2015-08-15

ICANN, Domain Registry Operators, Monopoly, Antitrust, FTC Statement

"... the rights to .xyz will remain with the company he’s [Daniel Negari] set up in perpetuity, assuming it keeps paying its quarterly fees and isn’t in breach of contract by letting the domain name servers fail... “There is no cap on money that can be charged [for new gTLD domain name registrations]. It’s the amount the market can bear,” James Cole, ICANN’s global media coordinator. “We don’t impose a limit.”" (source: Fusion; emphasis added)
ICANN is a monopoly, and being a California corporation, is subject to US jurisdiction, including the jurisdiction of the US Federal Trade Commission (FTC). ICANN is also in the business of granting "monopolistic franchises" to operate gTLDs (generic top-level domains), with very little oversight or control as to how each of those monopolies conduct business. Monopolistic franchises are known to lead to predatory and monopolistic pricing practices with concomitant anti-competitive effects deleterious to consumers, including domain name registrants. FTC jurisdiction extends to all persons (including corporations) doing business in the United States, and conceivably this would include those in contractual privity with US-based ICANN (e.g., generic Top-level Domain Registry operators and ICANN-accredited domain name Registrars).

The mission of the FTC is to protect consumers and promote competition. Its enforcement powers are broad and varied. On August 13, 2015, the FTC issued a "Statement of Enforcement Principles" that describes the underlying antitrust principles that guide the Commission’s application of its statutory authority to take action against “unfair methods of competition” prohibited by Section 5 of the FTC Act but not necessarily by the Sherman or Clayton Act.

“The promotion of consumer welfare is a cornerstone of the FTC’s antitrust enforcement, and these principles reaffirm the agency’s legal framework in carrying out that important mission,” said FTC Chairwoman Edith Ramirez. “The statement formally aligns Section 5 with the Sherman and Clayton Acts.”

Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act (pdf):

"... In deciding whether to challenge an act or practice as an unfair method of competition in violation of Section 5 on a standalone basis, the Commission adheres to the following principles:
• the Commission will be guided by the public policy underlying the antitrust laws, namely, the promotion of consumer welfare;
• the act or practice will be evaluated under a framework similar to the rule of reason, that is, an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications; and
• the Commission is less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm arising from the act or practice."
There was only one dissent to issuing the above FTC statement, Maureen K. Ohlhausen:
"Arming the FTC staff with this sweeping new policy statement is likely to embolden them to explore the limits of UMC" (note: UMC is Section 5 of the FTC Act’s prohibition of “unfair methods of competition”).
WSJ"Sen. Richard Blumenthal (D., Conn.), top Democrat on a panel overseeing the FTC, called the guidance “historic” and said he hoped it would “lead to more frequent and effective enforcement actions to protect both consumers and businesses.”" (emphasis added)

As the editor of Domain Mondo has previously noted:

"... If ICANN was really interested in the "public interest" and protecting consumers (domain name registrants) [as well as "promoting competition"], instead of just being a "captured organization" of the new gTLDs lobby, it would: (a) require the fees for domain name registrations be disclosed in every new gTLD Registry Agreement (RA) for the entire term of the RA, with no variances allowed for sunrise, landrush, GA, or otherwise, and no price increases allowed during the RA term; (b) open each new gTLD at the end of every RA term, for competing bids by other registry operator applicants, with award to the bidder with the "lowest and best" proposed registration fee schedule for the next term. Of course this will probably never happen as ICANN does not have a Registrants Stakeholder Group, unlike Registrars and Registry operators, and ICANN has no real interest in serving the public interest ..." (emphasis added)

Question: How long will it be before the first FTC investigation or proceeding involving ICANN or one or more of its "contracted parties" (registry operators, domain name registrars) is announced? 

Caveat Emptor!

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