YNOT – The Internet Corporation for Assigned Names and Numbers cannot not escape a federal lawsuit filed in November, a federal district judge ruled Tuesday. Moreover, although the judge dismissed two “attempted conspiracy” claims against ICANN and dot-xxx registry ICM Registry, he found sufficient cause to allow to proceed three others alleging violations of the Sherman Anti-Trust Act.
The judge’s ruling came in response to separate motions to dismiss filed by ICM and ICANN in January.
The Honorable Philip S. Gutierrez, ruling in chambers at the U.S. District Court for the Central District of California, also granted Manwin until Sept. 9 to file a second amended complaint that provides more compelling arguments to support one of the dismissed claims.
At issue in the lawsuit are claims that ICM and ICANN conspired to create a monopoly on adult-centric top-level internet domains. Manwin alleges ICM bullied ICANN into a contract that ICANN eventually willingly signed when the terms became financially beneficial for both parties. The causes Gutierrez allowed to stand allege predatory pricing, elimination of competition for dot-xxx registry management and exclusion of potentially competing top-level domains in the future.
Manwin has asked the court to void the contract between ICM and ICANN and require a competitive rebidding process that would impose price and service restrictions on the winning registry.
In addition to taking exception to Manwin’s allegations of wrongdoing, ICANN sought to be excused from the litigation, asserting that as a non-profit organization operated for the good of the internet community it is not subject to anti-trust claims. Gutierrez dismissed that argument, saying non-profit status does not grant immunity from laws regulating interstate and international commerce.
“The identity of a defendant as a nonprofit or charitable organization does not immunize that organization from antitrust liability,” Gutierrez wrote. “To the contrary, nonprofit organizations that act in trade or commerce may be subject to the Sherman Act. Rather than focusing on the legal character of an organization, an antitrust inquiry focuses on whether the transactions at issue are commercial in nature.
“In any circumstance, ‘[t]he exchange of money for services … is a quintessential commercial transaction,’” he noted, quoting from previous case law.
“The Court finds the transactions between ICANN and ICM described in the First Amended Complaint are commercial transactions,” Gutierrez continued. “ICANN established the .XXX TLD. ICANN granted ICM the sole authority to operate the .XXX TLD. In return, ICM agreed to pay ICANN money. This is ‘quintessential’ commercial activity and it falls within the broad scope of the Sherman Act.
“Even aside from collecting fees from ICM under the contract, ICANN’s activities would subject it to the antitrust laws…. Accordingly, ICANN may be held liable under the Sherman Act….”
The judge also found sufficient evidence to support Manwin’s claim that ICM engaged in predatory behavior as part of a premeditated campaign to coerce ICANN into approving dot-xxx.
“At the very least, the misrepresentation of support from adult entertainment companies, the generation of fake comments in support of .XXX, the submission of misleadingly edited videos and photos, the non-disclosure that certain celebrity adult entertainment supporters of .XXX were paid by ICM, and the creation of a supposedly independent sponsoring entity [the International Foundation for Online Responsibility — ed.] that was in fact controlled by ICM, are sufficient allegations to establish improper, anticompetitive conduct” under existing case law, Gutierrez wrote.
A Manwin representative has said the company is pleased with the judge’s ruling. Neither ICANN nor ICM responded to requests for comment.
