ICANN throws out another challenge to the Donuts-Afilias deal

ICANN is set to reject a plea for it to reconsider its decision to allow Donuts to buy Afilias last December.

Its Board Accountability Mechanisms Committee recently threw out a Request for Reconsideration filed by Dot Hotel and Domain Venture Partners, part of a multi-pronged assault on the outcome of the .hotel gTLD contention set.

The RfR was “summarily dismissed”, an infrequently used way of disposing of such requests without considering their merits. BAMC concluded that the requestors had failed to sufficiently state how they’d been harmed by ICANN’s decision, and therefore lacked standing.

The requestors, both applicants for .hotel, had said that they were harmed by the fact that Donuts now owns two applications for .hotel — its own open, commercial one and Afilias’ successful community-based one.

It also said that ICANN’s seemingly deliberate opacity when it came to approving the deal broke its bylaws and sowed confusion and risk in the registry industry.

At some point before the December 17 board meeting that approved the acquisition, ICANN staff briefed the board on its decision to approve the deal, but no formal resolution was passed.

By exploiting this loophole, it’s not clear whether the board actually voted on the deal, and ICANN was not obliged by its bylaws to publish a rationale for the decision.

But BAMC, acting on the advice of ICANN’s lawyers, decided (pdf) that the statements of alleged harm were too vague or seemed to rely on potential future harms.

DVP and Dot Hotel are also party to a lawsuit and an Independent Review Process case against ICANN related to .hotel.

A Documentary Information Disclosure Request related to the Afilias acquisition was also thrown out in March.

BAMC’s dismissal will be rubber-stamped by ICANN’s full board at a later date.

Decision on $135 million .web auction expected in weeks

ICANN, Verisign, Donuts, and the other applicants for .web will find out who gets to control the fiercely contested gTLD by the first week of June at the latest, according to Verisign’s CEO.

Jim Bidzos told analysts tonight that the Independent Review Process panel currently handling a complaint filed by Afilias declared its case closed April 7, and said that a decision will come within 60 days.

Afilias, now owned by Donuts, came second in an ICANN “auction of last resort” in which a Verisign-backed company called Nu Dot Co agreed to pay $135 million for the coveted string.

Afilias wants the auction declared invalid because ICANN, it claims, did not sufficiently pursue allegations that NDC was being secretly bankrolled by Verisign, which it says broke ICANN bylaws and new gTLD application rules.

This is denied by ICANN, as well as NDC and Verisign, which have filed legal documents with the IRP panel despite not being parties.

Afilias and others suspect that Verisign wants .web in order to bury it, keeping what could be a strong .com competitor weak, which Verisign also denies.

The IRP panel held a seven-day virtual hearing last August, but has continued to receive briefs from ICANN and Afilias since then.

Verisign says it needs .web because .com is running out of names

Verisign’s affinity for cognitive dissonance has emerged yet again — it’s now claiming that it needs to be awarded the .web gTLD because it’s running out of .com domains to sell.

In legal documents released by ICANN yesterday, Verisign’s lawyers say: “The undisputed evidence is that Verisign needs a TLD like .WEB for growth given the decreased name availability in .COM”.

The admission/claim/lie (delete according to preference) came in a joint post-hearing filing by Verisign and Nu Dot Co, the .web applicant to which Verisign loaned $135 million to bid for the gTLD on its behalf at a record-breaking ICANN auction in 2016.

Afilias, now owned by Donuts, was the second-highest bidder and since November 2018 has been trying to get the auction result cancelled via ICANN’s quasi-judicial Independent Review Process.

The IRP’s final hearing was held over seven days last June, and we’ve been waiting with baited breath for a ruling ever since.

At some point over the last 48 hours, ICANN published three sets of post-hearing arguments — one from itself, one from complainant Afilias and an amicus (non-party, friend of the court) filing from Verisign/NDC.

