Antitrust Claims Revived Against VeriSign for .com Contract
The 9th U.S. Circuit Court of Appeals reinstated antitrust claims against VeriSign over its 2006 no-bid contract with ICANN. Citing “the benefit of extensive briefing, collegial discussions and amicus participation” from other domain-name interests, the 9th Circuit reversed and remanded a lower court ruling dismissing the case. The Coalition for ICANN Transparency challenged the 2006 no-bid contract between VeriSign and ICANN for the operation of .com (WID Dec 15/06 p7). But the 9th Circuit rejected the group’s claims concerning VeriSign’s 2005 .net contract.
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The coalition alleged provisions that allow VeriSign to raise domain name prices 7 percent in each of four of the six succeeding years of the .com agreement, and to presumptively renew the .com contract, violate federal and state antitrust laws. The group, made up of registrars and registries, also said VeriSign offered to drop a lawsuit against ICANN, paying a “multi-million dollar fee in exchange for favorable terms” in the 2005 and 2006 contracts. The district judge said the coalition hadn’t alleged antitrust violations and rejected the group’s claim that a “market for expiring domain names existed separate and apart from the market for newly registered domain names.” The coalition accused VeriSign of planning to “leverage” its .com and .net monopolies to control an expiring-names market through its Central Listing Service.
The 9th Circuit said the coalition’s .com renewal claim was “even more severe” than a ruling by the court in favor of a plaintiff who was the only victim of a “rigged” bidding process. The coalition said “competition itself” was eliminated, and that’s “precisely the type of allegation required” to state a claim. The .net contract, though, “was reached after a competitive bidding process,” so it’s safe, the court said.
The district judge also misapplied precedent under section 2 of the Sherman Act on monopolization to the coalition’s section 1 claim of restraint of trade against the 7-percent provision, the 9th Circuit said. VeriSign’s unilaterally raising prices doesn’t matter, except that the coalition said the above-market prices were reached “under conditions hostile to competition.”
The coalition’s predatory-conduct claim was based not only on VeriSign’s litigation against ICANN, but also on the “predatory and harassing activities that accompanied that litigation,” the appeals court said. Those included planting unflattering news stories about ICANN, threatening it with government investigation, and “stacking” ICANN meetings with VeriSign supporters, the coalition had said. That claim counts under Supreme Court precedent on “improper coercion of a [private] standards-setting body,” the 9th Circuit said. It agreed that ICANN is a “private body with no public accountability.”
Using two “out-of-circuit” district-court rulings, the lower court improperly ruled there’s not a separate market for expiring names, the 9th Circuit said. One concerned the market for a single domain name, not a group of domain names as alleged by the coalition, and the other was based on a small pool of expiring domain names: “CFIT’s claims are not so narrowly drawn.” The second ruling also came in 2001, when a separate market may not have yet existed, the appeals court said. It approvingly cited “cogent” evidence from the Internet Commerce Association, a group of domain-name holders, that expiring names “often carry with them a history of established Web traffic and advertising support.”
Though it said the coalition didn’t allege any predatory or conspiratorial conduct for .net, the 9th Circuit remanded the coalition’s .net claims to the lower court so the group can amend its complaint.