[governance] Appeals Court Revives the CFIT Anti-Trust Suit Against VeriSign

[Pranesh Prakash]

From:
<http://www.circleid.com/posts/print/20090605_appeals_court_revives_cfit_anti_trust_suit_against_verisign/>

Appeals Court Revives the CFIT Anti-Trust Suit Against VeriSign
Jun 05, 2009 4:19 PM PDT

By 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. 

-- 
Pranesh Prakash
Programme Manager
Centre for Internet and Society
W: http://cis-india.org | T: +91 80 40926283
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