Namecheap sues ICANN over .org price caps

Namecheap has sued ICANN in California, asking a court to force the Org to revisit its decision to lift price caps on .org and .info domain names five years ago.

Registrar CEO Richard Kirkendall announced the suit on Twitter this afternoon:

Today we filed suit against @ICANN. After a previous ruling via a mediation process they have taken little action towards the recommendations of that ruling and so our hand has been forced to take this action. We feel that ICANN is in direct violation of their mandate and…

— Richard Kirkendall (@NamecheapCEO) February 5, 2024

The lawsuit follows an Independent Review Process case that Namecheap partially won in December 2022, where the panel said ICANN should hire an economist to look at whether price caps are a good idea before revisiting its decision to scrap them.

The panel found that the ICANN board of directors had shirked its duties to make the decision itself and had failed to act as transparently as its bylaws mandate.

Namecheap says that over a year after that decision was delivered, ICANN has not implemented the IRP panel’s recommendations, so now it wants the Superior Court in Los Angeles to hand down an injunction forcing ICANN to do so.

Before 2019, .org was limited to 10% price increases every year, but the cap was lifted, along with caps in .info and .biz, when ICANN renewed, standardized and updated the respective registries’ Registry Agreements.

After the decision was made to scrap .org price caps, despite huge public outrage, Namecheap rounded up its lawyers almost immediately.

The caps decision led to the ulimtately unsuccessful attempt by Ethos Capital to acquire Public Interest Registry, which runs .org.

Namecheap’s new lawsuit wants the judge to issue “an order directing ICANN to comply with the recommendations of the IRP Panel”.

That means ICANN’s board would be told to consider approaching PIR and .info registry Identity Digital to talk about reintroducing price caps, to hire the economist, and to modify its procedures to avoid any future transparency missteps.

ICANN kicks the can on .org price cap defeat

ICANN has deferred action on its recent Independent Review Process defeat over price caps on .org and .info, instead referring the decision to one of its committees.

The IRP panel ruled in late December that ICANN broke its own bylaws when it approved the removal of price caps from the .org and .info registry contracts in 2019. It recommended that ICANN look into ways to restore the caps.

The ICANN board of directors at the weekend voted to ask its Board Accountability Mechanisms Committee (BAMC) to “review, consider, and evaluate” the IRP decision and recommend next steps.

The IRP was fought by the registrar Namecheap.

IRP panel tells ICANN to stop being so secretive, again

ICANN’s dismal record of adverse Independent Review Process decisions continued last week, with a panel of arbitrators telling the Org to shape up its transparency and decision-making processes.

The panel has essentially ruled that ICANN did everything it could to be a secretive as possible when it decided to remove price controls from its .org and .info registry contracts in 2019.

This violated its bylaws commitments to transparency, the IRP panel found, at the end of a legal campaign by Namecheap commenced over three years ago.

Namecheap wanted the agreements with the two registries “annulled”, but the panel did not go that far, instead merely recommending that ICANN review its decision and possibly enter talks to put the price caps back.

But the decision contains some scathing criticisms of ICANN’s practice of operating without sufficient public scrutiny.

Namecheap had argued that ICANN broke its bylaws by not only not applying its policies in a non-discriminatory manner, but also by failing to adequately consult with the community and explain its decision-making.

The registrar failed on the first count, with the IRP panel ruling that ICANN had treated registry contract renegotiations consistently over the last 10 years — basically trying to push legacy gTLDs onto the 2012-round base Registry Agreement.

But Namecheap succeeded on the second count.

The panel ruled that ICANN overused attorney-client privilege to avoid scrutiny, failed to explain why it ignored thousands of negative public comments, and let the Org make the price cap decision to avoid the transparency obligations of a board vote.

Notably, the panel unanimously found that: “ICANN appears to be overusing the attorney-client privilege to shield its internal communications and deliberations.”

