Ninth Circuit Affirms Dismissal of ICANN Sherman Act Claims | Practical Law

Ninth Circuit Affirms Dismissal of ICANN Sherman Act Claims | Practical Law

The US Court of Appeals for the Ninth Circuit held in name.space, Inc. v. Internet Corp. for Assigned Names and Numbers (ICANN) that the plaintiff did not present sufficient allegations to sustain claims that ICANN engaged in a conspiracy to restrain trade and monopolization in violation of Sections 1 and 2 of the Sherman Act.

Ninth Circuit Affirms Dismissal of ICANN Sherman Act Claims

Practical Law Legal Update 9-617-8634 (Approx. 3 pages)

Ninth Circuit Affirms Dismissal of ICANN Sherman Act Claims

by Practical Law Antitrust
Published on 03 Aug 2015 • USA (National/Federal)
The US Court of Appeals for the Ninth Circuit held in name.space, Inc. v. Internet Corp. for Assigned Names and Numbers (ICANN) that the plaintiff did not present sufficient allegations to sustain claims that ICANN engaged in a conspiracy to restrain trade and monopolization in violation of Sections 1 and 2 of the Sherman Act.
On July 31, 2015, a panel of judges for the US Court of Appeals for the Ninth Circuit held in name.space, Inc. v. Internet Corp. for Assigned Names and Numbers (ICANN) that the plaintiff failed to state claims for restraint of trade and monopolization under Sections 1 and 2 of the Sherman Act, affirming the lower court's dismissal of the antitrust charges (No. 13-55553 (9th Cir. July 31, 2015)).
The plaintiff accused ICANN of restraining trade and monopolizing the market for top level domain (TLD) names, such as .com and .net. The Department of Commerce (DOC) gave TLD-issuing authority to ICANN in 1998. In 2012, ICANN began accepting applications for new TLDs, after which the plaintiff brought the current complaint.

Restraint of Trade Allegations

In its complaint, the plaintiff alleged that in connection with the 2012 TLD application process, ICANN conspired with its board members to amend the rules and procedures of the application to restrain trade in the TLD market. The plaintiff relied on circumstantial evidence to support its allegations of an anticompetitive agreement, including that:
  • Some of ICANN's board members are industry participants with vested interest in TLDs.
  • ICANN and its board wrote the 2012 application rules, which were more complex than rules for a 2000 application round.
  • The application fee was significantly higher than previous application fees.
  • Most 2012 applicants were industry insiders and large technology firms.
  • The more complex rules and higher application fee deterred many applicants, including the plaintiff, from applying for TLDs in 2012.
The court held that the plaintiff's allegations could easily be rational business behavior and therefore did not find them to support an anticompetitive agreement. The court reasoned that independent business decisions about the TLD application process, including how many new TLDs to create and what to charge for them, are not reached by Section 1. The court also noted that:
  • The 2012 application process was facially neutral.
  • There was no indication that the TLD selection process was fixed.
  • There was no specific basis to find that board members acted with an improper motive in designing the 2012 application.
  • The fact that the ICANN board included industry insiders was a feature of ICANN from its inception and not evidence of conspiracy.

Monopolization Allegations

The plaintiff also alleged that ICANN illegally monopolized the TLD market, the international market for domain names and the market for blocking or defensive registration services. However, the court held that the plaintiff was not a competitor in any of those markets and could not be liable under Section 2. The court further noted that even if the defendant could be considered a competitor, it acquired its TLD authority through a lawful contract with the DOC, and is free to choose with whom to do business and the terms of that business.