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Lawsuit accuses registrar of hoarding potential domain sales to lock customers into a sale

A Los Angeles-based law firm representing search engine expert Chris McElroy filed suit against domain registrar Network Solutions last Monday, alleging that the company created an illegal monopoly by temporarily holding domain names that potential customers searched for on its web site.

According to the suit, as well as Network Solutions’ stated policies, customers searching for a .com domain on Network Solutions’ web site would find it held “on reserve” for a period of four days, after which it would be released back into the pool of available names. During this time, potential customers are unable to register the domain with a competing registrar – forcing them to pay Network Solutions’ higher-than-average registration fees or wait until the hold expires.

Network Solution calls its policy a “consumer protection measure,” and claims it is necessary to prevent customers from losing prospective domains to “front-runners,” who monitor domain search logs and quickly buy up searched domain names for themselves, hoping to sell them back to their original searchers.

Network Solutions’ reservation strategy, implemented early this year, makes use of an ICANN grace period that gives domain purchasers five days to seek a refund if they mistakenly register the wrong domain, like in the event of a typo. Unfortunately, the refund policy sees far more use in the hands of profiteers and domain poachers, who “taste” domains by buying them in bulk, sometimes millions at a time, gauging their ability to generate advertising revenue and then jettisoning the unprofitable ones for a refund.

Critics and industry observers were quick to blast Network Solutions’ “customer protection measure,” accusing the registrar of front-running and creating a temporary monopoly for itself. One such critic happened to no other than ICANN itself, who recently grilled Network Solutions at a meeting in New Delhi.

In a somewhat humorous twist, McElroy also named ICANN in the list of defendants for the lawsuit, which is seeking class action status. McElroy, a sharp critic of ICANN’s grace period, writes the only real solution is to eliminate the grace period and force purchasers to be mindful of what they buy. “There is no real need for the grace period. For every one legitimate person dropping a domain name because they changed their mind, I’m betting there are 100,000 domain names that were ‘tasted’ by the pros,” wrote McElroy in his blog, SEO Service Provider. “If you spend a whole $6.99 for a domain name at GoDaddy and then change your mind, you’re out a whole $6.99. Boohoo.”

Earlier this year, Network Solutions CEO Champ Mitchell defended his company’s policy, claiming that it only holds legitimate name searches to prevent them from being snatched up by profiteers. “We would be perfectly happy to end this process,” said Mitchell, “if ICANN or the registries would do something to protect small businesses or other small users.”

ICANN is currently mulling over a plan to implement a nonrefundable $0.25 fee in its registration process, in an effort to render the domain tasting process unprofitable.



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Opt-Out
By InternetGeek on 2/27/2008 11:00:44 PM , Rating: 2
Don't all contracts have an Opt-Out clause that allows the final customer to get off the contract no questions asked?

I think the period makes sense because otherwise you're stuck with a domain for which you don't have any use but another person might.

It's a different ball park, but if we were talking about Internet IPs then you would see everyone agreeing or even finding ways to poach other people's addresses no questions asked.




RE: Opt-Out
By GaryJohnson on 2/27/2008 11:53:47 PM , Rating: 2
You wouldn't get 'stuck' with a domain without the grace period. You can always transfer (or sell) it to that other person.


RE: Opt-Out
By Mitch101 on 2/28/2008 9:45:55 AM , Rating: 2
Trying to get them to update an old e-mail address is also a nightmare. My e-mail address changed at the worst time (Lesson learned) but it should have been an easy process sending a copy of drivers license and other information to prove who I was. Every fax I sent they claimed was garbled and they sent a rejected notice. To be sure I faxed 2 people I know and the faxes came through clear as day. I tried numerous things to get them to update the information. Called many people. After about 15 calls and 30 attempts at sending a fax I finally got a tech who in 10 minutes had all the e-mail addresses updated on all my domains with them. Immediately I moved my domains elsewhere. Had it not been for that one tech my domains would still be hostage to Network Solutions.


