Watch .club win its new gTLD for $[censored]

As we reported earlier in the week, .CLUB Domains was one of the first companies to win its new gTLD auction and now the company has published a short video of the moment the auction closed.

The first reaction of CEO Colin Campbell is to put out a press release announcing the win, followed by calling the lawyers, which I think we can all agree is the Natural Order for all things.
Sadly, because winning bids are supposed to be confidential, the company has bleeped out references to the amount it paid and blurred a laptop screen in shot, lest CSI:Miami’s cyberpunks are watching.

Six private new gTLD auctions raise $9m

We now know (roughly) how much a new gTLD is worth.
The new gTLD contention sets for .club, .college, .luxury, .photography, .red, and .vote have been settled in a series of auctions this week that raised over $9 million.
That’s an average price of $1.5 million per string.
Writing on CircleID, Innovative Auctions project director Sheel Mohnot confirmed that the withdrawal of Donuts’ application for .vote was a result of losing the auction.
We also already know that .CLUB Domains won its auction.
But Mohnot did not reveal the winners of the other four auctions, each of which was a two-way fight between Donuts and one rival. ICANN’s web site does not yet reflect any other withdrawals.
His article does, however, quote Top Level Design and Luxury Holdings, which applied for .photography and .luxury respectively, as saying they were happy with the outcome.
Assuming they won too (which is of course not certain) that would mean Donuts lost at least four of the six auctions.
Donuts had originally submitted 63 strings to auction, but they could of course only go ahead if all of its competitors agreed to participate.
One wonders if the company submitted its lowest-value strings first in order to build up its war chest for future auctions. A good chunk of the $9 million raised will have flowed straight into its coffers.

Private auction settles .club fight

.CLUB Domains has won the right to launch the .club gTLD at a private auction against two other applicants, according to an announcement from the company.
The company, chiefed by Tucows and Hostopia founder Colin Campbell, also said it has raised $7 million to bring the TLD to market.
Its two rivals for the string were portfolio applicants Donuts and Merchant Law Group. The auction was designed by Cramton Associates and managed by Innovative Auctions of Hong Kong.
Neither competing applicant has had their withdrawals, assuming they’ve been submitted, processed by ICANN yet.
None of the applications were subject to formal objections or Governmental Advisory Committee meddling, giving the successful bidder a relatively clear run at delegation and launch.
.CLUB Domains said in a press release:

Domains like www.golf.club, www.poker.club, and www.book.club should hit the market in late 2013 or early 2014. In addition to acting as the worldwide .CLUB registry, the company has plans to offer .CLUB domain name registrants a web and mobile social platform designed specifically for member engagement and management, making it easy for clubs of any kind to establish themselves on the internet.

According to its application, the registry plans to target:

1. Social Clubs, 2. Sporting Clubs 3. Special Interest/Hobby Clubs, 4. Country Clubs 5. Buying Clubs, 6. Fraternities and Sororities, 7. Personal Clubs, 8. Professional Clubs, 9.School Clubs, 10. Service Clubs, and 11. Night Clubs.

That said, .CLUB does not plan to implement any registration restrictions; .club will be completely open.
The applicant has chosen Neustar to provide its back-end registry.

Private gTLD auctions really will be private

The first new gTLD auctions to be held by Innovative Auctions is set to take place on Monday, but we won’t know which applicants took part until after the fact.
Innovative, which is managing the auction process designed by Cramton Associates, told DI it might announce the participants next week, after the auctions are over.
Failing that, we’ll have to infer the winners from which applications are subsequently formally withdrawn from contention with ICANN.
The only companies to publicly announce their participation so far are Donuts and Demand Media — which as partners are obviously not in any contention sets with each other — and .Club Domains.
Donuts has previously announced that it would submit 63 applications to auction, but 17 of those probably won’t go ahead because Uniregistry, which doesn’t like the private auction idea, has declined to take part.
Demand Media’s applicant, United TLD Holdco has committed its bids for .fishing, .green, .mom, .rip and .wow to the auction. Unless Uniregistry has changed its mind, the .mom one won’t be happening.
It also seems unlikely many winning bids will be disclosed.
Under the terms designed by Cramton, if only one applicant in an auction decides it wants to keep the outcome private, the other applicants will be contractually bound to keep schtum.
Private auctions will see money flow to losing applicants, some of which will also face ICANN-managed auctions at a later date. They may not want to reveal their wedge by having their pay-off public knowledge.