The Verisign filing (pdf) attempts to rubbish Afilias’ claims across the board, but its rebuttal of the argument that it only wants .web in order to bury it and protect .com’s dominance is particularly interesting:

Verisign Has Every Incentive To Grow .WEB Aggressively. Afilias’ Amended IRP Request asserts without evidence that Verisign seeks to acquire .WEB in order to eliminate a potential competitor for .COM and that Afilias would make a better operator of .WEB. Afilias presented no evidence to support this claim prior to the IRP, and none was presented at the hearing. In fact, the evidence before this Panel refutes Afilias’ claims. The undisputed evidence is that Verisign needs a TLD like .WEB for growth given the decreased name availability in .COM. Even Afilias’ own experts concede that the .COM TLD now has limited name availability. Moreover, the undisputed evidence establishes that Verisign is well-positioned to maximize .WEB’s potential, while Afilias’ recent track record suggests that it would be a less effective operator of .WEB.

In June last year, Verisign had submitted to the IRP panel:

Verisign needs a new TLD like .WEB for growth. Verisign’s growth rate has declined in recent years, largely due to many names in .COM already having been taken and increased competition from new gTLDs and ccTLDs that have superior name availability.

Even Afilias’ own experts concede that the .COM name space effectively is taken. Numerous other industry participants have noted that most of the “good” names in .COM already are taken.

While Verisign had a applied for a few non-English transliterations of .com in the 2012 new gTLD application round, it had avoided getting involved with potential competitors to .com.

But, according to its brief, in 2014 it had just sold off the remainder of its non-domain businesses and, realizing its growth now needed to come from a pure domains strategy, tasked VP Paul Livesay with figuring out how it could worm its way back into the new gTLD program.

Many of the details of Livesay’s research and decision making have been redacted by ICANN (purportedly at Verisign’s request), but it seems he came to the conclusion that the best way to benefit from the program long after the application window closed would be to secretly financially back NDC’s participation in the .web auction, with the provision that the .web contract would be transferred to Verisign should it win.

Quite apart from its regular postings touting .com availability over the last few years, the same year that Verisign was coming to the conclusion that .com was becoming saturated and it needed new growth opportunities in other TLDs, it sued XYZ.com for false advertising for having the gall to suggest that it was hard to find available .com domains. It lost.

Because Verisign apparently enjoys nothing more than holding two diametrically opposed positions simultaneously, its October amicus filing also claims that .web isn’t nearly as awesome as Afilias and others claim.

On the same page that it insists that .web is needed to drive growth, Verisign poo-poos the notion that .web could be a significant competitor to .com, relying on an “expert report” commissioned by Verisign and compiled by University of Chicago economist Kevin Murphy.

(Murphy’s report is redacted in its entirety (pdf) by ICANN, but his 1,119 pages of unredacted exhibits (pdf) prominently include screenshots from this blog, so I feel the need to point out that he’s a different Kevin Murphy — he’s not me, and I’d never even heard of the dude until this morning. On a personal level, the fact that I’m apparently not even the best Kevin Murphy when it comes to the .web story that I’ve been covering for the last two decades is, as you might imagine, as depressing to me as it is presumably amusing to you.)

While his report is redacted, reading around the edges it appears that Murphy reckons .web will not be an exceptional competitor to .com.

Verisign’s October filing states:

.WEB’s Valuation Shows It is Not Particularly Competitively Significant. The Murphy Report models multiple economic scenarios to assess Afilias’ claim that the $135 million price paid for .WEB at the public auction shows that .WEB will be a substantial competitor. None of these scenarios indicate that .WEB is likely to gain a significant market share. Instead, each scenario shows that .WEB is likely to have no more than a 2–3% market share.

Because of the redactions, it’s not clear what market Murphy was referring to, but a 3% market share of the current universe of domain names across all TLDs works out to over 10 million domains. In other words, .web could be a top-five gTLD, up alongside the likes of .org.

But elsewhere in its IRP filings, Verisign cites Murphy to support its argument that .web will have “registrations in the low single digit millions”. That would still be enough to make it one of the best-selling new gTLDs.

This relatively low expected turnout of course begs the question of why Verisign needs .web to grow. It added 4 million net new names across .com and .net last year alone, with .net pretty static, according to its financial filings.

I’m no Kevin Murphy, but here’s a table I’ve thrown together showing Verisign’s domain growth over the last decade.

[table id=64 /]

Its revenue has consistently grown year over year, from $681 million in 2010 to $1.27 billion in 2020. It’s considered one of the most profitable companies in the world, and its share price has tripled since 2011.

And that was without .web.

EFF rages as Ethos closes Donuts buy

The Electronic Frontier Foundation thinks the acquisition of Donuts by “secretive” private equity group Ethos Capital represents a risk to free speech.

