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June 22, 2009

Antitrust: Catching up with ICANN.

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A complaint alleging antitrust violations against Verisign--the corporation with exclusive contracts with the Internet Corporation for Assigned Names and Numbers (ICANN) to maintain .com and .net domain name registries--states a valid claim.

In Coalition for ICANN Transparency, Inc. v. VeriSign, Inc., No. 07-16151 (June 5, 2009), the Ninth Circuit reversed and remanded the decision of the U.S. District Court for the Northern District of California with respect to one of the contracts. It held that the claims concerning the ".net contract" were correctly dismissed due to the competitive bidding process that preceded its execution; however, it held the ".com contract" to be much more suspect in the absence of such bidding--and so those claims were valid.

The Ninth Circuit explained that, because the complaint alleged that an automatic renewal provision harmed free-market competition in and of itself (as opposed to individual competitors), it properly stated a claim for restraint of trade under Section 1 of the Sherman Act. The Ninth Circuit also allowed a claim under Section 1 that alleged that the price per domain name--to which VeriSign and ICANN agreed--exceeded the rate competitive market conditions would produce, thus causing actual injury to competition. It recognized that this bilateral action is held to a higher standard than the unilateral price setting appearing in the cases on which the district court relied.

Finally, based on arguments both by the parties and in amicus briefs, the Ninth Circuit noted that expiring domain names may now represent a market distinct from other names, and remanded the case to the district court to make that determination. If deemed a separate market, the claims under Section 2 of the Sherman Act for attempted or actual monopolization based on predatory conduct should be allowed.

The plaintiff here must still prove the allegations. But at least it will get its day in the Northern District.

Posted by Rob Bodine at June 22, 2009 11:59 PM

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