One of the better side stories of yesterday's Congressional hearing on ICANN concerned Congressman Dingell's 5-minute intervention (see ~1:49:00 into the video) during witness questioning. In addition to raising the expected inquires into the expiration of the JPA, he also asked the witnesses their opinions concerning the 2006 ICANN-VeriSign negotiation of the .com contract.

When the witnesses were asked if the contract "suffered from a lack of transparency," he got the expected answers. ICANN's CEO Paul Twomey, pointing out the contract was publicly available, said "no." Ken Silva of VeriSign agreed. Go Daddy, VeriSign's largest customer, argued to the contrary. Yes, Christine Jones said, the contract was publicly available, but it was the secrecy-shrouded process that led up to it that was cause for concern, and that Go Daddy didn't agree with the outcome.

Apparently this concern is justified. Today, a 9th Circuit Appeals Court ruling indirectly supported Go Daddy's suspicions in its reversal of an earlier decision made in Plaintiff Coalition for ICANN Transparency (“CFIT”) vs. VeriSign. In the 2005 case, the CFIT, an organization composed of participants in the Internet domain name system, including website owners, filed a complaint in the Northern District Court against VeriSign, the operator of the “.com” and “.net” domain name registries.

CFIT's complaint alleged the defendant engaged in conspiracy in restraint of trade in connection with the terms of the .com and .net contracts’ pricing and renewal provisions. In essence, CFIT sought to show that the .com and .net domain name prices were artificially high and that the contract renewal provisions VeriSign had negotiated with ICANN wrongfully restrained competition. In addition, CFIT alleged that VeriSign’s conduct in obtaining the anti-competitive provisions constituted monopolization or attempted monopolization of the .com and .net registration markets.

Despite the seriousness of the allegations, the District Court eventually dismissed the action with prejudice. However, today's Appeals Court reversal could be characterized as an almost complete affirmation of CFITs original allegations:

1. The Court concluded that CFIT adequately alleged a Section 1 violation of the Sherman Anti-trust Act. According to the Court, "CFIT has adequately pled the existence of a conspiracy between VeriSign and ICANN, and that VeriSign had the intent to restrain trade when it entered into the .com contract." "VeriSign and ICANN undertook concerted action to restrain trade by imposing prices higher than market rate and under conditions hostile to competition."

2. Furthermore, the Court concluded that "CFIT has adequately alleged that VeriSign’s improper coercion of ICANN and attempts to control ICANN’s operations in its own favor violated Section 2 [of the Sherman Anti-trust Act]."

Obviously, this is bad news for VeriSign, and only slightly better news for ICANN. Time will tell if the allegations prove out. But the successful application of antitrust arguments to regulation of the domain name industry is good news for the Internet.