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As ICANN meets to decide .org’s fate, California AG says billion-dollar deal must be rejected

Kevin Murphy, April 16, 2020, Domain Policy

California Attorney General Xavier Becerra has urged ICANN to deny approval of Ethos Capital’s $1.13 billion acquisition of .org manager Public Interest Registry.

The call came in a letter (pdf) dated yesterday, just a day before ICANN’s board of directors was scheduled to meet to discuss the deal.

Becerra, who started looking into the deal in late January, wrote, right out of the gate:

I urge ICANN to reject the transfer of control over the .ORG registry to Ethos Capital. The proposed transfer raises serious concerns that cannot be overlooked.

Chief among his concerns is the fact that ICANN originally granted PIR the right to run .org largely because it was a non-profit with a committment to serve non-profits. He wrote:

If, as proposed, Ethos Capital is permitted to purchase PIR, it will no longer have the unique characteristics that ICANN valued at the time that it selected PIR as the nonprofit to be responsible for the .ORG registry. In effect, what is at stake is the transfer of the world’s second largest registry to a for-profit private equity firm that, by design, exists to profit from millions of nonprofit and non-commercial organizations

He’s also bothered about the lack of transparency about who Ethos is and what its plans are. The proposed new owners of PIR are hidden behind a complex hierarchy of dummy LLCs, and Ethos has so far refused to name its money men or to specify what additional services it might offer to boost its revenue.

Becerra also doesn’t buy the business plan, which would see PIR required to pay off a $300 million loan and, as a newly converted for-profit entity, start paying taxes.

He’s particularly scathing about the fact that ICANN approved the removal of PIR’s price caps last year despite receiving over 3,000 public comments opposing the changes and only half a dozen in favor.

“There is mounting concern that ICANN is no longer responsive to the needs of its stakeholders,” he writes.

Despite saying he “will take whatever action necessary to protect Californians and the nonprofit community”, Becerra does not specify what remedies are available to him.

But it looks like ICANN faces the risk of legal action no matter which way its board of directors votes (or voted) today.

Its current deadline to make a decision is April 20.