As one example, senior staffers would copy in the legal team on internal communications about the price cap decision in order to trigger privilege, meaning the messages could not be disclosed in future, the decision says.

ICANN created “numerous documents” about the thinking that went in to the price cap decision, but disclosed “almost none” of them to the IRP due to its “overly aggressive” assertion of privilege, the panel says.

As another example, staffers discussed cutting back ICANN’s explanation of price caps when it opened the subject to public comment, in order to not give too much attention to what they feared was a “hot” and “sensitive” topic.

ICANN’s failure to provide an open and transparent explanation of its reasons for rejecting public comments opposing the removal of price controls was exacerbated by ICANN’s assertion of attorney-client privilege with respect to most of the documents evidencing ICANN’s deliberations…

ICANN provided a fairly detailed summary of the key concerns about removing price caps, but then failed to explain why ICANN decided to remove price caps despite those concerns. Instead, ICANN essentially repeated the explanation it gave before receiving the public comments.

The panel, which found similar criticisms in the earlier IRP of Dot Registry v ICANN, nevertheless decided against instructing ICANN to check its privilege (to coin a phrase) in future, so the Org will presumably be free to carry on being as secretive as normal in future.

Namecheap also claimed that ICANN deliberately avoided scrutiny by allowing Org to remove the price caps without a formal board of directors resolution, and the panel agreed.

The Panel finds that of the removal of price controls for .ORG, .INFO, and .BIZ was not a routine matter of “day-to-day operations,” as ICANN has asserted. The Price Cap Decision was a policy matter that required Board action.

The panel notes that prior to the renewal of .org, .info and .biz in 2019, all other legacy gTLD contracts that had been renewed — including .pro, which also removed price caps — had been subject to a board vote.

“ICANN’s action transitioning a legacy gTLD, especially one of the three original gTLDs (.ORG), pursuant to staff action without a Board resolution was unprecedented,” the panel writes.

Quite why the board never made a formal resolution on the .org contract is a bit of a mystery, even to the IRP panel, which cites lots of evidence that ICANN Org was expecting the deal to go before the board as late as May 13, 2019, a month before the anticipated board vote.

The .org contract was ultimately signed June 30, without a formal board resolution.

(Probably just a coincidence, but Ethos Capital — which went on unsuccessfully to try to acquire .org registry Public Interest Registry from ISOC later that year — was formed May 14, 2019.)

The IRP panel notes that by avoiding a formal board vote, ICANN avoided the associated transparency requirements such as a published rationale and meeting minutes.

The panel in conclusion issued a series of “recommendations” to ICANN.

It says the ICANN board should “analyze and discuss what steps to take to remedy both the specific violations found by the Panel, and to improve its overall decisionmaking process to ensure that similar violations do not occur in the future”.

The board “should consider creating and implementing a process to conduct further analysis of whether including price caps in the Registry Agreements for .ORG and .INFO is in the global public interest”

Part of that process should involve an independent expert report into whether price caps are appropriate in .info and especially .org.

If it concludes that price controls are good, ICANN should try to amend the two registry agreements to restore the caps. If it does not conduct the study, it should ask the two registries if they want to voluntarily restore them.

Finally, the panel wrote:

the Panel recommends that the Board consider revisions to ICANN’s decision-making process to reduce the risk of similar procedural violations in the future. For example, the Board could adopt guidelines for determining what decisions involve policy matters for the Board to decide, or what are the issues on which public comments should be obtained.

ICANN is on the hook to pay the panel’s fees of $841,894.76.

ICANN said in a statement that it is “is in the process of reviewing and evaluating” the decision and that the board “will consider the final declaration as soon as feasible”.

Namecheap says it won legal fight over .org price caps

Namecheap claims to have won a fight against ICANN over the lifting of contractual price caps in .org and .info back in 2019.

The two parties have been battling it out for almost three years in an Independent Review Process case over ICANN’s decision to allow the .info and .org registries to increase their prices by as much as they want.