RE: Opt-Out
By mcmilljb on 2/27/2008 11:59:53 PM , Rating: 2
Yeah, when companies Opt-Out of contracts someone usually gets paid. That's why we need the non refundable fee. It's clear the system is being abused, and they should take precautions to protect potential users not abusers. I say the fee should be a dollar. Besides it's cheap and expires after a year any way. Domain names used to be more expensive. I find it funny they want argue over a few bucks when at one point it was $25.


RE: Opt-Out
By mcturkey on 2/28/2008 1:28:05 AM , Rating: 2
$25? I remember a time when it was more like $100/yr!


RE: Opt-Out
By Mitch101 on 2/28/2008 2:23:00 PM , Rating: 2
Wow. I jumped in when it was $70.00 a year. Guess I got a bargain.

Now all my stuff is on Godaddy and 1and1. Go daddy has a significantly better renewal system than 1and1 and you can usually find a coupon code to renewing domains. Usually $1.00 off renewal.


RE: Opt-Out
By pauluskc on 2/28/2008 9:55:46 AM , Rating: 2
Hmm... If its in the contract, I imagine it's there. I would also imagine a contract existing without that clause.

Typically in the U.S. there's a 3 day grace period in contract law. New cars to wireless phone access to dildo of the month club.

If you don't want the domain any more, put it on an auction site. Start the bidding at the price you paid. No Guilt. You may make money off it. Oh No!!

Internet IPs (Intellectual Properties, right?) - you do have protection under the law. If someone bought dell.xxx or microsoft.xxx - ha ha ha ha ha - the respective companies do have recourse to get the domain.


RE: Opt-Out
By johnsonx on 2/28/2008 2:15:13 PM , Rating: 2
quote:
New cars


That's a common myth, though maybe it's true somewhere. In most states, once you drive a car off the lot, it's yours.


RE: Opt-Out
By Xerstead on 2/28/2008 2:42:56 PM , Rating: 2
quote:
dildo of the month

Surely not on hygene grounds...
Contracts differ from the purchace/sale of items. You should be able to leave the club but anything you purchace, and use, or open the packaging is yours. There is additional protection for faulty products etc.

The problem is with companies registering millions of domain names and returning any not profitable enough for a full refund. A small $1 handeling/processing charge (non-refundable) will stop this.
It's the consumers fault if they mis-sppell and click 'confirm' I'd accept this if the rest of the registration fee could be refunded.


RE: Opt-Out
By Xerstead on 2/28/2008 2:44:02 PM , Rating: 2
quote:
mis-sppell

Oh the irony...


How?
By HighWing on 2/28/2008 1:41:02 PM , Rating: 2
quote:
ICANN is currently mulling over a plan to implement a nonrefundable $0.25 fee in its registration process, in an effort to render the domain tasting process unprofitable.


Ok so maybe I'm missing something here but how does a 25 cent fee render this unprofitable by companies that are doing this in bulk?

quote:
who “taste” domains by buying them in bulk, sometimes millions at a time, gauging their ability to generate advertising revenue and then jettisoning the unprofitable ones for a refund.


If I bought 2 million domain names and only half turn out to be profitable, I would only loose out on $250,000 by returning the other half. I'm pretty sure the profits from the remainning million domain names would far surpass that. Furthermore thats only assuming I dumped 50% of the names and bought in the millions. If I were buying only a 1,000 and dumped half there's only a loss of $250.

So Again how would a $.25 fee make this unprofitable?




RE: How?
By GaryJohnson on 2/28/2008 2:44:07 PM , Rating: 2
There's no guarantee even 1% of the million domains you buy will be profitable. I don't know what the yields are, but I don't think they are as high as you think they are.

If you buy 1 million domains, and only 10,000 of them can together, after the cost of registration and hosting, generate $1000/month profit under the current system you're doing pretty good. Under the $.25 fee system, you're in the hole for 20 years.


