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Mutually assured destruction? Now Afilias faces .web disqualification probe

Kevin Murphy, March 15, 2022, 14:04:05 (UTC), Domain Policy

Afilias’ ongoing quest to have Verisign’s winning bid for the .web gTLD thrown out may have backfired, with ICANN now launching a probe into whether Afilias’ own bid should be disqualified.

Afilias and Verisign could now BOTH be kicked out of the .web fight, delivering the coveted gTLD into the hands of the third-placed bidder for a knock-down price.

There’s even the possibility that Verisign’s winning $135 million bid could be more than cut in half, taking tens of millions out of ICANN’s coffers.

ICANN’s board of directors on Thursday said it will investigate not only whether Verisign broke new gTLD program rules by using a Nu Dot Co as proxy to bid, but also whether Afilias broke the rules when an executive texted NDC during a pre-auction comms blackout period.

It’s the first time board has resolved to take a look at the allegations against Afilias, which so far have only come up in letters and arbitration filings from Verisign and NDC.

The .web auction in 2016 resulted in a winning bid of $135 million from NDC. It quickly emerged that its bid was bankrolled by Verisign, which had not directly applied for .web.

Afilias’ applicant subsidiary (now called Altanovo Domains, but we’re sticking with “Afilias” for this story) has been trying to use Verisign’s sleight-of-hand to get the auction overturned for years, on the basis that ICANN should have forced NDC to show its cards before the auction took place.

An Independent Review Process panel last year ruled that ICANN broke its own bylaws by failing to rule on Afilias’ allegations when they were first made, and told ICANN to put .web on hold while it finally formally decides whether Verisign broke the rules or not.

What the IRP panel did NOT do was ask ICANN to rule on Verisign’s counter-allegations about Afilias violating the auction blackout period. ICANN’s decided to do that all by itself, which must piss off Afilias no end.

The board resolved last week, with my emphasis:

Resolved (2022.03.10.06), the Board hereby: (a) asks the [Board Accountability Mechanisms Committee] to review, consider and evaluate the allegations relating to the Domain Acquisition Agreement (DAA) between NDC and Verisign and the allegations relating to Afilias’ conduct during the Auction Blackout Period; (b) asks the BAMC to provide the Board with its findings and recommendations as to whether the alleged actions of NDC and/or Afilias warrant disqualification or other consequences, if any, related to any relevant .WEB application; and (c) directs ICANN org to continue refraining from contracting for or delegation of the .WEB gTLD until ICANN has made its determination regarding the .WEB application(s).

I see four possible outcomes here.

  • Nobody gets disqualified. Verisign wins .web and ICANN gets to keep its $135 million. Afilias will probably file another IRP or lawsuit.
  • Verisign gets disqualified. Afilias gets .web and ICANN probably gets paid no more than $79.1 million, which was its maximum bid before the auction became a two-horse race. Verisign will probably file an IRP or lawsuit.
  • Afilias gets disqualified. Verisign wins .web and then it has to be figured out how much it pays. I believe the high bid before the third-place bidder pulled out was around $54 million, so it could be in that ball-park. Afilias will probably file another IRP or lawsuit.
  • Both Afilias and Verisign get disqualified. The third-placed bidder — and I don’t thinks its identity has ever been made public — wins .web and pays whatever their high bid was, possibly around $54 million. Everyone sues everyone else and all the lawyers get to buy themselves a new summer home.

The other remaining applicants are Donuts, Google, Radix and Schlund. Web.com has withdrawn its application.

The people who will decide whether to disqualify anyone are the six members of the Board Accountability Mechanisms Committee who are not recusing themselves due to conflicts of interest (Edmon Chung has a relationship with Afilias).

Given that the board has already ruled that it has a fiduciary duty to dip into the new gTLD auction proceeds pretty much whenever it pleases, can’t we also assume that it has a fiduciary duty to make sure that auction proceeds pool is as large as possible?

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Comments (2)

  1. Kurt says:
    March 17, 2022 at 6:35 pm

    Fifth possible outcome: Verisign is disqualified, other parties sue to re-establish private auction?

    Reply
  2. Christopher Ambler says:
    March 21, 2022 at 11:36 pm

    You miss another possibility – that there is another entity with a claim and rights that is practicing the patience it has learned over the past almost-thirty years since .Web was first proposed in 1994.

    Reply

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