question Is post drop premium reclassification technically forbidden?

[ryan87]

Many of you have probably seen my thread about my reclassified domain. That still isn't resolved, but while re-reading the registry agreement for the hundredth time while trying to decide if I want to pursue the issue beyond ICANN, I started scrutinizing some of the exact wording in section 2.10. The part that's used to permit premium domains says:

Section 2.10(c) shall not apply for (i) purposes of determining Renewal Pricing if the registrar has provided Registry Operator with documentation that demonstrates that the applicable registrant expressly agreed in its registration agreement with registrar to higher Renewal Pricing at the time of the initial registration of the domain name following clear and conspicuous disclosure of such Renewal Pricing to such registrant

Why is the word initial included in that sentence? If the intent is to apply the exemption to the current registration, there's no reason to include the word initial because there's only one registration event for the current registration period.

Both Oxford and Merriam Webster list first as a synonym for initial. Re-read that part of the agreement while interpreting initial to mean first. Now re-read it again with the word initial removed. The word initial isn't necessary and, in my opinion, it affects the meaning in a way that says the uniform pricing exemption in section 2.10c can't be applied to domains that have been registered (as non-premium) and dropped.

To give another example:

• The TLD .invalid is launched.
• Bob registers smith.invalid. This is the initial registration of the domain.
• Bob drops smith.invalid.
• Alice registers smith.invalid. This is a subsequent registration of the domain.

I'm not a legal person, so I have no idea how it would be interpreted in a legal argument. Does the precise meaning of the language in the agreement matter or is it interpreted to approximate the intent?

 

[jberryhill]

The language which matters, as far as you are concerned is this in 7.8:

7.8 No Third-Party Beneficiaries. This Agreement will not be construed to create any obligation by either ICANN or Registry Operator to any non-party to this Agreement, including any registrar or registered name holder.

So, referring back to the passage in question, the word "initial" means whatever ICANN and the registry take it to mean.

Whether it means the 'absolute first time ever' as you are interpreting it, or whether it is simply meant to mean the first payment term of the current registration, in contrast to a renewal, is a discussion that can be had between the registry and ICANN, but the language does not vest you with any enforceable right either way.

One contextual reference point could be that some courts have interpreted renewals as "re-registrations" of a domain name.

But in an example where a domain name was, say, registered for a year between 2015-2016, not renewed, dropped, and not registered again until 2024, I doubt that anyone would consider the "initial registration" to have been that 2015 term. Registrars and registries aren't even required to keep records beyond something like a three year time horizon after termination of a registration (I believe it was three last time I checked, but I'm not doing a research project at this moment).

If ICANN and the registry both agree that the passage means that the registry CEO needs to dress up in a bunny outfit and jump around ICANN HQ at Easter, then that's what it means.

 

[ryan87]

This is such a fantastic reply. Thank you!

but the language does not vest you with any enforceable right either way.

If ICANN and the registry both agree that the passage means that the registry CEO needs to dress up in a bunny outfit and jump around ICANN HQ at Easter, then that's what it means.

So registrants are, more or less, dependent on ICANN's subjective interpretation of all the terms that are ambiguous or undefined. Are there any limits to that?

As an absurd, hypothetical example, what if ICANN and the registries started interpreting identical, as it relates to renewal pricing, as equal or different. Would registrants have any recourse if that kind of tactic was used to allow individualized price discrimination for popular domains?

 

[jberryhill]

So registrants are, more or less, dependent on ICANN's subjective interpretation of all the terms that are ambiguous or undefined. Are there any limits to that?

That's a great question. It is probably most accurate to say (a) there are probably limits, and (b) no one has found them yet.

First off, the right to enter into contracts - which is essentially two parties deciding what shall be the law for them - is very broad. In general, we don't find there to be third party beneficiaries to a contract lightly, or else a lot of folks would be attempting to mess around in other people's business.

