CFIT's Complaint Dismissed For A Second Time

Last Friday, 8 December 2006, United States' Federal District Court Judge Ronald M. Whyte dismissed, for a second time, an antitrust complaint filed by CFIT against ICANN. The strongly worded 22-page Order from Judge Whyte stems from CFIT's allegations challenging ICANN and VeriSign entering into the most recent .NET and .COM Agreements. Judge Whyte held that "[m] ere extension of VeriSign's lawful appointment as the sole registry operator does not constitute an antitrust violation". The Order in CFIT v. VeriSign, Inc. et al., can be found here: <http://www.icann.org/legal/cfit-v-icann/order-on-cfit-08dec06.pdf>. Judge Whyte dismissed CFIT's original complaint against ICANN and VeriSign on 28 February 2006. <http://www.icann.org/legal/cfit-v-icann/cfit-rule12-order-28feb06.pdf>

All attempts to sue ICANN relating to antitrust violations during its eight-year existence, have been dismissed at very early stages in the proceedings. ICANN's structure and operations have never failed to survive antitrust challenge.

Judge Whyte rejected each of CFIT's antitrust assertions. CFIT argued that the renewal provisions in the Registry Agreements permitted VeriSign to operate .NET and .COM "in perpetuity," and that this somehow violated the U.S. antitrust laws. In his Order, Judge Whyte pointed out that these provisions merely extended the terms of the Agreements, and that ICANN retained the ability to seek a new registry operator if VeriSign did not comply with the Agreements.

CFIT also argued that the Agreements increased the prices that VeriSign may charge for registrations; the Court ruled against CFIT here as well pointing out that "[a]s ICANN argues, the setting of maximum prices is not precluded by antitrust laws and has been found to be pro-competitive in some instances."

Judge Whyte also rejected CFIT's contention that VeriSign and ICANN colluded to avoid competitive bidding associated with the new .COM Agreement: "The 2001 .com Agreement does not obligate ICANN to seek competitive bidding . . . . [T] he proposal in the 2006 .com Agreement to increase prices above the current maximum price or to share fees with ICANN, without more, does not constitute a conspiracy to avoid an obligation to obtain competitive bidding or to impose supra-competitive prices."

Finally, the Court rejected CFIT's argument that the Agreements would mean reduced competition in the "back order services" market, as CFIT was attempting to preempt a possible future registry service from VeriSign, which under both the .COM and .NET agreements, and a policy adopted last year by ICANN's Generic Names Supporting Organization, could only be introduced through a "new registry services process". The new registry service process contained in both the .COM and .NET Registry agreements would test the service against any security and stability concerns by way of an independent panel and would additionally allow ICANN to refer competition issues to an appropriate governmental authority.

"This kind of litigation is perhaps inevitable when commercial interests are at stake, but the community should take some comfort, from this unbroken string of legal victories, that ICANN's structure and operations have been and will continue to be carefully shaped to avoid any significant risk of successful antitrust challenges." said Joe Sims of Jones Day who, with Jeffrey LeVee (also of Jones Day), leads ICANN's outside litigation team which has successfully defended ICANN in each antitrust challenge ICANN has faced.

Judge Whyte gave CFIT 20 days to decide whether to file yet another amended complaint. ICANN's General Counsel, John Jeffrey, expressed the hope that CFIT would elect not to burden the community for a third time merely to advance the narrow commercial interests of its members: "CFIT has not set out a viable legal theory against ICANN or VeriSign, and we believe Judge Whyte's Order makes it clear that CFIT will not be able to do so. ICANN is hopeful that this ruling will persuade CFIT to end the litigation, and allow ICANN to focus its resources on its primary objectives and mission."