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ICANN: antitrust law does not apply to us

Kevin Murphy, January 21, 2012, 14:58:25 (UTC), Domain Registries

ICANN says it “does not engage in trade or commerce” and therefore US antitrust laws do not apply to its approval of the .xxx top-level domain, according to court documents.
The organization and .xxx operator ICM Registry yesterday submitted their coordinated responses to the antitrust lawsuit filed by YouPorn owner Manwin Licensing.
ICANN claims it cannot be held liable under antitrust law and ICM has accused Manwin of filing a nuisance lawsuit because it missed its opportunity to secure some premium .xxx domain names.
Manwin sued in November, alleging ICANN and ICM illegally colluded to deliver “monopolistic conduct, price gouging, and anti-competitive and unfair practices”.
The company, which runs the largest porn sites on the internet, claims ICANN should have opened the .xxx contract to competitive bidding and that ICM’s sunrise policies amounted to “extortion”.
It wants a California District Court to shut down .xxx entirely.
But ICANN has now argued that Manwin’s antitrust claims cannot possibly apply to it because it is a charitable, public-interest organization:

ICANN cannot, as a matter of law, be liable under the antitrust laws with respect to the conduct alleged in the Complaint because ICANN does not engage in “trade or commerce.”
…
[ICANN] does not sell Internet domain names, it does not register Internet domain names, and it certainly is not an Internet pornographer. ICANN does not make or sell anything, it does not participate in any market, and its Bylaws expressly forbid it from participating in any of the markets referenced in the Complaint.

Its motion to dismiss (pdf) goes on to say that the introduction of .xxx is actually pro-competition, and that Manwin only sued because it is scared of losing market share.

Plaintiffs claim to be upset with the manner in which ICM is operating the new .XXX registry, but since Plaintiffs already operate (by their own admission) some of the most successful pornographic websites on the Internet, websites that will continue to operate irrespective of anything ICM might do, what the Plaintiffs are really complaining of is the potential competition that their websites may face from the operation of .XXX.

ICM Registry makes similar arguments in its motion to dismiss (pdf):

what Plaintiffs are really complaining about is the fact that they lost the opportunity to purchase the least expensive defensive registry options offered by ICM because they missed the deadline

But ICM also says that the lawsuit falls foul California’s laws against so-called SLAPPs (“strategic lawsuits against public participation”), basically nuisance suits designed to suppress speech.
Declarations from CEO Stuart Lawley (pdf) and marketing director Greg Dumas (pdf) detail conversations between Manwin and ICM in the run-up to the gTLD’s approval and launch.
Manwin managing partner Fabian Thylmann offered to invest in ICM in July 2010, but Lawley declined, according to an ICM exhibit (pdf).
By October 2010 these offers had turned to legal threats, according to Dumas’ declaration:

Manwin saw the introduction of the .XXX sTLD as a threat to Manwin’s dominance over the adult Internet industry. At that time, Thylmann said that he would do whatever he could to stop .XXX. Specifically, Thylmann said that if ICANN approved the .XXX sTLD, Manwin would file a lawsuit against ICM to disrupt its ability to conduct business

Shortly after ICANN’s December 2010 meeting in Cartagena concluded with an ambiguous resolution on .xxx’s future, Thylmann rebuffed Dumas’ overtures about the .xxx Founders Program.
He predicted in an email to Dumas that ICANN’s Governmental Advisory Committee would force ICANN to reject .xxx, adding “the .xxx domain is useless even if it comes to market”, according to an ICM exhibit.
In September 2011, when the .xxx launch was already well underway, Manwin demanded thousands of free premium .xxx domains and a veto over some registry policies, according to Dumas:

Manwin demanded that ICM: allocate a minimum of several thousand .XXX domain names to Manwin free of charge; commit to prevent IFFOR from making any policies that ban or restrict the operation of user-generated content “tube” sites on .XXX domains; grant across-the-board discounts on all .XXX domain registrations; and allow Manwin to operate certain ‘premium’ or high value domain names, such as “tube.xxx,” through a revenue sharing arrangement between Manwin and ICM.

ICM says that these demands were accompanied by legal threats.
The lawsuit and Manwin’s boycott of companies using .xxx domains has harmed ICM’s business, according to the company’s court filings.
The case continues.

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Comments (8)

  1. George Kirikos says:
    January 21, 2012 at 4:54 pm

    Allow me to destroy ICANN’s argument with a single link:
    http://tarr.uspto.gov/servlet/tarr?regser=serial&entry=75584695
    “First Use in Commerce Date: 2000-02-09”
    ICANN cannot argue in court that they do not engage in “trade or commerce”, while at the same time owning multiple trademark registrations each with a “first use in commerce” date.

    Reply
    • Michael Palage says:
      January 21, 2012 at 9:42 pm

      George,
      While not always agreeing with you, I do respect and share your attention to detail. Specifically ICANN states that it does not register domain names and does not compete in any markets and cites to its bylaws to justify these claims.
      However, notwithstanding these representations by ICANN, the facts are ICANN is a registry operator of the .ARPA gTLD, http://www.iana.org/domains/root/db/arpa.html, and the .INT gTLD, http://www.iana.org/domains/root/db/int.html.
      Now while ICANN has tried to qualify this language about it NOT participating in any market, the ITU has previously expressed its willingness to operate the .INT gTLD on behalf of their community. Therefore I believe when two organizations seek to provide a service, that could constitute a market.
      Moreover, the fact that ICANN is competing in an open tender process by the USG for the right to operate these gTLDs as a part of the IANA contract also seems to undercut ICANN’s statement that it is not competing in any market.

      Reply
  2. Mike says:
    January 21, 2012 at 7:35 pm

    ICAN these last few years are trying to make money in any way possible by this I mean useless gTLD domain names and of course .XXX domain names that just pups out money from large online companies due to prices of these extensions.
    The question is what will be ICAN’s next thing to do to make more money as appetite grows with eating.

    Reply
  3. Paul Keating says:
    January 24, 2012 at 12:48 pm

    What a ridiculous position. It is like the NASDAQ saying they are not in commerce because they dont sell stock.

    Reply
  4. Rubens Kuhl says:
    January 24, 2012 at 4:39 pm

    Where do we draw the line between positions that are part of a legal defense strategy and positions that reflect the standing of an organization ? Corporations usually try to get out of lawsuits using “let’s see if it sticks” propositions.
    We might hold ICANN to a higher standard, though.

    Reply
  5. Shadow Sterling says:
    July 9, 2012 at 2:41 am

    Interesting and scary article.

    Reply
  6. Christopher Ambler says:
    October 24, 2012 at 3:42 pm

    ICANN does not run a registry? What about the root, itself?
    ICANN sells entries in the root. Indeed, at $185,000 each, they are the most expensive domains, more expensive than all other registries on the planet, combined.
    And you’re not even guaranteed to get it after paying.

    Reply

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