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

[Richard Forno]

Appeals Court Revives the CFIT Anti-Trust Suit Against VeriSign
Jun 05, 2009 4:19 PM PDT
By John Levine
http://www.circleid.com/posts/20090605_appeals_court_revives_cfit_anti_trust_suit_against_verisign/

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.