Let's say your neighbor has a lawn care contractor who is supposed to cut the grass every week. One week, the contractor doesn't show up, and your neighbor is okay with that. Meanwhile, your real estate agent is having an open house this week to show prospective buyers. You don't get to sue the contractor under your neighbor's contract because you are unhappy with the way your neighbor's lawn looks. If your neighbor was okay with the contractor skipping a week, that's between them. Their contract wasn't intended to benefit you.

Does it happen, sure.

So, what a lot of people put into a contract is a clause just like that one I posted above, which expressly forbids the contract from being interpreted to apply to third party beneficiaries.

Is that ironclad? Ultimately, no. In the US, a court could look at what the underlying intent may have been and find that the contract, regardless of the TPB clause, was intended to benefit a particular person. But, with something like this, a court could say that, yes, the price provisions are intended to give ICANN the ability to protect consumers generally. But the court could find the TPB prohibition clause to give ICANN discretion and flexibility to enforce the terms as they see fit, in their judgment about whether consumers in general are being protected, while also finding that you, in particular, do not have a right to enforce those terms.

Maybe the contractor gave your neighbor a partial refund or some other reason why your neighbor decided to let the grass grow that week. It's just none of your business.

One thing to be aware of is that there are certainly a number of other folks who would like to have their own power to enforce ICANN's registry and registrar contracts, and not in ways that would be generally beneficial to domain registrants.

So, approaching a question like this, one might look at "have TPB issues come up before in litigation relating to ICANN registry or registrar contracts", and the answer is yes.

Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 399-400 (2d Cir. 2004)

We are persuaded by the arguments Register and ICANN advance. It is true Register incurred a contractual obligation to ICANN not to prevent the use of its WHOIS data for direct mail and telemarketing solicitation. But ICANN deliberately included in the same contract that persons aggrieved by Register's violation of such a term should seek satisfaction within the framework of ICANN's grievance policy, and should not be heard in courts of law to plead entitlement to enforce Register's promise to ICANN. As experience develops in the fast changing world of the Internet, ICANN, informed by the various constituencies in the Internet community, might well no longer consider it salutary to enforce a policy which it earlier expressed in the ICANN Agreement. For courts to undertake to enforce promises made by registrars to ICANN at the instance of third parties might therefore be harmful to ICANN's efforts to develop well-informed and sound Internet policy.

Verio's invocation of the ICANN Agreement necessarily depends on its entitlement to enforce Register's promises to ICANN in the role of third party beneficiary. The ICANN Agreement specified that it should be deemed to have been made in California, where ICANN is located. Under § 1559 of the California Civil Code, a "contract, made expressly for the benefit of a third person, may be enforced by him." Cal. Civ. Code § 1559. For Verio to seek to enforce Register's promises it made to ICANN in the ICANN Agreement, Verio must show that the Agreement was made for its benefit. See Am. Home Ins. Co. v. Travelers Indemnity Co., 175 Cal.Rptr. 826, 834 (1981). Verio did not meet this burden. To the contrary, the Agreement expressly and intentionally excluded non-parties from claiming rights under it in court proceedings.


Balsam v. Tucows Inc., 627 F.3d 1158, 1160 (9th Cir. 2010)

All of Balsam's claims stem from the allegation that Tucows violated ¶ 3.7.7.3 of the RAA. Balsam argues that as a third party beneficiary of the RAA entered into between Tucows and ICANN, he has the right to enforce Tucows's compliance with ¶ 3.7.7.3. Balsam reasons that Tucows should be liable for the full amount of the default judgment against Angeles. Importantly, Balsam acknowledges that all of his claims are dependent on his status as a third party beneficiary to the RAA.

...

Given the absence of any evidence to the contrary, we conclude that the "No Third Party Beneficiaries" clause unambiguously manifests an intent not to create any obligations to third parties through the RAA. SeeCal. Civ. Code § 1638 ("If contractual language is clear and explicit and does not involve an absurdity, the plain meaning governs."); see also Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 400 (2d Cir. 2004) (the RAAs "No Third-Party Beneficiaries" provision "expressly and intentionally exclude(S) non-parties from claiming rights under it in court proceedings"). Accordingly, Balsam's claims, which are entirely dependent on his claimed status as a third-party beneficiary, must fail.