Namecheap now claims the decision has been delivered and “the IRP panel decided that ICANN had, indeed, violated its Bylaws and Articles of Incorporation and that ICANN’s decision to remove the price caps was invalid.”

The registrar also says it failed in its attempt to have a similar ruling with regrds the .biz TLD, but it’s not clear why.

Neither party has yet published the decision in full (ICANN is likely redacting it for publication as I type), and ICANN has yet to make a statement, so we only have Namecheap’s interpretation to go on.

It seems the IRP panel disagreed with ICANN that it was within its staff’s delegated powers to renegotiate the price provisions of the contracts without input from the board of directors.

Rather, there should be a open and transparent process, involving other stakeholders, for making such changes, the panel said according to Namecheap.

What the panel does not appear to have said is that the price caps can be unilaterally restored to the contracts. Rather, it seems to suggest a combination of voluntary reinstatements, expert competition reviews, and bilateral renegotiations.

The decision also seems to say that price controls are more important in .org than .info, due to its not-for-profit nature, which flies in the face of ICANN’s long-term push to standardize its contracts to the greatest extent possible.

The row over .org pricing emerged shortly before the ultimately unsuccessful takeover attempt of Public Interest Registry by for-profit private equity firm Ethos Capital was announced. Ethos had planned to raise prices, but PIR, still a non-profit owned by the Internet Society, to date has not.

Namecheap’s IRP claims related to ICANN’s handling of that acquisition attempt were thrown out in 2021.

.info was an Afilias TLD when the IRP was filed but is now Ethos-owned Identity Digital’s biggest gTLD following consolidation.

I’ll have more on this story after the full decision is made public.

GoDaddy Registry to raise some TLD prices, lower others

GoDaddy Registry is to raise the base price of three of its recent acquired gTLDs and lower the price on three others.

The company is telling registrars that the prices of .biz, .club and .design domains are going up later this year, while the prices of .luxe, .abogado and .case are going down.

For .biz, which GoDaddy took over when it acquired Neustar’s registry business in 2020, the price will increase by $0.87 to $13.50.

While .biz hasn’t been price-regulated by ICANN since 2019, the new rise is lower than the annual 10% it was allowed to impose under its previous, price-capped contracts. It’s around 7% this year, roughly in line with .com’s capped increase. It will mean the price of a .biz has gone up by over 70% in the last decade.

For .club, which GoDaddy acquired last year, registrations, renewals and transfers are going up by a dollar to $10.95, the fourth consecutive year in which .club fees have increased.

It’s in the ball-park of what previous owner .CLUB Domains was already doing — .club launched in 2014 with a $8.05 fee, but that went up to $8.95 in 2019, then $9.45 in 2020, then $9.95 last year.

.club has about a million domains under management at the moment. If that level holds, it’s an extra million bucks a year to GoDaddy, which frankly will barely register on the company’s now billion-dollars-a-quarter income statement.

For lower-volume .design, another one of the 2021 acquisitions, the price is going up by $2 to $35.

All of these price changes go into effect September 1 this year, giving registrants over six months to lock-in their pricing for up to 10 years by committing to a multi-year renewal before the changes kick in.

Registrars in most cases pass on registry price increases to their customers, but they don’t have the same six-month notification obligations as registries.

For three other GoDaddy Registry TLDs, prices are coming down in the same timeframe, so registrants may wish to see if the savings are passed on in future by registrars.

.luxe prices are going down from $15 a year to $12, .abogado is going down from $25 to $20 and .casa is going down from $7.50 to $6. The latter two mean “lawyer” and “home” respectively in Spanish.

GoDaddy isn’t currently altering the regular price of the TLDs it acquired from MMX, but it is bumping the restore fee for expired domains by $10 to $40, bringing them into line with .com.

Price caps on .org could return, panel rules

ICANN could be forced to reimpose price caps on .org, .biz and .info domains, an Independent Review Process panel has ruled.

