ICANN's escape from antitrust liability.

• Author: Lepp, Justin T.
• Position: Internet Corp. for Assigned Names and Numbers

The power to control the architecture of the Internet is the power to control communication, commerce, and vast quantities of personal data. That power is wielded primarily by an American non-profit organization called the Internet Corporation for Assigned Names and Numbers (ICANN). Although one of ICANN's professed purposes is to promote competition in the markets for domain names and domain name services, (1) it has failed to do so effectively. (2) On the contrary, many of ICANN's actions have harmed competition. (3)

This Note will examine ICANN's conduct through the lens of American antitrust law and evaluate why ICANN has largely escaped antitrust liability. Part I describes the technical background of the Domain Name System (DNS), the role that ICANN plays in the administration and governance of the DNS, and the basic principles of antitrust law that regulate the domain name marketplace. Part II details the antitrust allegations against ICANN and explains how ICANN's actions may be anticompetitive. ICANN has used its unilateral control over the DNS to restrict competitive bidding, influence prices, and maintain entry barriers in the domain name marketplace. Part III explains why ICANN's conduct has received little antitrust scrutiny. ICANN's unusual and complex decision-making process and its close relationship with the United States government each contribute to the reluctance of courts and antitrust enforcement authorities to examine ICANN's conduct. Unless ICANN receives closer attention, all participants in the domain name marketplace, from businesses to consumers, will continue to pay higher prices, and innovation will continue to be stifled.

1. Domain Names and the Law of Competition

   The Domain Name System, or DNS, is the organizational backbone of the Internet. Without the shorthand of domain names, Internet users would be largely unable to communicate, transact, or share information. (4) This Part describes the DNS and relevant antitrust law. Section A describes the technology underlying the DNS and the domain name hierarchy. Section B describes ICANN and the role it plays in the administration of the DNS. Section C briefly summarizes American antitrust law.

   1. The Domain Name System

      The DNS allows users to easily navigate the Internet. (5) The Internet is a series of interconnected computers that exchange data using uniform communications protocols. (6) The standardized protocols guarantee that each computer connected to the Internet can communicate easily with all the others. (7) To facilitate this communication, each connected computer is assigned a unique number called an Internet Protocol (IP) address that identifies the computer's virtual location. (8) All connected computers have these addresses, from a terminal in a public library to smart phones to the servers of Google and Microsoft. (9)

      IP addresses are randomly assigned, unwieldy, and difficult to remember. (10) The DNS solves these problems by replacing the numbers with a series of alphanumeric characters that typically use common words, names, or phrases to refer to the particular computer the user intends to access. (11) Thus, www.google.com stands in for an otherwise obscure number. (12) When an Internet user types a domain name into a web browser, a computer called a root server (13) matches the domain name with its corresponding IP address and directs the user's computer to the target. (14)

      Domain names are organized in a hierarchical structure. (15) The familiar endings of domain names (the ".com" in www.google.com, for example) are called Top-Level Domains (TLDs). (16) These TLDs are further divided into second-level domains (the "google" in www.google.com). (17) Internet users and businesses can register and obtain a second-level domain name within a TLD, but only ICANN is able to create new TLDs. (18) ICANN's control over whether and how to add new TLDs derives from its authority to administer the root servers, the computers that match domain names to IP addresses. (19) Because the root servers contain the information that allows Internet users to get where they want to go online, (20) control of those servers grants ICANN nearly plenary power over the DNS. (21)

      Only seven TLDs existed prior to the formation of ICANN in 1998. (22) Despite millions of second-level domains being registered in the past decade and considerable consumer demand for additional name space, ICANN has added only thirteen new TLDs. (23) Finally, in 2008, ICANN decided to create a program for regularly adding new TLDs to the DNS. (24) The new program has only recently been implemented, with applications for new TLDs accepted between January and April 2012. (25)