The deal, which sees Ethos buy a controlling stake from fellow PE firm Abry Partners, closed earlier this week, having apparently received no official objection from ICANN.

But the EFF now wants ICANN to force Donuts to change its gTLD registry contracts to make it harder for the company to engage in what it calls “censorship-for-profit”.

The group’s senior staff attorney, Mitch Stoltz, raised the issued at the Public Forum session of last week’s ICANN 70 virtual public meeting, and expanded upon his thinking in a blog post this week. He wrote:

Donuts already has questionable practices when it comes to safeguarding its users’ speech rights. Its contracts with ICANN contain unusual provisions that give Donuts an unreviewable and effectively unlimited right to suspend domain names—causing websites and other internet services to disappear.

He pointed to Donuts’ trusted notifier program with the Motion Picture Association, which streamlines the takedown of domains used for pirating movies, as an example of a registry’s power to censor.

Donuts runs gTLDs including ones with social benefit meanings that the EFF is particularly concerned about, such as .charity, .community, .fund, .healthcare, .news, and .university.

Stoltz also makes reference to the Domain Protected Marks List, a Donuts service that enables trademark owners to block their marks, and variants, across its entire portfolio of 240+ gTLDs.

In effect, this lets trademark holders “own” words and prevent others from using them as domain names, even in top-level domains that have nothing to do with the products or services for which a trademark is used. It’s a legal entitlement that isn’t part of any country’s trademark law, and it was considered and rejected by ICANN’s multistakeholder policy-making community.

The DPML is not unique to Donuts. Competitors such as UNR and MMX have similar services on the market for their gTLDs.

When Stoltz raised the EFF’s concerns at last week’s ICANN meeting, CEO Göran Marby basically shrugged them off, saying he didn’t understand why one PE firm buying an asset off another PE firm was such a big deal.

I have to say I agree with him.

Ethos came under a lot of scrutiny last year when it tried to buy .org manager Public Interest Registry, turning it into a for-profit entity, generating cash for Ethos’ still-undisclosed backers.

(This week, Ethos disclosed in a press release that its investors include massive hedge funds The Baupost Group and Neuberger Berman “among others”, which appears to be the first time these names have been mentioned in connection with the company).

But a pretty good case could be made that .org is a unique case, that has had a non-profit motive baked into its DNA for decades. That does not apply to Donuts, which was a profit-making venture from the outset.

It’s not entirely clear why the EFF is suddenly concerned that Donuts will start exercise its contractual right-to-suspend more frequently under Ethos than under Abry. Stoltz wrote:

As we learned last year during the fight for .ORG, Ethos expects to deliver high returns to its investors while preserving its ability to change the rules for domain name registrants, potentially in harmful ways. Ethos refused meaningful dialogue with domain name users, instead proposing an illusion of public oversight and promoting it with a slick public relations campaign. And private equity investors have a sordid record of buying up vital institutions like hospitals, burdening them with debt, and leaving them financially shaky or even insolvent.

Even with the acquisition passing through ICANN easily, the EFF wants Donuts to change its contracts to make it more difficult for the company to suspend domain names on a whim.

I believe the language causing the controversy comes from anti-abuse policies in the Public Interest Commitments found in almost all Donuts’ contracts with ICANN, which state in part:

Registry Operator reserves the right, at its sole discretion and at any time and without limitation, to deny, suspend, cancel, or transfer any registration or transaction, or place any domain name(s) on registry lock, hold, or similar status as it determines necessary for any of the following reasons:

a. to protect the integrity and stability of the registry;

b. to comply with any applicable laws, government rules or requirements, requests of law enforcement, or any dispute resolution process;

c. to comply with the terms of this Registry Agreement and the Registry Operator’s Anti-Abuse Policy;

d. registrant fails to keep Whois information accurate and up-to-date;

d. domain name use violates the Registry Operator’s acceptable use policies, or a third party’s rights or acceptable use policies, including but not limited to the infringement of any copyright or trademark; or

e. as needed during resolution of a dispute.

As a voluntary PIC, this language is unique to Donuts, though other registries have similar provisions in their registry agreements.

ICANN refuses to say why it allowed Donuts to buy Afilias

ICANN appears determined to make its decision-making process when it comes to industry consolidation as opaque as possible.