The panel handling the IRP case filed by Namecheap against ICANN in February 2020 has decided to allow the registrar to continue to pursue its claims that ICANN broke its own bylaws by removing price controls from the three gTLD contracts.

Conversely, in a win for ICANN, the panel also threw out Namecheap’s demand that the IRP scrutinize ICANN’s conduct during the attempted takeover of .org’s Public Interest Registry by Ethos Capital in 2019.

The split ruling (pdf) on ICANN’s motion to dismiss Namecheap’s case came March 10 and was revealed in documents recently published by ICANN. The case will now proceed on the pricing issue alone.

The three-person panel decided that the fact that ICANN ultimately decided to block Ethos’ acquisition of PIR meant that Namecheap lacked sufficient standing to pursue that element of its case.

Namecheap had argued that ICANN’s opaque processing of PIR’s change of control request created uncertainty that harmed its business, because ICANN may approve such a request in future.

But the panel said it would not prejudge such an eventuality, saying that if another change of control is approved by ICANN in future, Namecheap is welcome to file another IRP complaint at that time.

“Harm or injury flowing from possible future violations by the ICANN Board regarding change of control requests that are not presently pending and that may never occur does not confer standing,” the panel wrote.

On the pricing issue, the panel disagreed with ICANN’s argument that Namecheap has not yet been harmed by a lack of .org price caps because PIR has not yet raised its .org prices.

It said that increased prices in future are a “natural and expected consequence” of the lack of price controls, and that to force Namecheap to wait for such increases to occur before filing an IRP would leave it open to falling foul of the 12-month statute of limitations following ICANN decision-making baked into the IRP rules.

As such, it’s letting those claims go ahead. The panel wrote:

This matter will proceed to consideration of Namecheap’s request for a declaration that ICANN must annul the decision that removed price caps in the .org, .info and .biz registry agreements. The Panel will also consider Namecheap’s request for a declaration that ICANN must ensure that price caps from legacy gTLDs can only be removed following policy development process that takes due account of the interests of the Internet user and with the involvement of different stakeholders. The Panel will consider Namecheap’s request for a declaration that “registry fees… remain as low as feasible consistet with the maintenance of good quality service” within the context of removal of price caps (not in the context of regulating changes of control).

In other words, if Namecheap prevails, future price caps for pre-2012 gTLDs could be decided by the ICANN community, with an assumption that they should remain as low as possible.

That would be bad news for PIR, as well as .info registry Donuts and .biz registry GoDaddy.

But it’s important to note that the IRP panel has not ruled that ICANN has done anything wrong, nor that Namecheap is likely to win its case — the March 10 ruling purely assesses Namecheap’s standing to pursue the IRP.

The panel has also significantly extended the proposed timeline for the case being resolved. There now won’t be a final decision until 2022 at the earliest.

The panel last week delayed its final hearing in the case from August this year to January next year, according to a document published this week.

Other deadlines in the case have also been pushed backed weeks or months.

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

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.

Ethos clarifies .org price rises, promises to reveal number of censored domains

Public Interest Registry and would-be owner Ethos Capital have slightly revised the set of promises they hope to keep if ICANN approves the $1.13 billion acquisition.

Notably, in updating their proposed Public Interest Commitments (pdf), they’ve set out in plain dollar terms for the first time the maximum annual price PIR would charge for a .org domain over the coming seven years.

[table id=59 /]

Previous versions of the PICs just included a formula and invited the reader to do the math(s).

The two companies are proposing to scrap price caps altogether after June 2027.

If ICANN rejects the deal, under its current contract PIR would be free to raise its prices willy-nilly from day one, though some believe it would be less likely to do so under its current ownership by the non-profit Internet Society.

The new PICs also include a nod to those who believe that PIR would become less sensitive to issues like free speech and censorship — perhaps because China may lean on Ethos’ shadowy billionaire backers. The document now states:

Registry Operator will produce and publish annually a report… This report will also include a transparency report setting forth the number of .ORG domain name registrations that have been suspended or terminated by Registry Operator during the preceding year under Registry Operator’s Anti-Abuse Policy or pursuant to court order.