RE: How?
By HighWing on 2/28/2008 3:00:53 PM , Rating: 2
Yeah I could see if you were returning more then you kept then it wouldn't be profitable. Which I guess is mostly what they are trying to combat

But then that only applies in large numbers. When you get down to smaller purchases and keeping more, it only puts a small dent in profits. Which I bet is what these companies would find a way to do cause I'm sure there would be some sweet spot where when you buy X domain names and then return Y, the fee of .25X would still be far less then estimated profits Z.


RE: How?
By Xerstead on 2/28/2008 2:54:44 PM , Rating: 2
Very unlikely to be 50% that turn out to be profitable. If you think how many of those 'millions' will be just random combinations of words and letters. I don't have the figures but call it 5%, which i still think is be a bit high. On 1000000 domains, thats 950000 returned at $0.25 each.
$237500 is quite a large number.


Hmmmmm
By eye smite on 2/27/2008 10:16:38 PM , Rating: 4
Now what can you say about all this.........




RE: Hmmmmm
By Shwanzig on 2/27/08, Rating: 0
I think I might be a victim to this policy.
By Montrevux on 2/27/2008 11:30:17 PM , Rating: 2
I've been thinking about registering a certain domain name for a long time. I would look to see if it was available using both Godaddy and Network Solutions over the course of a couple months until one time it actually WAS taken.

The who-is listed it as registered to Network Solutions. I was disappointed, but I figured it was merely a case of someone beating me to the punch and using the Network Solutions offer to give a generic who-is report instead of personal information.

That is, until I checked it randomly a week later. This time it was available again. It started to go into a series of off-and-on registration until I finally saw it available, and decided to grab it.

Well, I'm sitting here a week later and my Web Hosting service has yet to set up any part of my account and I'm wondering if they are having problems registering the domain name.

Any ideas?




By pauluskc on 2/28/2008 9:42:40 AM , Rating: 2
sounds like you need a new web host.

but the real question is did you grab it or not?

check the whois (using godaddy for example) for the domain. is it registered? if not, buy it. $7. Oh No.

Instead of months of do I buy it or not. Stop killing yourself! Is $7 of your time worth more or less than the hour(s) you've spent checking on it, thinking about doing it, etc.?? I know for me it's not.

Just Do It (r) OR drop the whole stinking idea.

But you could use a better webhost probably. Check out: http://www.powweb.com -- used them for 7+ years - can't beat the price and they include a free first year registration. And they're fast and I've never had a problem. YMMV.


I glad.
By 67STANG on 2/28/2008 1:32:46 AM , Rating: 2
NetSol has been overcharging for service for ages now, at least as long as I have been registering domains (8+ years). At one time they were charging $50/yr. for .Com domain names... I don't even know how they stay in business with GoDaddy around... Probably had so many customers before Godaddy because they were pretty much the only game in town.

Hope this forces them out of business. Blah.




RE: I glad.
By TomCorelis on 2/28/2008 2:40:58 AM , Rating: 2
Not to mention their customer control panel consists of 150% upsell advertisements. Buy a domain wash! Has your computer been drop tested today? Quick! Order a power button diagnostic for your servers, before its too late!


Makes sense to me
By Spivonious on 2/28/2008 10:19:21 AM , Rating: 2
If I was looking to register a domain, I'd first search to see if it was available. Then I'd ponder the idea for a few days and then register it or not. As long as Network Solutions is only temporarily registering their own search logs, I'm perfectly fine with that.




By masher2 (blog) on 2/28/2008 10:40:37 AM , Rating: 2
A so-called "front-runner" can just as easily purchase the domain from Network Solutions as they can anyone else, with the same end result to the person attempting to register it.




"Mac OS X is like living in a farmhouse in the country with no locks, and Windows is living in a house with bars on the windows in the bad part of town." -- Charlie Miller

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