Donuts puts 63 new gTLDs to private auction, but at least 17 are dead on arrival

Donuts has committed 63 of its 307 new gTLD applications to a private auction next month, but at least 17 of them are doomed already because rival Uniregistry won’t take part.
Donuts, which does not want to enter into joint ventures with competing gTLD applicants, has decided to use a private auction managed by Cramton Associates instead of an ICANN auction.
The first round of auctions are due to kick off June 3, but Cramton has set a deadline of next week for applicants to commit the strings they want to bid on.
Donuts has put forward these ones (note that they’re different to those reported elsewhere earlier due to a couple of typos in the original press release):

.apartments, .auction, .audio, .baseball, .boats, .cafe, .church, .college, .construction, .direct, .discount, .fish, .football, .forsale, .furniture, .fyi, .global, .gratis, .guide, .juegos, .jewelry, .legal, .living, .luxury, .phone, .photography, .plus, .red, .run, .storage, .theater, .trading, .vote, .beauty, .broadway, .city, .club, .forum, .garden, .help, .hosting, .hot, .marketing, .media, .memorial, .wedding, .chat, .online, .pizza, .sale, .salon, .school, .search, .show, .soccer, .team, .group, .site, .style, .law, .store, .blog, and .art.

Running the list through the DI PRO database, we quickly discover that 33 of these strings are in two-horse races, 13 have three applicants, nine have four and three have five.
The remaining four contention sets have six, seven, nine and 10 applicants respectively.
Uniregistry, the portfolio applicant run by domainer Frank Schilling, is involved in 17 of the contention sets, and Schilling confirmed to DI today that the company does not intend to participate.
As we’ve previously reported, Uniregistry says it has concerns that private auctions may be illegal under US antitrust law, though substantial doubt has been cast over that assertion since.
Because all applicants in a contention set need to commit for the auction to be meaningful, we can assume that at least 17 of Donuts’ proposed auctions will not go ahead, unless Uniregistry changes its mind.
Top Level Domain Holdings has applied for 13 of the strings Donuts wants to take to auction. TLDH has also expressed concern in the past about the private auction concept.
Directi, Famous Four Media and Google are each involved in eight of the contention sets, while Amazon is involved in five.
According to Cramton, each auction will take place in bidding rounds, with the first round having a maximum bid of $50,000 multiplied by the number of applicants and subsequent rounds increasing that by 10% multiplied by the number of bidders.
If any applicant in a given auction requests privacy, then the winning amount will not be disclosed.

Unrest remains despite new new gTLD contract

ICANN has proposed big changes to how it will handle premium domain names, dot-brands, mergers and acquisitions and mandatory fees in new gTLDs.
It published a new version of the proposed Registry Agreement for new gTLD operators this morning, saying that it is the product of months of “negotiations” with applicants and registries.
But some applicants and back-end providers disagree with this characterization, saying that while some registries helped ICANN with the text they have no authority to speak for all applicants.
The agreement was posted for 42 days of public comment this morning. Before it is approved by the ICANN board of directors, no new gTLD applicants will be able to sign contracts and begin to go live.
There are several major changes compared to the version in the Applicant Guidebook.
Premium domains not dead after all
In what could prove to be the most significant and controversial changes, ICANN has given registries the ability to run Founders Programs and premium name schemes without interference from trademark owners.
New text in the contract will let them self-register up to 100 names “necessary for the operation or the promotion of the TLD” and release those names to third parties if they want.
This appears to be a way around the fear that mandatory Sunrise periods could thwart registries’ plans to sign up anchor tenants to the gTLDs, a crucial launch marketing tactic for many.
The new RA also appears to give broad powers to the registry to allocate premium domain names at will.

Registry Operator may withhold from registration or allocate to Registry Operator names (including their IDN variants, where applicable) at All Levels in accordance with Section 2.6 of the Agreement. Such names may not be activated in the DNS, but may be released for registration to another person or entity at Registry Operator’s discretion.