-----

Those are just two examples involving the Registrar Accreditation Agreement in which a third party was attempting to enforce a provision of the RAA, which is a contract between ICANN and the registrar in question.

The Registry agreements are further attenuated. One could argue that the registrars, at least, are accredited to do business with consumers and that the RAA was intended to benefit those consumers in certain respects. But the registries don't even do that. Maybe the pricing provisions of the Registry agreement are intended, at best, to provide pricing predictably for the registrars.

But, overall, arguing that the registry agreements confer enforceable rights to you, specifically, would be a very steep hill to try to climb.

 

[jberryhill]

As an absurd, hypothetical example, what if ICANN and the registries started interpreting identical, as it relates to renewal pricing, as equal or different. Would registrants have any recourse if that kind of tactic was used to allow individualized price discrimination for popular domains?

Whether ICANN decides to simply ignore a violation, regardless of whether they have a weird interpretation, is up to ICANN.

If your neighbor decides its not worth picking a fight over getting his lawn skipped one week, that's up to your neighbor, regardless of what impact his lawn might have on the perception of your prospective home buyers.

ICANN could say, "Yep, there was a violation. Naughty registry. Don't do it again." and be done with it, the same way a cop can see you run a stop sign and decide to let you off with a warning instead of a citation.

 

[jberryhill]

But, good questions. In general the various ICANN contractual requirements imposed on registrars and registries are like Biblical commandments. There might be a whole lot of folks breaking them, and your interpretation might be right, but you still aren't the one in charge of enforcing them.

 

[Acroplex]

But, good questions. In general the various ICANN contractual requirements imposed on registrars and registries are like Biblical commandments. There might be a whole lot of folks breaking them, and your interpretation might be right, but you still aren't the one in charge of enforcing them.

What if someone peddles the sale of Bibles but has broken most of its commandments?
One could say that if there is no contract there are no legal repercussions - but there is a load of ethical issues at stake.

Back to my regular Sunday blog.

 

[ryan87]

@jberryhill Thank you! I really appreciate getting such a thorough explanation. What you've said is more or less how I assumed things worked, but I didn't know how to assess it properly and I wouldn't have a chance of articulating it as well as you did.

I think you've done a great job of showing how registrants need to think about their standing and liability when assessing the risks associated with different registrars and registries.

Liability is a concern for me with my reclassified domain and probably should be for anyone else that ends up selling a reclassified domain. A reclassified domain that's sold will leave the subsequent registrant in a position where they may not be able to prove the domain's original fee class. That'll cause problems if the registry decides to increase the price and the practice of reclassification only targets high-value domains, so there's likely money to fight over.

I think it would be a mistake for a seller to assert that a reclassified domain is entitled to standard pricing because the seller would be the only party the buyer has standing against if the registry increases the price and ICANN refuses to intervene.

I'm not sure if the concept of buyer beware exists in the domain aftermarket, but I'm definitely sure I don't want to be the test case for a reclassified domain.

 

[leopardini]

What happens if a domain under a lease to own contract is reassessed as a premium domain during the term of the contract? Can that happen? Who is left holding the bag? The company managing the contract i.e. Godaddy? The domain owner?

I never see this addressed by Godaddy or Atom or any other platform offering lease to own. It will be rare, but no doubt there will be a case or two. Rotten boroughs can just scrape the domains in LTO contracts and target those domains for premium renewals. Easy money. Doh!

ICANN (aptly named) will just sit back and watch this happen? May the good prevail and justice uphold us. Gentlemen ...

 

[ryan87]

What happens if a domain under a lease to own contract is reassessed as a premium domain during the term of the contract? Can that happen?

