ANTITRUST LAW
The Internet Corporation for Assigned Names and Numbers (ICANN) is a nonprofit entity that organizes Internet domain names. It is governed by a board of directors elected by various groups with commercial interests in the Internet. One of ICANN’s functions is to authorize an entity to serve as a registrar for certain “Top Level Domains” (TLDs). ICANN and VeriSign entered into an agreement that authorized VeriSign to provide registry services in accordance with ICANN’s specifications. VeriSign complained that ICANN was restricting the services that it could make available as a registrar and was blocking new services, imposing unnecessary conditions on those services, and setting the prices at which the services were offered. VeriSign claimed that ICANN’s control of the registry services for domain names violated Section 1 of the Sherman Act. Answer the following questions, using the information presented in the chapter. 1. Should ICANN’s actions be judged under the rule of reason or deemed per se violations of Section 1 of the Sherman Act?
In a straight forward analysis, ICANN operates in violation of the Sherman Act and thus scrutiny of ICANN’s control registry services precede under the “Rule of Reason”. In the case at hand, however; VeriSign charges that ICANN’s prohibition upon Verisign’s SMARTBROWSER correcting a searcher’s misspelled search request overreached ICANN’s authority. VeriSign complains that ICANN’s action resulted via a conspiracy of competing actors intertwined in ICANN processes.
Since VeriSign alleges a conspiracy, this team proposes the VeriSign allegations present a pro se violation. There can be no “reason” in justifying conspiracy, accordingly; the opportunity to present evidence arises.
Interestingly, the court recognizes the pro se allegation but continues to discuss the cause using the “Rule of Reason”. 2. Should ICANN’s actions be viewed as a horizontal or a vertical restraint of trade?
ICANN’s relationship with the US Government is unique. The Clinton Administration called for a third party with inherent knowledge to oversee the registry of domain names. ICANN utilizes various parties from several organizations with interest in internet commerce while operating “in a manner that increases competition and facilitates international participation in its management”.
The team determines that ICANN operates under the umbrella of governmental authority and represents more than a trade association with accreditation authority thus allegations of an Anti-Trust violation necessitate review as a vertical restraint. Importantly, the team recognizes that individuals within ICANN could be reviewed horizontally if they were to act outside the scope of ICANN regulation. VeriSign, however, alleges no such action; indeed, VeriSign fails to allege any individuals as conspirators and ICANN’s actions warrant review as a vertical restraint in this action.

3. Does it matter that ICANN’s leadership is chosen by those with a commercial interest in the Internet?
A pro se violation under section 1 of the Sherman Anti-Trust Act is inherently illegal requiring no proof of motive as the mindset of the violator remains immaterial. While a court may properly examine motive for a criminal action, none is necessary.
The implication in VeriSign’s Anti-Trust action could be that conspirators maintained an economic interest in issuing the ultimatum. Should the court reach for a “Rule of Reason” analysis, then motive rises to a more interesting stand. Here, the position of the player outside the functioning body of ICANN bears recognition. Nevertheless, unless the player acts outside the authority bestowed by the Department of Commerce the “Rule of Reason” analysis proceeds as examining a regulatory agency with recognition of the possibility of prejudicial influence. 4. If the dispute is judged under the rule of reason, what might be ICANN’s defense for having a standardized set of registry services that must be used?
A “Rule of Reason” analysis continued as both parties argued, and the court discussed, “Rule of Reason” criteria.
“Rule of Reason” consideration involves four examinations. 1) The court shall consider the purpose of the agreement, 2) the parties’ ability to implement the agreement, 3) the effect or potential effect of the agreement on competition, and 4) whether the parties could have relied on a less restrictive means to achieve their purpose.
A. Should the court consider a challenge to ICANN’s control over registries, ICANN will defend itself arguing that such agreement proves necessary to “increase(s) competition and facilitate(s) international participation”. ICANN would argue that the United States cannot duplicate the technical knowledge available to ICANN, nor might any agency of the US Government achieve the level of international participation which ICANN successfully musters.
The agreement between VeriSign and ICANN allows Verisign to charge for domain name registry at a rate determined as twice that of that possible in a free market. In return, Verisign agrees to surrender opportunity to compete as a service correcting misspelled words in a user’s search result.
B. ICANN successfully implemented the agreement between itself and the US Department of Commerce and, indeed, maintains the power to allow Verisign rights as a domain name registrar. Accordingly, ICANN implement either agreement we would wish to analyze.
C. ICANN argues no harm results within the market. Several providers offer the services which Verisign wishes to expand. Defining “market” as those internet users who misspell search request, no such harm to said market can be identified by Verisign.
D. The court looks for a less restrictive means. Almost any complainant may argue a lesser restriction is available, thus a further analysis by the court proves necessary to determine whether or not the restriction is reasonable and it becomes valuable to examine the intent of those imposing the restriction.
While a harmful, anti-competitive intent to favor competitors, warrants inquiry particularly where the regulators may serve within competitor organizations; Verisign’s complaint only alleges this possibility without reference to specific parties or their intentions. Thus, Verisign fails to cross the hurdle.
The reasonableness of ICANN’s arrangement with the federal government appears above. As to the reasonableness of the agreement with Verisign and the ultimatum prohibiting entry into this market, the reasonableness analysis continues.
ICANN’s delegated role is to “increase competition”. Certainly, a prohibition against Verisign’s entry into additional markets serves this purpose as even Verisign provides evidence that the market is reasonably served through its competitors. In that Verisign’s expansion into these markets is prohibited, ICANN stipulates that to allow and single agent broad market access would limit competition and disadvantage consumers as a single player could harness unreasonable power. Verisign’s agreement with ICANN allows it an advantage which if unrestrained may result in lessening the influence of other participants.