The Org has denied a request from two rival registries for information about how it approved the acquisition of Afilias by Donuts last December, apparently exploiting a loophole in its bylaws.

The transaction got the nod from ICANN after its December 17 board of directors meeting, at which the board discussed the deal and gave CEO Göran Marby the nod to go ahead and process the request.

What it didn’t do was pass a formal resolution approving the deal, which seems to have given it the room to wriggle out of its transparency requirements, such as publishing its rationale and briefing materials.

It’s a trick it also used last year when it decided to bar Ethos Capital from acquiring Public Interest Registry.

In response to a Documentary Information Disclosure Process request (pdf) last month, filed by Dot Hotel and Domain Venture Partners, ICANN said:

ICANN org makes available, as a matter of due course, on the ICANN website the resolutions taken, preliminary report, minutes, and the Board briefing materials for each Board meeting… ICANN org has already published all materials for the 17 December 2020 Board meeting.

No new information was published.

The DIDP was filed by two applicants for the new gTLD .hotel, which are competing with applications originally filed by both Donuts and Afilias.

They’d also asked for ICANN’s rationale for allowing Donuts to own two .hotel applications post-acquisition, but ICANN said it had no documents reflecting that rationale.

The .hotel contest is also the subject of an Independent Review Process case and a lawsuit, in which DVP is a plaintiff.

Donuts adds another TLD to its stable as Richemont finally bows out of new gTLD program

Luxury goods maker Richemont, an early and strong proponent of the new gTLD concept, has got rid of the final string of the 14 it originally applied for.

According to ICANN records, the registry agreement for .watches was officially transferred to Afilias at the end of December, one day before it was in turn acquired by Donuts.

The domain nic.watches current resolves to a placeholder bearing the Afilias branding.

Richemont, the company behind luxury brands such as Cartier and Piaget, now has no TLDs left.

It had applied for nine dot-brands, along with five generic dictionary terms that it at first intended to maintain as single-registrant spaces, before that use case was banned by ICANN.

At the start of the decade, the company was an enthusiastic endorser of new gTLDs, even sending speakers to conferences to promote the concept.

Richemont was also the first registrant of second-level domains in third-party new gTLDs, when it registered Arabic versions of some of its famous brands in December 2013.

But its enthusiasm waned gradually over the last eight years.

Its dot-brands were discarded in tranches, either during the application process or after contracting. Donuts beat it to .jewelry at auction, and it terminated its contracts for Chinese versions of .jewelry and .watches last year.

There’s not much money in internationalized domain names, so now it seems likely these Chinese IDNs were shopped around but failed to find a buyer.

.watches, however, is right in Donuts’ wheelhouse, a niche generic English string related to a specific product or service.

Last month, I reported that Donuts had acquired .markets, .forex, .broker and .trading from Boston Ivy as it exited the new gTLD game, while letting the less-attractive .spreadbetting die on the vine.

.hotel battle lands ICANN in court over accountability dodges

ICANN’s accountability mechanisms, or lack thereof, have landed the Org in court.

Three applicants for the .hotel new gTLD have sued in California’s Superior Court in LA, claiming ICANN has consistently failed to provide true accountability, refusing for over seven years to implement fundamental mechanisms required by its bylaws.

They want the court to force ICANN to stick to its bylaws and to also temporarily freeze an Independent Review Process case related to .hotel.

The registries in question are Fegistry, Domain Venture Partners and Radix. They filed their complaint at the end of October, but ICANN did not publish it until the end of January, after its terse reply, and an administrative ruling, had also been filed with the court.

While the endgame is presumably to get the .hotel contention set pushed to auction, the lawsuit barely mentions the gTLD at all. Rather, it’s a broad-ranging challenge to ICANN’s reluctance to submit to any kind of accountability at all.

The main beef is that ICANN has not created a so-called “Standing Panel” of judges to preside over IRP cases, something that its bylaws have required since 2013.

The Standing Panel is meant to comprise seven legal experts, trained up in all things ICANN, from which the three panelists presiding over each IRP would be selected.

It would also operate as a final appeals court for IRP rulings, with all seven panelists involved in such “en banc” challenges.

The idea is to have knowledgeable panelists on a retainer to expedite IRPs and ensure some degree of consistency in decision-making, something that has often been lacking in IRP decisions to date.