There does not appear to be a numerical limit on how many domains can be reserved in this way.
Hypothetically, this might allow a registry to reserve the entire dictionary (or dictionaries) at launch, preventing holders of trademarks on generic terms grabbing the matching names during Sunrise.
The still-draft Trademark Clearinghouse rules will also play a part here, but from the RA it looks like registries have just been handed a massively flexible reservation tool.
If my initial interpretation is correct, I expect the trademark lobby will have strong view here.
Concessions for dot-brands
New text in the agreement makes it clearer that ICANN has no plans to redelegate dot-brand gTLDs to third parties after the Registry Agreement expires or is terminated.
This means, for example, that if L’Oreal decides to stop using .loreal at some point in future, ICANN very probably won’t give .loreal to a competitor. The new text is:

(i) ICANN will take into consideration any intellectual property rights of Registry Operator (as communicated to ICANN by Registry Operator) in determining whether to transition operation of the TLD to a successor registry operator

It’s probably not rigid enough language to satisfy some lawyers’ wishes, but I think it does enough to convey the spirit of ICANN’s intentions.
ICANN is of course mainly concerned that dead gTLDs don’t leave registrants with dead domain names, but if there are no registrants I can’t imagine why it would want to redelegate.
Lower fees for registries
Newly added text in the RA specifies that registries must pay ICANN a $5,000 one-off fee (per TLD) to use the new Trademark Clearinghouse, plus with $0.25 per domain that uses its services.
Domains registered under Sunrise periods or which trigger Trademark Claims alerts would incur this one-time fee, which appears to have been reduced from the $0.30 previously discussed.
These fees will actually be passed on to the Trademark Clearinghouse operators (Deloitte and IBM), for which ICANN has agreed to manage billing in order to keep costs down.
In addition, the RA now clarifies that the registry operator’s regular fixed fees to ICANN of $6,250 a quarter only kick in from the date that the gTLD hits the DNS root, not the date of contract signing. That could save registries up to a year’s worth of fees, if they’re late to delegation.
M&A approvals
There are also changes to the way ICANN plans to approve of mergers and acquisitions among registries.
First, it will be much easier for the contract to be passed around within a corporate holding group. The RA now states:

Registry Operator may assign this Agreement without the consent of ICANN directly to a wholly-owned subsidiary of Registry Operator, or, if Registry Operator is a wholly-owned subsidiary, to its direct parent or to another wholly-owned subsidiary of its direct parent, upon such subsidiary’s or parent’s, as applicable, express assumption of the terms and conditions of this Agreement

This change would seem to enable portfolio applicants that have applied for many gTLDs each under separate shell company names (Donuts, for example) to consolidate their contracts under a single parent.
What I don’t think it does is allow for contention set resolution based on joint ventures (which are obviously not “wholly owned”), such as what Uniregistry and Top Level Domain Holdings announced they had agreed to yesterday.
The new RA also states that ICANN must approve subcontracting deals the registry inks for any of the five “critical functions” (EPP, DNS, DNSSEC, Whois and escrow).
Unilateral amendments are gone
The controversial “unilateral right to amend” that ICANN wanted to grant itself — essentially an emergency power to change the contract almost at whim and over the objections of registries — is gone.
It’s been replaced with a convoluted series of procures almost identical to those found in the proposed final version of the 2013 Registrar Accreditation Agreement currently open for comment.
Registries would get the ability to punt the changes to a GNSO Policy Development Process, submit alternative amendments, take ICANN to arbitration or request exemptions, under the new rules.
While the new provisions still give ICANN the ability to force through unpopular changes under certain circumstances, a lot more engagement by registries is envisaged so “unilateral” is probably not a good word to use any more.
So is the deal final or not?
ICANN said in a blog post: “The proposed agreement is the result of several months of negotiations, formal community feedback, and meetings with various stakeholders and communities.”
It added:

We have come a long way since February 2013 when we posted a proposed Revised New gTLD Registry Agreement for public comment. A new and highly spirited sense of mutual trust has catapulted us into a fresh atmosphere of collaboration, which in turn has led to a consistently more productive environment. The spirit of teamwork, productive dialogue and partnership that has underpinned this negotiation process is tremendously heartwarming, as it has allowed us to bring to fruition a robust contractual framework for the New gTLD Program.

But some are worried that ICANN seems to be portraying the RA as equivalent to the Registrar Accreditation Agreement, which was subject to 18 months of talks with a negotiating team representing registrars.
The registries’ Registry Agreement Negotiating Team (RA-NT), on the other hand, was formed less than three weeks ago during ICANN’s meeting in Beijing, and did not have the authority to speak for all applicants.
The RA-NT said in a statement published by ICANN:

The RA-NT agreed to review the new gTLD Registry Agreement with ICANN staff in an effort to minimize some of the more controversial aspects of the Agreement for applicants as a whole. While participants reflected a variety of perspectives, the team did not “represent” or have any authority to “speak for” new gTLD applicants generally, or any group of applicants.