A few other tweaks clarify the launch date and composition of its proposed Stewardship Council, a body made up of expert outsiders that would offer policy guidance and have a veto on issues such as changes to .org censorship and privacy policy.

The PICs now ban family members of people working for PIR from sitting on the council, and clarify that it would have to be up and running six months after the acquisition closes.

Because .org is not a gTLD applied for in 2012, the PICs do not appear to be open for public comment, but post-acquisition changes to the document would be.

ICANN currently plans to approve or deny the acquisition request by April 20, just 11 days from now.

ICANN grants Verisign its price increases, of course

ICANN has given Verisign its ability to increase .com prices by up to 7% a year, despite thousands of complaints from domain owners.

The amendments give Verisign the right to raise prices in each of the last four years of its six-year duration. The current price is $7.85 a year.

Because the contract came into effect in late 2018, the first of those four years begins October 26 this year, but Verisign last week said that it has frozen the prices of all of its TLDs until 2021, due to coronavirus.

Not accounting for discounts, .com is already already worth $1.14 billion in revenue to Verisign every year, based on its end-of-2019 domains under management.

In 2019, Verisign had revenue of $1.23 billion, of which about half was pure, bottom-line, net-income profit.

In defending this shameless money-grab, ICANN played up the purported security benefits of the deal, while offering a critique of the domainers and registrars that had lobbied against it.

Göran Marby, ICANN’s CEO, said in a blog post.

I believe this decision is in the best interest of the continued security, stability, and resiliency of the Internet.

…

Overall, the decision to execute the .COM Registry Agreement amendment and the proposed binding Letter of Intent is of benefit to the Internet community.

The decision was explained in more detail in a eight-page analysis document (pdf) published late last week.

I’ll summarize this paper in three bullet points (my words, not ICANN’s):

• Domainers are hypocrites.
• The deal is good for DNS security.
• Our hands were tied anyway.

First, while ICANN received over 9,000 comments about the proposed amendment, almost all negative, it said that publicity campaigns from domainer group the Internet Commerce Association and domainer registrar Namecheap were behind many of them.

the Internet Commerce Association (ICA) and Namecheap, are active players in the so called “aftermarket” for domain names, where domain name speculators attempt to profit by “buying low and selling high” on domain names, forcing end users to pay higher than retail prices for desirable domain names

It goes on to cite data from NameBio, which compiles lists of secondary market domain sales, to show that the average price of a resold domain is somewhere like $1,600 (median) to $2,400 (mean).

Both Namecheap and ICA supporter GoDaddy, which sells more .coms than any other registrar, have announced steep increases in their .com retail renewal fees in recent years — 20% in the case of GoDaddy — the ICANN document notes.

This apparent hypocrisy appears to be reason ICANN felt quite comfortable in disregarding many of the negative public comments it received.

Second, ICANN reckons other changes to the .com contract will benefit internet security.

Under a side deal (pdf) Verisign’s going to start giving ICANN $4 million a year, starting next January and running for five years, for what Marby calls “ICANN’s initiatives to preserve and enhance the security, stability, and resiliency of the DNS.” These include:

activities related to root server system governance, mitigation of DNS security threats, promotion and/or facilitation of Domain Name System Security Extensions (DNSSEC) deployment, the mitigation of name collisions, and research into the operation of the DNS.

Note that these are without exception all areas in which ICANN already performs functions, usually paid for out of its regular operating budget.

Because it looks like to all intents and purposes like a quid pro quo, to grease the wheels of getting the contract amendments approved, Marby promised that ICANN will commit to “full transparency” as to how its new windfall will be used.

The new contract also has various new provisions that standardize technical standardization and reporting in various ways, that arguably could provide some minor streamlining benefits to internet security and stability.