Despite this requirement being in the bylaws since 2013, ICANN has consistently dragged its feet on implementation and today there still is no Standing Panel.

The .hotel plaintiffs reckon ICANN has dodged $2.7 million in fees by refusing to pick a panel, all the while offloading certain fees onto complainants.

It didn’t get the ball rolling until January 2018, but the originally anticipated, rather streamlined, selection process quickly devolved into the usual mess of ICANN bureaucracy, red tape and circular community consultation.

The latest development was in November 2020, when ICANN announced that it was looking for volunteers for a cross-community “IRP Community Representatives Group”, a team similar to the Nominating Committee. which would be responsible for picking the Standing Panel members.

The deadline to apply was December 4, and we’ve not heard anything else about the process since.

The .hotel litigants also have beef with the “sham” Request for Reconsideration process, which is notorious for enabling the board to merely reinforce its original position, which was drafted by ICANN staff lawyers, based on advice provided by those same ICANN staff lawyers.

They also take aim at the fact that ICANN’s independent Ombudsman has recused himself from any involvement in Reconsideration related to the new gTLD program, for unclear reasons.

The lawsuit (pdf) reads:

ICANN promised to implement these Accountability Mechanisms as a condition of the United States government terminating its formal oversight of ICANN in 2016 — yet still has wholly failed to do so.

Unless this Court forces ICANN to comply with its bylaws in these critical respects, ICANN will continue to force Plaintiffs and any other complaining party into the current, sham “Reconsideration” and Independent Review processes that fall far short of the Accountability Mechanisms required in its bylaws.

The plaintiffs say that ICANN reckons it will take another six to 12 months to get the Standing Panel up and running. The plaintiffs say they’re prepared to wait, but that ICANN is refusing and forcing the IRP to continue in its absence.

They also claim that ICANN was last year preparing to delegate .hotel to HTLD, the successful applicant now owned by Donuts, which forced them to pay out for an emergency IRP panelist to get the equivalent of an injunction, which cost $18,000.

That panelist declined to force ICANN to immediately appoint a Standing Panel or independent Ombudsman, however.

The .hotel plaintiffs allege breach of contract, fraud, deceit, negligence and such among the eight counts listed in the complaint, and demand an injunction forcing ICANN to implement the accountability mechanisms enshrined in the bylaws.

They also want an unspecified amount of money in punitive damages.

ICANN’s response to the complaint (pdf) relies a lot on the fact that all new gTLD applicants, including the plaintiffs in this case, signed a covenant not to sue as part of their applications. ICANN says this means they lack standing, but courts have differed of whether the covenant is fully enforceable.

ICANN also claims that the .hotel applicants have failed to state a factual case for any of their eight counts.

It further says that the complaint is just an effort to relitigate what the plaintiffs failed to win in their emergency hearing in their IRP last year.

It wants the complaint dismissed.

The court said (pdf) at the end of January that it will hold a hearing on this motion on DECEMBER 9 this year.

Whether this ludicrous delay is related to the facts of the case or the coronavirus pandemic is unclear, but it certainly gives ICANN and the .hotel applicants plenty of time for their IRP to play out to conclusion, presumably without a Standing Panel in place.

So, a win-by-default for ICANN?

Rival wants the truth about the Afilias-Donuts deal amid “collusion” claims

Portfolio gTLD investor Domain Venture Partners wants ICANN to fully explain its decision to approve Donuts’ acquisition of Afilias, claiming the deal gives the combined company an unfair advantage in the long-running battle for the .hotel gTLD.

DVP has filed a formal Request for Reconsideration with ICANN, tearing it a new one for seemingly going out of its way to avoid its transparency obligations when it came to the December approval of the acquisition.

ICANN’s board of directors had been scheduled to discuss the mega-deal at a special meeting December 17, but instead it carried out these talks off-the-books, in such a way as to avoid bylaws rules requiring it to publish a rationale and meeting minutes.

As I noted recently, it was the second time in 2020 (after the Ethos-PIR deal) the board resorted to this tactic to avoid publicly stating why it was approving or rejecting a large M&A transaction.