ARI Registry Services CEO Adrian Kinderis told DI:

My fears (and frustrations) come from the fact that ICANN staff have made it sound like they have reached the same point in the process. “It is done”. It most certainly isn’t “done”. They need to understand that the negotiation is actually still very much active and all of the community should feel like their opinions and feedback will be considered in the development of the “final draft”.

The draft RA is now open for public comment until June 11.
That would give ICANN about a month to synthesize all the comments, make any changes, and put the deal to its board of directors for approval during the meeting in Durban, South Africa, this July.

Right Of The Dot gets legal opinion: new gTLD auctions not illegal

Right Of The Dot, one of the companies hoping to offer contention set resolution services to new gTLD applicants, has published a legal opinion arguing that auctions are not inherently illegal.
The document was issued in response to Uniregistry’s claim that the US Department of Justice has refused to give auctions a green light under antitrust law.
ROTD hired the law firm Lewis Brisbois Bisgaard & Smith, including a partner with DoJ experience, to draft the statement.
It’s aimed at lawyers, primarily, but the gist of it is that simply participating in an auction is not illegal in and of itself — participants would have to collude in some other way too.
It states:

The finding of an antitrust violation necessarily would depend on a showing that the private auction unreasonably restrained interstate trade or commerce.
The question comes down to the conduct of the parties to an auction, be it a private auction or an ICANN Last Resort Auction.
If the parties to an auction, engage in collusion such as price fixing and/or bid rigging, it constitute per se violations of Section 1 of the Sherman Act.
It’s not the auction provider that creates a violation it’s the action of the parties to an auction and those actions can take place in an ICANN Last Resort auction.

In other words, there’s no difference between an ICANN-run auction, in which ICANN gets paid, and a private auction in which the participants and the auctioneer get paid, according to these lawyers.
Uniregistry’s argument as I understand it, on the other hand, is that simply participating in an action that could constitute illegal collusion, because ICANN ends up out of pocket.
Who’s right? Who’s wrong?
I think the only person who could answer that, in light of the DoJ’s refusal to intervene, would be a judge. We’re unlikely to get an answer unless somebody sues somebody.

NameJet and Afternic sign another gTLD launch

NameJet and Afternic will provide launch auctions and premium name distribution for the .build gTLD, should it be approved, the two companies have announced.
The deal was inked with applicant Plan Bee LLC, which is affiliated with Minardos Group, a construction company.
The two companies will handle auctions under the sunrise and landrush phases, according to a press release.
It’s the second such deal to be announced by the Afternic/Namejet partnership to date, after WhatBox’s .menu. The companies are also working with Directi’s .pw registry.
Plan Bee has also applied for .expert and .construction, but these are both contested so there’s less certainty that they’ll end up approved.
The applicant reckons it will be able to bring .build to market in the fourth quarter of this year.
With a prioritization number of 1,049 in ICANN’s queue, this may prove optimistic, depending on how the remaining portions of the program — such as predelegation testing and contracting — pan out.

DoJ says new gTLD private auctions might be illegal

Companies hoping to resolve their new gTLD contention sets via private auction are about to get a rude awakening: according to the US Department of Justice, they might be illegal.
Portfolio applicant Uniregistry, the company founded by domainer Frank Schilling, said today that the DoJ has told it that:

arrangements by which private parties agree to resolve gTLD string contentions solely to avoid a public auction present antitrust issues.

The company contacted the department last October to get a “business review” decision, basically asking the DoJ for an assurance that it would not be prosecuted if it participated in a private auction.
The DoJ refused to give that assurance.
Uniregistry counsel Bret Fausett told DI that private auctions might be seen as “bid rigging”, an illegal practice in which competitors fix the awarding of contracts.
Schilling said that Uniregistry asked the DoJ for its advice because “we don’t want to go to jail”.
According to the company:

On March 18, 2013, Uniregistry was informed that the Department of Justice has declined to issue a business review of various private gTLD contention resolution mechanisms. In making its decision, the Department emphasized that no private party, including ICANN, has the authority to grant to any other party exemptions to, or immunity from, the antitrust laws. The decision means that the Department of Justice reserves its right to prosecute and/or seek civil penalties from persons or companies that participate in anti-competitive schemes in violation of applicable antitrust laws.

