Judge Won't Dismiss Manwin's Antitrust Claims Against ICM, ICANN

Aug 15, 2012 12:15 PM PST

LOS ANGELES — A federal judge has pared Manwin's antitrust lawsuit against ICM Registry and ICANN, granting in part and denying in part motions to dismiss the case.

U.S. District Judge Philip Gutierrez yesterday gave Manwin the option to move forward with the case after finding that, with two exceptions to charges — conspiracy to attempt to monopolize and charges that there are no substitute products in the relevant market for .XXX domain names — that the adult entertainment conglomerate adequately pled antitrust claims.

Gutierrez has given Manwin until Sept. 9 to amend its case against ICM Registry and ICANN.

Luxembourg-based Manwin filed suit last November, alleging that ICM Registry received the original and renewal registry contracts without competition, is charging above-market .XXX prices, imposes other anticompetitive .XXX sales restrictions and has, because of its ICANN contract, precluded other adult-oriented top-level domains from operating.

Manwin has asked the court to void the agreements between ICANN and ICM Registry and requiring a new .XXX registry contract that would be open to competitive bidding, imposing reasonable price constraints and service requirements on ICM.

Several highlights to yesterday's decision included rulings that ICANN could be held liable for antitrust actions alleged in the complaint and that Manwin sufficiently plead anticompetitive and predatory conduct by ICM Registry and ICANN.

ICANN, in responses to the complaint, had all along argued that it is not subject to antitrust laws in the case. But Gutierrez noted that transactions between ICANN and ICM Registry are commercial transactions.

"ICANN established the .XXX TLD," he wrote. "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.

"ICANN also spends much time recounting its charitable purpose and arguing that it only collects fees to carry out this charitable purpose," he said. "However, these arguments are irrelevant to an analysis of whether ICANN’s activities are commercial."

In another highlight, Manwin sufficiently plead anticompetitive and predatory conduct by ICM Registry and ICANN by alleging that ICM mounted a coercive campaign to force ICANN to approve the .XXX TLD and award the registry contract to ICM, Gutierrez said.

Turning to Manwin's complaint, Gutierrez pointed to ICM Registry's campaign to get .XXX off the ground beginning in 2000.

According to Manwin's complaint, the campaign allegedly included misrepresenting interest from the public in establishing a .XXX TLD, submitting intentionally overbroad and baseless Freedom of Information Act requests to federal ICM Registry and ICANN argued that this conduct cannot have been predatory because the conduct was unsuccessful governmental bodies interested in the .XXX issue, filing a baseless lawsuit against these governmental bodies and baselessly threatening to sue ICANN.

"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 that was in fact controlled by ICM, are sufficient allegations to establish improper, anticompetitive conduct ...," he said.

Gutierrez yesterday said that the antitrust suit can go forward after hearing seven arguments for dismissal.

"Because the court has found plaintiffs have stated valid antitrust claims, the proper time to fashion relief will be after plaintiffs have proven their allegations," he said.

Officials from ICM Registry did not immediately respond for XBIZ comment by post time.

Manwin officials lauded the federal judge's ruling.

"We are delighted with the court’s ruling," Manwin spokeswoman Kate Miller told XBIZ. "It reaffirms what we have long stated about the monopolistic nature of the .XXX top-level domain, its detrimental impact on competition and the overall harmful effect of the .XXX TLD on businesses and consumers.

"The court upheld the most important claims in their entirety, and granted leave to amend the few claims it dismissed. We are contemplating whether to amend those claims."    

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