DVP notes the contrast with the Ethos-PIR proposal, which endured months of public scrutiny and feedback, adding in its RfR:

Why did the ICANN Board have a Special Meeting on this topic? Why did they not publish or otherwise identify a single background fact or point of discussion from the Special Meeting? Why did they not identify a single source of evidence or advice relied upon in coming to the decision? Why have they refused to provide even the slightest hint as to anything they considered or any reason why they came to their decision? How did they vote, was there any dissent? Nobody knows, because ICANN has kept all that secret.

The company argues that all this secrecy leaves itself and other registries at a loss to predict what might happen should they be involved in future acquisitions, particularly given the allegedly anti-bylaws “discriminatory” treatment between PIR on the one hand and Afilias on the other.

DVP stops short of asking for ICANN to overturn its decision to permit the acquisition — it would be moot anyway, as the deal has already closed — but it does demand that ICANN:

Provide complete, published rationale for the Resolution of Dec. 17, 2020 to essentially approve the Afilias acquisition of Donuts, including identification of all materials relied upon by the Board and/or Staff in evaluating the transaction, publication of all communications between Board, Staff and/or outside advisors relating to the transaction, and publication of all communications regarding the transaction between ICANN on the one hand, and Afilias, Donuts and/or Ethos Capital on the other hand.

Develop, implement, publish and report results of a clear policy as to what registry combination transactions will be approved or rejected, including clearly defined criteria to be assessed — and clearly defined process to assess that criteria – as to each and every future proposed transaction.

It’s interesting that nobody has filed a Documentary Information Disclosure Policy request for this information yet.

But it’s not all just about transparency for DVP. Its big concern appears to be its application for .hotel, which is in one of the few new gTLD contention sets still not resolved almost a decade after the 2012 application round.

DVP is the Gibraltar investment vehicle that controls the 16 new gTLDs that were formerly managed by Famous Four Media and are now managed by GRS Domains (which I believe is owned by PricewaterhouseCoopers). Dot Hotel Limited is one of its application shells.

Donuts is now in possession of two competing .hotel applications — its own, which is for an open, unrestricted space gTLD, and the Afilias-owned HTLD application, which is for a restricted Community-based space.

Back in 2014, HTLD won a Community Evaluation Process, which should have enabled it to skip a potentially expensive auction with its rival bidders and go straight to contracting and delegation.

But its competing applicants, including DVP and Donuts, challenged the CPE’s legitimacy with an Independent Review Process appeal.

To cut a long story short, they lost the IRP but carried on delaying the contention set and came back with a second IRP (this one not including Donuts as a complainant), which involves claims of “hacking”, one year ago.

The contention set is currently frozen, but DVP thinks Donuts owning two applications is a problem:

Donuts now owns or controls both that Community Application, and another pending standard application in the contention set for .hotel. There is no provision in the Applicant Guidebook for applicants to own more than one application for the same gTLD string. It certainly indicates collusion among applicants within a contention set, since two of them are owned by the same master.

…

DVP is concerned that Donuts may have no intention of honoring those Community commitments, and instead intends to operate an open registry.

DVP wants ICaNN to publish a rationale for why it’s allowing Donuts to own two applications for the same TLD.

It also wants ICANN to either force Donuts to cancel its HTLD application — which would likely lead to a .hotel auction among the remaining applicants, with the winning bid flowing to either ICANN or the losing applicants — or force it to stick to its Community designation commitments after launch, which isn’t really Donuts’ usual business model.

RfRs are usually resolved by ICANN’s lawyers Board Accountability Mechanisms Committee in a matter of weeks, and are rarely successful.

One year on, Namecheap still fighting aborted .org takeover and may target GoDaddy and Donuts next

Even though Ethos Capital’s proposed takeover of Public Interest Registry was rejected last May, registrar Namecheap is still doggedly pursuing legal action against ICANN’s handling of the deal, regardless.

The Independent Review Process complaint filed last February is still active, with Namecheap currently fighting a recent ICANN motion to dismiss the case.

The company is also demanding access to information about GoDaddy’s acquisition of Neustar and Donuts’ acquisition of Afilias, and is threatening to file separate actions related to both those deals.

Namecheap has essentially two beefs with ICANN. First, that it should not have lifted price caps in its .org, .biz and .info registry contracts. Second, that its review of Ethos’ bid for PIR lacked the required level of transparency.

