resolve your conflicts prior to or in a private auction and are available to discuss any of these issues.

By Michael Berkens, President of Worldwide Media, Inc.. Michael H. Berkens is a member of the Florida Bar, President of Worldwide Media, Inc. which owns over 75,000 domain name, a Director in RightoftheDot.com and writes a blog at TheDomains.com.

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Comments

Losers can Still Win Norman Payne  –  Jan 23, 2013 1:09 PM PDT

Appreciate the different approach you have taken as to flexibility for when the auctions take place and how they are conducted.  I’m sure that will be appreciated by those who chose to go the private auction route but I still don’t understand why anyone who is in contention with a portfolio player would even dream of this.

Professor Cramton has avoided responding to what is the biggest disincentive for even the smallest applicants with multiple TLD applications.  How do you rationalize an auction where the “loser”, who also happens to be a competitor, actually adds to their cash pile as a result of loosing?

In your case – would you participate in a domain name auction where parts of the proceeds are refunded to one of your fellow domain investors if you knew they were going to use that money against you in the next auction?

The example I previously pointed out is this:  I have one application and happen to be in contention with Minds + Machines or Uniregistry or some other portfolio applicant.  Why would I want them to become enriched from participating in a few prior auctions and growing their cash pile while “losing” these auctions?  That doesn’t help me. 

How does TLDH explain to shareholders that they lost at auction for .gay because the money they paid to win .lawyer from Donuts was used by Donuts out bid them on .gay?
It just doesn’t make any business sense unless you are not really trying to win any of these and want to recoup some small percentage of your investment to date.

Norman - you raise a valid point Monte Cahn  –  Jan 25, 2013 10:45 AM PDT

Norman - you raise a valid point and one that has been debated over and over since this process started.  A better question may be - is it better to get paid as a non-winning participant rather than have the money go ICANN where it is unknown of when they would even hold last resort auctions or where the funds would go from the auctions that end up there? 

Remember that the RightOfTheDot.com option also allows the winning funds to go to a third party, charity, or be paid to an organization other than the non-winning bidders of the auction.  Many of the participants in this process actually like that option.  Either way, RightOfTheDot believes it should be up to the individual contention set participants, not the Auction provider, to determine where the funds should go, when, and when the auctions should be held and what auction type would work best for that contention set.  That's the big differences between the two providers offering the service, along with who has the most experience in the industry and who is more likely to bring folks together to resolve either through mediation or private auction.

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