But ICANN is playing up new language that requires Verisign to require its registrars to forbid their .com registrants from doing stuff like distributing malware and operating botnets. Verisign’s registrar partners will now have to include in their customer agreements:

a provision prohibiting the Registered Name Holder from distributing malware, abusively operating botnets, phishing, pharming, piracy, trademark or copyright infringement, fraudulent or deceptive practices, counterfeiting or otherwise engaging in activity contrary to applicable law and providing (consistent with applicable law and any related procedures) consequences for such activities, including suspension of the registration of the Registered Name;

Don’t expect this to do much to fight abuse.

It’s already a provision that applies to hundreds of other TLDs, including almost all gTLDs, and registrars typically incorporate it into their registration agreements by way of a link to the anti-abuse policy on the relevant registry’s web site.

Neither Verisign nor its registrars have any obligation to actually do anything about abusive domains under the amendments. As long as Verisign does a scan once a month and keeps a record of the total amount of abuse in .com — and this is data ICANN already has — it’s perfectly within the terms of its new contract.

Third and finally, ICANN reckons its hands were pretty much tied when it comes to the price increases. ICANN wrote:

ICANN org is not a competition authority or price regulator and ICANN has neither the remit nor expertise to serve as one. Rather, as enshrined in ICANN’s Bylaws, which were
developed through a bottom up, multistakeholder process, ICANN’s mission is to ensure the security and stability of the Internet’s unique identifier systems. Accordingly, ICANN must defer to relevant competition authorities and/or regulators, and let them determine if any conduct or behavior raises anticompetition concerns and, if so, to address such concerns, whether it be through price regulation or otherwise. As such, ICANN org has long-deferred to the DOC and the United States Department of Justice (DOJ) for the regulation of wholesale pricing for .COM registry services.

It was of course the DoC, under the Obama administration, that froze Verisign’s ability to raise prices and, under the Trump administration, thawed that ability in November 2018.

If you’re pissed off that the carrying cost of your portfolio is about to go up, you can blame Trump, in other words.

US senators tell ICANN to reject .org deal

Five US senators have called on ICANN to not approve the acquisition of Public Interest Registry by Ethos Capital.
The senators — all Democrats — said in a March 18 letter published today that the proposed $1.13 billion deal is “against the public interest”.
The surprisingly detailed nine-page letter (pdf) was signed by Ron Wyden, Richard Blumenthal, Elizabeth Warren and Anna Eshoo, following up from a similar letter sent in January. The new letter also has Ed Markey as a signatory. They write:

We were concerned that the sale would be contrary to ICANN’s commitment to the public benefit, that it might undermine the reliability of .ORG websites, and that Ethos is unlikely to be a responsible steward of the .ORG registry. New information we have obtained in the last two months, including statements made by ISOC, PIR, and Ethos, has validated these concerns. Accordingly, we write to reiterate our view that ICANN should block the proposed change of control of the .ORG registry.

Chief among their concerns is the lack of transparency about who is actually bankrolling the deal. Ethos has confirmed it will be partially funded by loans, but the identities of its actual owners have not been confirmed.
It’s been said that two of the backers are investment firms linked to high-profile Republicans — Senator Mitt Romney and the late Ross Perot.
The senators are also worried that the business plan Ethos has publicly laid out may not be realistic, suggesting that PIR will be forced to rip off customers in order to recoup the cost of the acquisition.
They go on to say that Ethos’ promise to only increase prices by 10% per year, enforceable via a Public Interest Commitment in its ICANN contract, is “weak”, particularly given that the commitment would automatically expire seven years from now.
They’re also not buying the notion that PIR’s proposed Stewardship Council, made up of outside .org stakeholders, would have enough power to guide registry policy, calling the council “toothless”.
ICANN is of course under no obligation to take its lead from a handful of legislators, but it’s yet another voice stacked against a deal that already had very little support.
ICANN has until April 20 to make a decision about the change of control.