In my opinion it could happen, but the uniform price protections in section 2.10c should still apply, so the renewal pricing should be, more or less, the standard price. That's the thing that's perplexing to me. There's virtually no upside to the registry if the intention is to adhere to the uniform pricing obligations.

Who is left holding the bag?

If everyone plays by the rules, no one (ideally), but that makes a risky assumption that everyone is going to operate in good faith forever. The problem is that ICANN doesn't seem to acknowlege the concept of fee classes in their agremeents and I don't see anything to make me think anyone is obligated to maintain a record of a domain's original fee class. Registrants need that info if the registry ever violates their uniform pricing obligations on a reclassified domain.

I might be wrong, but I have a hunch the only reason I was able to get that info for my domain was because the (good) registrars are keeping a record of the EPP responses they get from the registries.

 

[jberryhill]

ICANN doesn't seem to acknowlege the concept of fee classes in their agremeents

And there's a good reason for that.

It's difficult for ICANN to be overly prescriptive of pricing structures, business models, etc., in their standard contracts. Unlike, say, Major League Baseball, ICANN doesn't have a statutory anti-trust exception. So they keep a wide distance from things that might be seen as anti-competitive pricing policies.

In the ICANN Registrar group, nothing will make a room go quiet faster than someone asking whether the discussion has veered into pricing models and policies.

That's also why, if you read ICANN policies and look at the sorts of works-in-progress at ICANN, I think a lot of domainers would be surprised that it is as if the domain secondary market does not exist. There are frequently discussions on this site about what ICANN should or could do relative to something going on in the secondary market, which usually miss the point that there is a wide range of things that, as you put it, they just don't acknowlege.

 

[ryan87]

And there's a good reason for that.

It's difficult for ICANN to be overly prescriptive of pricing structures, business models, etc., in their standard contracts. Unlike, say, Major League Baseball, ICANN doesn't have a statutory anti-trust exception. So they keep a wide distance from things that might be seen as anti-competitive pricing policies.

In general, I think that's a reasonable approach, but ICANN is enforcing a per-registry monopoly on the supply of domain renewals and, as a registrant, I'm subjected to the monopoly power of the registry when I want to renew my domain. The renewal market is anti-competitive by default, so a policy of doing nothing is an anti-competitive policy in my opinion.

To reinforce that viewpoint, I would say the registry has used their monopoly power against me. In a free market I wouldn't tolerate what they've done and I would move my registration to a different registry operator. However, ICANN doesn't allow competing registries for the same TLD, so that's not an option.

Of course the per-registry monopoly is a necessity for the way DNS functions, so it's not like you can just "have competition".

In the ICANN Registrar group, nothing will make a room go quiet faster than someone asking whether the discussion has veered into pricing models and policies.

The uniform pricing policy already exists and, in my opinion, it's critical to making the argument that renewal pricing is protected by market competition. It forces the registries to offer a product, aka standard domains, where ongoing renewal costs are tied to the competition to attract new registrants. That helps offset the monopoly power of the registries because ongoing renewal costs are anchored to the renewal costs new registrants need to consider and new registrants benefit from competition between registries. IE: I agree with the argument that existing registrants are protected by competition for new participants, but only for non-premium domains.

I would argue the uniform renewal pricing policy is one of the most important aspects of arguing that ICANN isn't enabling monopoly like behavior. That's one instance of setting a pricing policy. The uniform renewal pricing exemption in 2.10c is a second example.

That pricing exemption reverses the positive effects created by the uniform renewal pricing policy. ICANN is effectively endorsing a pricing model that encourages individualized price discrimination against registrants that may not understand the monopoly forces they're going to be subjected to on renewal. They're choosing to push the market back toward the default state of being anti-competitive. There's no incentive to compete on price for renewals once registrants have agreed to discriminatory pricing and, by registering a more valuable, premium domain, self-selected to indicate they're going to have above average investment in that domain.

