WASHINGTON -- Deepening a global controversy over allocation of the
"domain names" that point Web surfers to sites on the Internet, the
Justice Department has launched an antitrust probe of the company that
dominates the Internet address registration business, the agency
confirmed Monday.
Network Solutions Inc. of Herndon, Va., which is moving to raise
$35 million from an initial public offering to expand its business,
disclosed that it had received a request for documents from the
Justice Department.
"We are investigating complaints of possible anti-competitive
practices in the Internet address registration industry," department
spokeswoman Gina Talamona said.
The investigation comes as explosive growth and commercialization
of the Internet has prompted many businesses, organizations and even
foreign officials to complain bitterly about the way domain names are
administered.
With some experts predicting that the pool of desirable Internet
addresses could be depleted as early as 2000, the scramble for domain
names is dwarfing the battle for vanity phone numbers that many
Fortune 500 companies waged when 800 prefix numbers became available
in the 1970s.
Network Solutions has a monopoly to register Internet addresses
in crucial "top-level" domains--".com" for commercial sites, ".org"
for nonprofit groups and ".net" for communications carriers--under a
five-year contract with the National Science Foundation. The contract
ends in March.
It could not be learned what particular domain name registration
practices concern the Justice Department. In March, a New York company
called PG Media Inc. sued Network Solutions, alleging that the company
was violating antitrust laws by not adding new domain suffixes. The
company has also been the target of complaints about its service by
some involved in Internet commerce.
The federal probe is likely to be closely watched by groups such
as the World Intellectual Property Organization and the
telecommunications section of the Organization for Economic
Cooperation and Development in Paris, which also have been unhappy
with the way domain names are administered. The two groups have
recently talked of asserting some control over Internet domain names
with an eye toward setting up independent registries.
A handful of international groups that help govern the Internet
have recommended the creation of seven new top-level
domains--including ".store", ".firm" and ".info"--as a means of
alleviating the address crunch. But Network Solutions and some major
Internet service providers have withheld support for the proposal.
Network Solutions charges $100 for a two-year initial
registration and $50 a year for renewals; it sets aside 30% of the
money for Internet upkeep. The company contends the new plan would not
provide enough support for Net infrastructure.
The address process has been rife with controversy as the
Internet has gone from being a collegial, self-governing medium that
mostly served the academic and scientific communities to a roiling
commercial battlefield.
Earlier this year, for example, Mattel Corp., which owns the European trademark rights for Scrabble, sued Network Solutions in federal court in Los Angeles for letting archrival Hasbro register the domain name "scrabble.com," even though Hasbro markets the game in the United States. A lawyer for Mattel, which is seeking unspecified monetary damages and a preliminary injunction to bar Hasbro from using "scrabble.com," declined to comment.
More recently, Mecklermedia Corp., a magazine publisher, paid
more than $100,000 for the domain name "internet.com." Meanwhile,
sensing that many companies are frustrated in their quest to secure
choice domain names, two Silicon Valley entrepreneurs have convinced
the tiny Pacific Island nation of Tonga that there is big money to be
made selling domain names registered under the country's ".to" address
suffix--for example, "microsoft.to"
"Having your own cyber ID is becoming increasingly critical,"
said Gary Arlen, president of his own Bethesda, Md., Internet
consulting firm. "For companies that think it is important to have a
presence on the Internet . . . this is the first big battle over
corporate branding to build a base for electronic commerce" with
customers.
Meanwhile, a widely publicized White House study on electronic
commerce released last week, called for an inter-agency working group
to consider "what contribution government might make, if any, to the
development of a global competitive, market-based system to register
Internet domain names."
Network Solutions executives could not be reached for comment.
But Edward G. Poplawski, a Los Angeles lawyer who is an outside
counsel for Network Solutions on the Mattel case said, "A lot of these
domain name disputes have been blown out of proportion."
Poplawski added that since Network Solutions is operating under
an agreement with the National Science Foundation to administer domain
names, "it's difficult to imagine, under those circumstances, what
antitrust problem [Network Solutions] would be creating, given that
they are operating" under a government-created franchise.
But Stan Gorinson, a Washington lawyer and antitrust expert, said
government agreements alone can offer no protection to antitrust
violations.
"Government rights, whether they are patents or [Federal
Communications Commission] licenses, can be misused, and the fact that
somebody has a governmental licence doesn't necessarily preclude them
from being looked at on antitrust grounds," Gorinson said.
Copyright Los Angeles Times