In most industries, businesses that blatantly act against the interests of their customers to favor their own internal profit centers would either not be allowed or else subject to controls and oversight by the government. It is universally regarded as an unfair and deceptive business practice. In the domain name registrar business, however, the normal practices of legitimate business dealings and customer protection seem woefully wanting. Kelly’s Case described here illustrates the point, and it provides the opportunity for ICANN to demonstrate it can be responsive to egregious registrar behavior without government agencies or juridical bodies becoming engaged.
A young woman starting up a business recently conveyed a disturbing set of facts. I’ll call her Kelly. Kelly started up a web-based business five years ago, as part of an MBA enterprise development initiative. She created an LLC, registered a related domain name, and over the subsequent years built a business with innovative services, and a trademarked brand name with intellectual property — all associated with the domain name. She regularly ensured the domain registration fee was paid.
Suddenly she found the domain was not functional, and contacting the registrar was told that without her notice, knowledge, or approval, the domain had been hijacked — sold to what appeared to be a domain name collector. She was instantly out of business. Upon further inquiry to her amazement, she found out that the “hijacker” was the registrar itself — the auction unit within the registrar. After pursuing the matter within the registrar’s own processes, she was informed that the registrar regarded its obligations with to its own auction business unit, not her as a customer.
The basis for the registrar’s action was that five years previous when she had registered the domain name, she was enticed by the auction business unit to see what the domain name was worth. No further communication occurred and the relationship with the registrar auction unit itself was terminated — but apparently not the right to “hijack” the domain to sell it off. To the extent a clickthrough agreement existed, it would certainly be unconscionable. She never imagined that the registrar could years later simply transfer the domain name to its own business unit for sale to a third party without notice or approval by her. What is all the more appalling here is that the registrar also reviews its own actions and declared its actions are final in favor of the business unit. She was told by staff verbally that although this was patently unfair, the registrar regards its obligation is to its auction business unit rather than the registrar domain name customer.
From a legal and public policy standpoint, Kelly’s Case raises multiple significant concerns that seem increasingly common. The potential for abuse goes back to the Anti-cybersquatting Consumer Protection Act (ACPA) in 1999, and a considerable body of law has emerged. It is apparent that the U.S. Federal Trade Commission and its counterparts, as well as the courts in many jurisdictions, have instituted multiple actions against domain name registrars for unfair and deceptive practices. Indeed, the FTC itself — concerned about the potential increase in registrar deceptive practices and fraud — has repeatedly asked ICANN “to take additional steps to protect consumers.”
Other than a pro forma creation of an ICANN Data and Consumer Protection Working Group in 2010, however, it is not apparent that ICANN has actually done much of anything to protect consumers against the kinds of rather egregious activities and actions that Kelly’s Case raises. Indeed, until the very recent appointment of a new senior VP for contractual compliance and consumer safeguards, ICANN has been asleep in this area. As part of the group 20 years ago that helped initiate ICANN as a means to help nurture industry self-regulation, I personally find this situation dismaying. It puts the attempt to achieve domain name industry self-regulation at risk. Perhaps now, ICANN consumer protection action will occur — if for no other reason than to ward off government regulatory intervention.
By Anthony Rutkowski, Principal, Netmagic Associates LLC
Related topics: Domain Names, Registry Services, Internet Governance, Policy & Regulation
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