New gTLD applicants are now being advised to consult their own lawyers before participating in a private auction.
The news will come as a huge blow to companies such as Right Of The Dot and Cramton Associates, which have been at the forefront of pushing the private auction concept to applicants.
It’s also going to be a massive blow to any company that had banked on getting a pay-off to withdraw their applications following a private auction.
The benefit of private auctions — over the ICANN-managed auctions of last resort — is that the losing applicants get a share of the winning applicant’s winning bid.
In an ICANN auction, all the money goes to ICANN, which has promised to use to money to fund worthy causes.
Uniregistry has issued a press release on its talks with the DoJ here (pdf).

Here’s how Donuts wants to resolve its 158 new gTLD contention fights

Donuts is backing a private auction model designed and managed by Cramton Associates as its preferred solution for resolving its 158 new gTLD contention sets.
The proposals, spelled out by auction design expert Peter Cramton during private sessions with new gTLD applicants, caused a bit of a buzz — not all of it positive — at the ICANN meeting in Toronto last week.
But Donuts co-founder Jon Nevett told DI today that Cramton has addressed rivals’ concerns and that Donuts wants to handle as many of its contention sets as possible via private auction.
The idea is that private auctions will be faster and cheaper for applicants than the process set out by ICANN as the “last resort” method for resolving contention sets.
In the ICANN model, all of the proceeds of the auction would go to ICANN, to be distributed to worthy causes at a later date. But with a private auction, the winning bidder pays the losers.
This makes it more attractive to applicants, according to Donuts.
“The cost of losing an ICANN auction is greater than the cost of losing a private auction,” Nevett said. “If you lose an ICANN auction you get nothing, zero, you lose your asset.”
But with private auctions, “it doesn’t hurt as much to lose, so the theory is the second-place guys won’t stretch as much,” he said.
Cramton is a professor of economics at the University of Maryland. A long-time auction specialist, he’s been involved in designing processes for selling off wireless spectrum around the world.
For new gTLDs, Cramton proposes an “ascending clock” auction. At each stage, the price is increased by the auctioneer and the bidders/sellers can either commit to pay that amount or drop out.
The last man standing wins the gTLD, paying the amount that the second-highest bidder was willing to pay.
The money would be divided equally between all the losing applicants. According to Cramton, the advantage over proportional distribution is that it does not encourage applicants to over-bid, keeping costs down.
Cramton’s original plan, which left some applicants scratching their heads last week, was to run the auctions in the first quarter of 2013, before ICANN announces the results of Initial Evaluation.
That would mean that losing bidders would get a 70% refund of their ICANN application fee, which may be an attractive percentage in the case of low-value strings.
But it also means that an applicant could win an auction and later discover its application has been rejected. The other applicants would have withdrawn, so the gTLD would just disappear into the ether.
Judging by a series of videos shot last week and published on Cramton’s YouTube account, many applicants are in favor of running the auctions after IE results have been announced.
Another complaint expressed by Donuts’ competitors last week is Cramton’s “all or nothing” approach, in which Donuts’ rivals would have to commit to use the auctions for their entire portfolio of applications.
According to Nevett, that idea is no longer on the table.
“In the beginning he was discussing that it would have to be all your TLDs or none, and I think a lot of applicants told him that was unacceptable, so he changed his view,” he said.
The idea now is that the auctions would proceed on a TLD-by-TLD basis.
Given that winning bidders are giving money to their competitors, another concern is the ordering of the auctions. You don’t necessarily want to give your rivals a big wedge of cash they can use to out-bid you on the next lot.
The preferred solution here appears to be a simultaneous auction, with all the participating contention sets being resolved at the same time.
There was also a deal of suspicion in Toronto about whether Cramton would be biased towards Donuts, given that Donuts is responsible for finding Peter Cramton and introducing him to the gTLD program.
But Nevett said that Donuts has not contracted with Cramton. Peter Cramton showed up in Toronto on his own dime and has not required an up-front payment from Donuts, Nevett said.
“Every applicant has a veto on whether to participate, and it won’t happen unless every applicant wants to do it,” Nevett said. “Our incentive is to have an auction provider who is attractive to every applicant.”
“Our goal is to get as many applicants to participate in a private auction, so we need the auction to be designed in a way that is simple, fair and inclusive,” he said.
But there’s no denying that Donuts has a greater incentive than most to have a consolidated auction. By its own admission, it’s an eight-person operation without the manpower to negotiate 158 contention sets.
Cramton’s materials from last week’s Toronto sessions can be found at applicantauction.com or here.