ICANN’s trying to get the IRP complaint thrown out on two fairly simple grounds. First, that Namecheap lacks standing because it’s failed to show a lack of price caps have harmed it. Second, that it rejected the PIR acquisition, so Namecheap’s claims are moot.

In its motion to dismiss (pdf), its lawyers wrote:

Namecheap’s entire theory of harm, however, is predicated on the risk of speculative future harm. In fact, nearly every explanation of Namecheap’s purported harm includes the words “may” or “potential.” Namecheap has not identified a single actual, concrete harm it has suffered.

…

Namecheap’s claims related to the Change of Control Request should be dismissed because ICANN’s decision not to consent to the request renders these claims moot
and, separately, Namecheap cannot demonstrate any harm resulting from this decision.

In December, Namecheap had submitted as evidence two analyses of its business prospects in the event of registry price increases, one compiled by its own staff, the other prepared by a pair of outside expert economists.

While neither shows Namecheap has suffered any directly quantifiable harm, such as a loss of revenue or customers, Namecheap argues that that doesn’t matter and that the likelihood of future harm is in fact a current harm.

A mere expectation of an increase in registry prices is sufficient to show harm. This is because such expectation reduces Namecheap’s expected profits and its net present value.

It further argues that if Namecheap was found to not have standing, it would give ICANN the ability to evade future IRP accountability by simply adding a 12-month delay to the implementation of controversial decisions, pushing potential complainants outside the window in which they’re able to file for IRP.

On the PIR change of control requests, Namecheap says it’s irrelevant that ICANN ultimately blocked the Ethos acquisition. The real problem is that ICANN failed in its transparency requirements related to the deal, the company claims.

The fact that ICANN withheld its consent is no excuse for refusing to provide full transparency with respect to the actions surrounding the proposed acquisition and ICANN’s approval process. Namecheap’s claims relate to the non-transparent process; not the outcomes of such process. Irrespective of the outcome, lack of transparency increases the level of systemic risk in Namecheap’s business environment.

…

How did ICANN come to its decision? Was an imminent request for a change of control known to ICANN, when it took the decision to remove the price control provisions? What was discussed in over 30 hours of secret meetings between ICANN org and the Board? What discussions took place between ICANN, PIR and other entities involved? All these questions remain unanswered

Namecheap refers to two incidents last year in which ICANN hid its deliberations about industry acquisitions by conducting off-the-books board discussions.

The first related to the PIR deal. I called out ICANN for avoiding its obligation to provide board meeting minutes in a post last May.

The second relates to the board’s consideration of Donuts’ proposed (and ultimately approved) acquisition of Afilias last December. Again, ICANN’s board discussed the deal secretly prior to its official, minuted December 17 meeting, thereby avoiding its transparency requirements.

In my opinion, this kind of bullshit has to stop.

Namecheap is also now threatening to bring the Afilias deal and GoDaddy’s acquisition of Neustar’s registry business last April into the current IRP, or to file separate complaints related to them, writing in its response to ICANN’s motion (pdf):

Namecheap seeks leave to have ICANN’s actions and inactions regarding its consideration of the Neustar and Afilias changes of control reviewed by this IRP Panel. If, per impossibile such leave is not granted, Namecheap reserves all rights to initiate separate proceedings on these issues.

The deals are similar because both involve the change of control of legacy gTLD contractors with millions of domains under management that have recently had their price caps lifted — Afilias ran .info and Neustar ran .biz.

Donuts acquisition of Afilias closes, integration work begins

Donuts’ acquisition of Afilias closed without incident on December 29, the companies announced last week.

The registries said that registrants and registrar partners should not see any immediate disruption, but added that it’s now working on an integration plan that should see some changes over the longer term.

“Our combined teams can now begin developing an integration plan, with a goal of minimizing disruption to those we serve,” Akram Atallah, Donuts’ CEO, said in a press release. “We expect no changes in the short term, and ample notice on any changes that are decided.”

Atallah has previously told DI that it’s likely that Afilias’ owned and operated TLDs will likely be transferred to Donuts’ registry back-end, which is hosted on the Amazon cloud.

He also said that services such as the Domain Protected Marks List, currently available in 240+ Donuts gTLDs, should soon become available in Afilias’ 20-odd.

The deal, for an undisclosed sum, was subject to scrutiny by ICANN, which could have blocked it, but its board of directors considered the merger last month with no resolution passed.