ICANN, VeriSign Slapped With Antitrust Lawsuits

NEW YORK – Companies that sell and broker Internet domain names have filed two lawsuits against VeriSign Inc. and its oversight agency, accusing them of price-fixing and other anti-competitive practices.

The federal antitrust lawsuits are primarily over a proposed extension to a contract VeriSign has with the Internet Corporation for Assigned Names and Numbers to run the main database for the ".com" suffix, the most popular online.

That renewal, in turn, was part of an accord reached in a longstanding antitrust dispute between VeriSign and ICANN, the Internet's quasi-governmental oversight agency.

The lawsuits were filed Monday in U.S. District Court in San Jose, Calif., as ICANN opened weeklong meetings in Vancouver, British Columbia, at which the contract and settlement proposals were to be major topics of discussion.

John Jeffrey, ICANN's general counsel, called the lawsuits an attempt by special interests to hijack public debate.

"It's unfortunate that we're responding to a lawsuit in the middle of a conference instead of being able to engage actively in discussions" with other stakeholders, Jeffrey said Tuesday.

Even before the lawsuits were filed, many domain name holders and sellers had expressed concerns about giving even more influence to a company that already exerts significant control over traffic on the Internet.

Web browsers and e-mail programs depend on directories that VeriSign runs to find other computers.

Under the proposed deal, VeriSign could raise prices for ".com" names by 7 percent a year beginning in 2007, from the current $6 per name (what users actually pay may differ because of resellers' subsidies or fees).

With more than 40 million ".com" names in use, such an increase could generate $17 million for VeriSign in the first year.

The deal also would increase a separate per-name fee, doubling to 50 cents by July 2007, to fund ICANN's operations, allowing the agency "to share in the monopoly profit," alleges one lawsuit, filed by a group that calls itself the Coalition for ICANN Transparency.

VeriSign would get first rights to a renewal in 2012, thwarting any hopes competitors had for open bidding.

The second lawsuit, from the World Association of Domain Name Developers, accuses VeriSign and ICANN of conspiring to fix prices by essentially giving VeriSign a permanent monopoly over ".com."

Both groups complained that VeriSign could more easily introduce new services that, because of its vast influence already over the Domain Name System, would put some of their members out of business. The ICANN-VeriSign deal, reached in late October, calls for streamlining the review process for new services.

In particular, the plaintiffs oppose a proposal to change how domain names are released back into the pool if they are not renewed. Currently, companies like Pool.com Inc. and Moniker Online Services LLC offer "back order" services that, for a fee, constantly check for expired domain names and try to grab them for customers. VeriSign now wants to create an auctioning system that gives it 10 percent of proceeds.

Pool.com and its parent, Momentous.ca Corp., are the primary entities behind the Coalition For ICANN Transparency, while Moniker is active with the other group, which includes Internet marketing companies. Howard Neu, a lawyer who specializes in domain names, sits on both boards.

In a statement, VeriSign spokesman Tom Galvin accused Pool.com of "trying to use the courts, under the guise of ICANN reform, to stop a proposed beneficial new service." He said he could not speak further on the settlement because of the litigation.

The lawsuits do not seek monetary damages beyond lawyers' fees but ask the court to declare the proposed settlement illegal under antitrust laws.

The ICANN board is not likely to reach a final decision on the settlement when it meets Sunday. Rather, ICANN has set up forums for public comment this week.

If approved, the settlement and new contract terms would end a dispute between ICANN and VeriSign, primarily over a controversial search service the company created in late 2003 for guiding Internet users who mistype Web addresses.

After VeriSign launched the service, called Site Finder, for ".com" and ".net" names, critics complained that it interfered with spam filters and other key Internet tools while giving VeriSign an unfair competitive advantage in search.

Under pressure from ICANN, VeriSign agreed to suspend Site Finder shortly after it was introduced. The company sued ICANN months later, arguing such actions impeded VeriSign's efforts to offer new, moneymaking services. ICANN later countersued.