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NSI hit with domain class action

Under fire for the monopoly it holds on registering the Internet's most valuable domain names, Network Solutions is facing its second antitrust lawsuit.

3 min read
Long under fire for the monopoly it holds on registering the Internet's most valuable domain names, Network Solutions (NSOL) is facing its second antitrust lawsuit.

Filed as a class action on behalf of domain name registrants, the complaint names both Network Solutions (also known as NSI) and the National Science Foundation (NSF), the federal agency that contracts NSI to register domain names ending in ".com," ".net," ".edu" and ".org."

The suit, filed last Thursday in Washington, D.C. federal court, accuses NSI and the National Science Foundation of manipulating the domain name registration process.

"NSF and NSI...have agreed, colluded, and/or conspired to protect, maintain, and perpetuate NSI's monopoly over the domain name registration market and to deny access to an essential facility to those who would establish competing domain name registration services," according to the complaint.

The suit resembles a separate court challenge leveled against NSI in March. In that suit, alternative registrar PG Media claimed NSI is running an illegal monopoly by blocking competitors from the domain name registration market. Attorneys for PG Media amended their complaint last month to include the NSF as well.

Attorneys who filed last week's suit were not immediately available for comment. But Michael Donovan, PG Media's New York attorney, thought it was a logical companion to his client's legal challenge against NSI.

"[This suit has] been a long time coming," said Donovan. "It's about time that the legal community realized that antitrust laws and other business laws apply to the Internet the same way they apply to any other business."

NSI spokesman Christopher Clough vowed that the company will "vigorously defend itself in this action" and added that the two suits appear to be unrelated. A spokeswoman for the NSF said the agency doesn't comment on pending litigation.

Despite NSI's statement that the two suits are unrelated, they adopt similar legal theories. For example, both suits allege that the central server and configuration files that NSI maintains are so-called essential facilities that must be made available to others in order for them to compete. Both suits also challenge NSI's practice of charging maintenance and registration fees for domain names, saying that the NSF lacked the required congressional authority to approve such a scheme, constituting an unlawful tax.

Rich Gray, an antitrust attorney at Bergeson, Eliopoulos, Grady, & Gray in San Jose, California, said that proving a company owns an essential facility is generally "a very difficult thing, but here it's highly plausible because of the critical need to have a central clearinghouse for the granting and policing of domain names.

"[The plaintiffs are] going to have to show that there is some unique aspect that can not be otherwise duplicated that makes it impossible for competitors, and therefore consumers, to do business, except through this critical item that is controlled jointly by NSI and the NSF," he added.

Thursday's suit is filed on behalf of six domain name registrants, including MyHouse Communications and Delta Micro Systems in Maryland and Texas-based Sartori Associates. It is filed as a class action, meaning that if the judge hearing the case approves, other domain name registrants also could join the action.

The suit seeks a refund of more than $130 million NSI has allegedly collected for maintaining and registering Internet addresses. It also seeks antitrust damages and a court declaration that the NSF and NSI's activities are illegal.

Network Solutions received a contract from the National Science Foundation in 1993 to register and administer nonmilitary Internet addresses. As part of the deal, NSI took control of the so-called root server that routes much of the traffic on the Internet. Under the contract, NSI received reimbursements for its costs.

That contract was amended in 1995 to allow NSI to charge a $100 registration fee and $50 per year in maintenance costs after two years. The exclusive contract expires next March, and it is not known whether the NSF will renew it, permit other registries to compete with NSI, or award the exclusive arrangement to some other company.