SAN FRANCISCO (CN) – A coalition of Web site owners successfully used 19th century antitrust law to accuse VeriSign of monopolizing the .com and .net registration system, “so essential to the operation of our sophisticated 21st century communications network,” the 9th Circuit ruled.
VeriSign singlehandedly operates .com and .net domain registries, under contracts with the Internet Corporation for Assigned Names and Numbers, or ICANN, a nonprofit oversight body created by the Department of Commerce.
VeriSign and ICANN inked an agreement in 2006 for .com registries, allowing domain names to increase by 7 percent over four of the following six years. Their 2005 .net contract contained price caps that expired on Dec. 31, 2006, leaving no cap in its place.
The Coalition for ICANN Transparency claimed that these anti-competitive provisions constituted a monopoly. It also sought an injunction against VeriSign’s proposed service for registering expired domain names, claiming VeriSign tried to monopolize that market, too.
“CFIT alleged that in order to get ICANN to agree to the terms VeriSign desired,” Judge Schroeder explained, “VeriSign paid lobbyists to support its position, ‘stacked’ ICANN’s public meetings with VeriSign supporters, hired purportedly independent organizations and individuals to advocate VeriSign’s position, paid bloggers to attack ICANN’s reputation, planted news stories critical of ICANN in mainstream media, threatened ICANN with litigation, arbitration, and government investigation, and indeed eventually brought suit against ICANN in federal and state court.”
ICANN allegedly settled the suits by agreeing to pay VeriSign a fee of between $6 and $12 million in exchange for the favorable terms.
U.S. District Judge Ronald M. Whyte dismissed the lawsuit on the basis that the coalition failed to make its case that either VeriSign’s conduct or the contracts themselves violated antitrust law. Whyte also rejected the coalition’s claim that there was a separate market for expiring domain names.
The 9th Circuit reversed, saying Whyte had “failed to appreciate the seriousness of the allegations of anti-competitive conduct.”
Judge Schroeder said the coalition successfully argued that VeriSign and ICANN’s conspiratorial conduct eliminated competition, artificially raised prices for domain name registration, and tried to monopolize the market for expiring domain names.
The San Francisco-based federal appeals court also disagreed with Whyte’s finding that the coalition failed to state a claim for predatory conduct. Schroeder said this conclusion focused solely on VeriSign’s complaint against ICANN, but ignored the allegedly “predatory and harassing activities that accompanied that litigation.”
The court limited its findings to the .com market, however, saying the complaint lacks specific allegations about the .net market. Schroeder allowed the plaintiff to amend its complaint, saying the district court “will be in a better position” to determine if the plaintiff’s .net allegations are viable.
The court reversed Whyte’s dismissal and remanded.