Whether ICANN officially acknowledges the existence of domain front-running, the international organization is named in a class-action lawsuit against Network Solutions. The litigants architecting the suit claim ICANN’s return policy allowed Network Solutions to register searched-for domains and then raise the price.
Network Solutions Logo
(Photo Credit: Network Solutions)
UPDATE: We spoke with Brian Kabateck, who’s response is detailed at the bottom of this article.
Los Angeles-based plaintiff-only lawfirm Kabateck Brown Kellner accuses Network Solutions of forcing “millions of people to buy Internet domain names from them instead of cheaper competitors through a scheme that’s netted the firm millions of dollars.”
The “scheme” the firm is referring to involves a controversial practice recently instituted by Network Solutions. When a person queries a domain through Network Solutions’ website, Network Solutions automatically registers the domain and holds it for four days, just shy of ICANN’s five-day return grace period. Interested parties can purchase the domain within the four-day timeframe for $34.99, or about $25 more than what the domain costs normally.
Though many were outraged by the practice and ICANN questioned Network Solutions about it, Network Solutions stood by its new policy as a method for protecting customers from domain front-running. At an ICANN hearing on the issue, a Network Solutions representative cited customer complaints that after checking a domain’s availability, the customers would receive phone calls offering the domain at a highly inflated price. The representative couldn’t provide evidence of front-running, however, because of client confidentiality agreements.
Kabateck Brown Kellner equates Network Solutions’ new service with monopolistic practices. “Imagine if you asked a car dealer if they had a black convertible and were then forced to buy the car from them. Would you get a good deal? Each time someone asks Network Solutions about a domain name, the firm creates a monopoly for itself, forcing consumers to pay the price they demand,” said Brian Kabateck, lead counsel in the class action and Kabateck Brown Kellner’s Managing Partner, in a statement.
It wouldn’t take the brightest defense attorney to argue against that logic. Network Solutions does release the domain after four days, so no one is “forced” to buy anything. Network Solutions said at the ICANN hearing also that if customers called them they would delete the domain upon request.
They may be “forced” to wait, or be inconvenienced, though, and the ethics of Network Solutions’ practice is still in question.
ICANN is named in the suit because it “is aware that Network Solutions is abusing this policy and yet continues to facilitate its actions.”
Again, a highly debatable point considering ICANN was closing an investigation on front-running when the Network Solutions situation presented itself. The official answer from ICANN seems to be that it is still looking into the matter and awaiting further evidence. Nonetheless, the regulatory body does seem concerned about the situation.
Susan Wade, spokesperson for Network Solutions, said the company was aware of the suit but had not yet received a copy and therefore couldn’t comment on it specifically. “We’re confident that our protection measures meet all the legal requirements and benefits our customers,” she said.
The damages sought in the lawsuit was not disclosed and Brian Kabateck was unavailable for further comment. Request for comment made to ICANN were not returned at the time of publication.
UPDATE:
Kabateck said it was unclear how many plaintiffs would ultimately particapate in the lawsuit and therefore damages sought at this point are unknown. He estimates, though, that the number of plaintiffs is potentially in the thousands, and that the suit will seek a refund of about $25 per plaintiff, or the amount they allegedly were overcharged.
“In our mind, this is a very subtle form of price-fixing,” he said. “People don’t know how long the domain is going to be held up for, and people are going to be scared into paying a higher price now. They should have notified the customer. People should know they have other options.”
As to why ICANN was brought into the suit and how much he felt ICANN was liable for, Kabateck said the suit was not seeking monetary damages from ICANN. “It’s not so much that they have monetary liability. We simply want a declaration that they can’t set the rules for how long you can or can’t lock up domain names.”
When asked who should set the rules for that, Kabateck said that should be the government’s responsibility.
Though ICANN is a quasi-independent nonprofit organization, it was established by the US Dept. of Commerce to act on behalf of the government. Though the United Nations has pressured its cause that ICANN be placed under UN control, the contract between ICANN and the US was extended until 2011. Nevertheless, some argue ICANN lacks the authority to decide domain policy.
Kabateck says ICANN lacks such authority and also denies that ICANN is a government body.