   2. ICANN and Its Registries

      The Internet is older than it seems. The earliest research into the technology that would become the Internet was funded by the U.S. Department of Defense in the 1960s. (26) As networks became more complex and personal computers became more numerous, the administration of the Internet expanded beyond the Defense Department. (27) In 1990, the National Science Foundation took control of the Internet28 and quickly awarded the first private contract for control of the DNS to a for-profit company called Network Solutions, Inc. (29) Conflicts arose continuously between Network Solutions and the technical managers of the DNS--the scientists and engineers who had developed and guided the technology for decades. (30) In 1998, the U.S. government finally decided to consolidate the administration of the DNS in a single organization. (31)

      The Clinton administration issued a statement of policy in June 1998, which solicited a private American non-profit corporation to take over management of the DNS. (32) This policy statement became known as the DNS White Paper. (33) Shortly thereafter, a group of scientists led by Dr. Jon Postel, (34) one of the most well-known and respected Internet pioneers, created ICANN as a California non-profit organization. (35) The United States quickly recognized ICANN as the organization that it had envisioned in the White Paper. (36) The U.S. Department of Commerce (DOC) contracted with ICANN to manage the technical aspects of the DNS, (37) and entrusted it with policy control over the future of the DNS pursuant to a Memorandum of Understanding. (38) DOC formally relinquished control over DNS policy when the Memorandum expired in September 2009, but the U.S. government retains significant control over the DNS. (39)

      ICANN performs the central function of DNS management--registering and assigning domain names--by contracting with third parties. (40) Each of the Internet's Top-Level Domains (TLDs) is administered by a single entity called a registry operator. (41) Under contract with ICANN, these registries operate the authoritative domain name database for their TLD. (42) For example, the lucrative .com TLD is administered by the private company veriSign, Inc. (43) All domain names ending in .com must be registered with VeriSign. (44) These registry operators, in turn, contract with hundreds of organizations called registrars, which market and sell domain names to consumers. (45) While each TLD has only one registry operator, it may have hundreds of registrars. (46) Through its contracts with the registry operators, ICANN is able to set the terms for the registration and exchange of domain names and thereby exercise significant control over the domain-name marketplace. (47)

   3. Antitrust Law

      The U.S. Congress enacted the Sherman Act in 1890 to promote consumer welfare and efficiency, (48) counter the threat of antidemocratic political pressures from dominant corporations, (49) and protect small, independent businesses. (50) Section 1 of the Act makes illegal "[e]very contract, combination ... or conspiracy, in restraint of trade or commerce." (51) Section 1's prohibition extends to horizontal agreements (those among competitors at the same level of the supply chain) and vertical agreements (those between manufacturers and distributors). (52) Most agreements are analyzed under the "Rule of Reason," a level of scrutiny by which a court weighs an agreement's procompetitive benefits against its anticompetitive harms. (53) Only "naked" restraints such as price fixing are considered illegal per se and receive no benefit of the doubt, regardless of their effect on competition. (54)

      While Section 1 targets agreements among multiple firms, Section 2 of the Sherman Act aims at the anticompetitive conduct of single firms in a given market. (55) "Every person who shall monopolize, or attempt to monopolize" a relevant market is guilty of violating the Act. (56) A violation of Section 2 has two elements: "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." (57) This two-part test is meant to distinguish between monopolies that have acquired their market power through anticompetitive conduct and monopolies that have achieved success through vigorous competition. (58)

      Because the Sherman Act is meant to encourage vigorous competition, courts are wary to punish monopolies unless their conduct has damaged competition. (59) The essential antitrust inquiry, therefore, is whether a firm has engaged in activity that has harmed competition in a relevant market. (60) Part II uses this antitrust analysis to determine whether ICANN's conduct has damaged competition in the domain name market.

2. ICANN's Anticompetitive Conduct

   As the technical manager of the DNS, ICANN has a great deal of control over the domain name marketplace. (61) Some of ICANN's conduct, particularly as it relates to its contracts with registry operators, has harmed competition in the domain name market. Part II discusses three examples of ICANN's anticompetitive behavior. Section A describes ICANN's...