Suit Filed Against ICANN, VeriSign Over .Com Complaint

The ICANN-VeriSign link has irritated some in the Web community -- and prompted House Small Business Committee Chmn. Manzullo (R-Ill.) to send NTIA Dir. Michael Gallagher a letter highlighting questions about openness and antitrust (WID Nov 28 p1). The contract would renew and extend VeriSign’s control of the .com registry for 2 years, at an additional cost to consumers of $1.5 billion over 7 years, CFIT said. A VeriSign spokesman called the figure “nutty.” He said he wasn’t sure how CFIT got that estimate.

The antitrust action aims to safeguard the status quo in DNS-related markets and prevent VeriSign from extending its supremacy over the .com and .net TLD registries, CFIT attorney Jesse Markham said. CFIT wants to stop the signing and enforcement of the ICANN-VeriSign contract, seeking to enjoin VeriSign’s “monopoly leveraging conduct,” the lawsuit said.

The group asked the court to require ICANN to adhere to its govt. mandate to maintain competition and fight bias in the domain market while allowing competing bids to run the .com registry. Until now, ICANN has succumbed to VeriSign’s “strong arm tactic,” Markham said. If the new pact takes effect, VeriSign effectively would rule .com permanently, Markham said.

The suit is simply an effort to hijack the ICANN- VeriSign settlement discussions and block a proposed new service that, independent of the deal, would help Internet users, a VeriSign spokesman said. He claimed CFIT is a cover for Canadian-based registrar Pool.com, which tried to sue ICANN and VeriSign 2 years ago with a similar complaint. CFIT’s board consists of Trammell & Co.’s Jason Eberstein, Pool.com CEO Tony Farrow, WADND’s Howard Neu and Jennifer Ross-Carriere at Momentous.ca.

At issue is VeriSign’s proposed Central Listing Service (CLS), widely supported by other registrars, the spokesman said. In 2003, Pool.com tried to take ICANN and VeriSign to court over CLS predecessor Wait Listing Service (WLS), which would have let consumers pre-order domains before they expire. The feud, eventually thrown out in court, also led to ICANN reform bills on Capitol Hill. By the time the dust settled, VeriSign had nixed WLS in favor of CLS, which would let registrars bid on domain names on their customers’ behalf.

CFIT’s only real goal is to get a temporary restraining order against new services and stop CLS from launching, he said. “Pool.com is once again trying to use the courts under the guise of ICANN reform to stop a proposed beneficial new service from coming to market,” the spokesman added.

Competition has rewarded the market: Bidding for .net last spring resulted in a winning contract for VeriSign but also led to 30% lower registration prices for the domain, Markham said. According to the lawsuit, the deal would erode the Internet community’s role in determining policy, lock in price hikes that would multiply the cost to consumers without economic justification and cut the traditional role of U.S. govt. oversight.

Under the new contract, ICANN could terminate VeriSign’s role only if a court or arbitrator found the firm in material and substantial breach of the agreement, Markham said. ICANN would have to “go to war with VeriSign even to decide not to renew,” he said. If ICANN fought and won, VeriSign would remain untouchable by simply fixing the problem, Markham said. ICANN has grumbled about VeriSign’s monopolistic tendencies but the group is “tired and broke” and doesn’t have “the money or the will” to fight anymore, he said.

CFIT also said it is alerting the Justice Dept. (DoJ) to the “significant anticompetitive issues” in the proposed .com agreement. Meanwhile, the group filed a preliminary complaint with the European Commission (EC) on similar grounds, Markham said. “It’s now up to the courts to intervene and prevent ICANN and VeriSign from eliminating competition in many markets related to Internet domain names,” he said.

Govt. interest in alleged antitrust issues posed by the ICANN-VeriSign settlement is broader than CFIT’s grievance, Markham told Washington Internet Daily. “I would be surprised if the Justice Dept. does not take a keen interest in this. It’s a pretty vital area and they have an entire section of the antitrust division devoted to network and technologies,” he said. A DoJ probe most likely would mean sweeping demands for investigations, witness depositions and a massive document review, he said.

Europe has no private suit option, so EC responsiveness to the dispute is crucial, he added. An EC inquiry would be “quite complicating” for ICANN and VeriSign. Merely answering EC subpoenas would be “a big deal for them,” Markham said.

Another suit was filed Mon. by the World Assn. of Domain Name Developers (WADND) in the same court. ICANN and VeriSign have engaged in conspiracy, monopolization, price fixing for .com and .net domain-name markets and other anticompetitive efforts, that suit said. The 2 are “on the verge of entering an unlawful agreement [that] gives VeriSign a permanent monopoly.” the 27-page filing said. “ICANN and VeriSign are trying to take advantage of the lack of government oversight to line their pockets at the expense of consumers,” said WADND attorney Patrick Cathcart.

The lawsuit will inevitably affect ICANN’s Vancouver meeting, where intense .com registry proposal discussions are expected to take place. VeriSign’s ability to speak about the settlement with ICANN is limited because negotiations continue. “We're listening to viewpoints from the community and hope the settlement is completed.”

When the agreement was announced last month, NTIA Dir. Michael Gallagher said he supported ICANN’s aim to seek public comment and was looking forward to reviewing the document after comments were received and considered. A spokesman for the agency said Gallagher wouldn’t elaborate on the issue, despite the 2 new lawsuits.

The Assn. for Competitive Technology (ACT) weighed in Tues., slamming CFIT’s antitrust lawsuit and criticizing the group for being sponsored by a company that’s interested in “preventing innovation and competition in the area of waitlists for expiring domain names.” ACT Pres. Jonathan Zuck said the lawsuit won’t help improve ICANN transparency and independence and said he hopes the judge will throw out the complaint. ACT is financially backed by Microsoft.

Meanwhile, 1&1 Internet said it doesn’t support the ICANN-VeriSign .com proposal. The draft agreement “practically assigns .com to VeriSign forever,” said 1&1 Domain Expert Eric Schaetzlein, who will present the registrar community’s concerns to ICANN in Vancouver. 1&1’s and the other registrars’ main concern is the effect that the potential 7% annual fee increases could have on global Web users, and the fact that VeriSign can implement the hikes without justification, the company said. Web hosts and registrars would be forced to pass on the increases to individual domain registrants, officials said. More than 30 registrars have signed a statement opposing the agreement currently under consideration and have asked ICANN’s board to review the VeriSign settlement proposals and hold public hearings.

1&1 shares CFIT and WADND’s .com concerns but will sue only if the draft proposal being considered is signed unchanged, Schaetzlein told us. “As we still believe in the ICANN process, we are trying to solve this issue ’the regular way,’ through discussions with the various ICANN constituencies and convincing the ICANN board that they have to change the contract for the benefit of the Internet community,” he said: “But as we have seen in the case with VeriSign, it seems to prove more effective to use lawsuits as a method of effecting change within ICANN.”