You can make the argument that giving consumers more choice is better, and I think it's reasonable to argue that. In terms of high quality domains, relatively low registration and renewal prices have created an aftermarket with side-effects that don't benefit consumers. However, the uniform renewal pricing exemption wasn't needed to allow registries to price domain registrations at market value.

In addition, Registry Operator must have uniform pricing for renewals of domain name registrations (“Renewal Pricing”). For the purposes of determining Renewal Pricing, the price for each domain registration renewal must be identical to the price of all other domain name registration renewals in place at the time of such renewal, and such price must take into account universal application of any refunds, rebates, discounts, product tying or other programs in place at the time of renewal.

That doesn't prevent registries from offering first year premium domain registrations at market value with uniform renewal pricing, does it? First year premiums also end up being a better product for the average consumer who doesn't have the ability or time or desire to consider the risks that come along with non-uniform renewal pricing. It's easy for registrants to understand how much they're paying upfront and the uniform renewal pricing obligations would help protect them against anti-consumer behavior that comes from the per-registry monopoly power that ICANN grants registries for domain renewals.

That exemption in 2.10c isn't the result of a hands-off approach. They've intentionally added an exemption that allows registries to restrict the supply of high value domains to consumers that will opt-in to a vulnerability that uniform renewal pricing would offset. They foster a competitive market for registrants in one sentence, but build in a loophole for the registries in the next.

By doing that, they've created two classes of domains; domains that are entitled to uniform renewal pricing and domains that aren't. By failing to acknowledge that, ICANN is failing to create a definitive record of which class a domain belongs to and that puts the future enforcement of uniform renewal pricing at risk. If no one is responsible for keeping those records, they won't be kept.

At least that's my opinion.

That's also why, if you read ICANN policies and look at the sorts of works-in-progress at ICANN, I think a lot of domainers would be surprised that it is as if the domain secondary market does not exist.

That makes sense to me because it's a competitive market with, presumably, sophisticated participants, and a lot of implied risk. My explanation of the aftermarket on the registrant focused website I'm building is basically "it's complicated and you should consider hiring a broker to represent your interests".

 

[jberryhill]

I never see this addressed by Godaddy or Atom or any other platform offering lease to own.

Oh, there are a lot of things that aren't addressed in platform LTO's. I don't know what sort of volume they do in those, but the casino rule applies - never play with what you don't mind losing. Most of the time, and I do mean most of the time, these things probably work out fine. If it was a substantial deal, you might want to take something other than "I'll have a #5 on the menu".

But if it is my favorite "million dollar deal" - a dollar a year for a million years - I wouldn't lose a lot of sleep over it.

a per-registry monopoly on the supply of domain renewals

Ryan, that's one of the most thoughtful posts I've seen here in a long while. I just wanted to highlight that phrase, because there is a kind of disconnect where .com is considered "special" relative to the other gTLDs which are usually considered substitutes for one another - regardless of switching cost, goodwill, etc..

I have a horse for sale, and each of my neighbors has a horse for sale. Some are black, some are brown, some are draft horses and some are thoroughbreds, but nobody says that we each have a per-horse monopoly, even if nobody is running a Clydesdale at 1:10 over six furlongs at Aqueduct, or plowing a field with Secretariat's great grandson. But, sure, to ICANN they are all "horses".

By doing that, they've created two classes of domains; domains that are entitled to uniform renewal pricing and domains that aren't. By failing to acknowledge that, ICANN is failing to create a definitive record of which class a domain belongs to and that puts the future enforcement of uniform renewal pricing at risk. If no one is responsible for keeping those records, they won't be kept.

That's a really good point. The "we don't do pricing" stance has its blind spots.

 

[leopardini]

They foster a competitive market for registrants in one sentence, but build in a loophole for the registries in the next.

Ryan, your whole post was so cogently written I haven't been this impressed since "Suits" came up with the girlfriend's name, Sheila Sazs.

 

[enterscope]

Premium domain renewals are a damn shame, regardless.