NSI's New Domain Search 'Reserve' Policy Continues to Evolve

NSI's so-called Reserve Policy adapts to market pressure and threatened legal challenge.

After 5 days of controversy, sniping, public relations statements and damage control, Network Solutions (NSI) has attempted to address the growing firestorm over allegations of Domain Name Front Running (DNFR). To be sure, there will still be debate about whether NSI was ever really motivated to protect consumers by reserving searched domains for 4 of the 5 day grace period.  Certainly, NSI was also protecting itself against the prospect that consumers would use their domain availability search service and then register available domains with less expense registrar (no doubt a common occurrence).  

There are legitimate arguments that NSI's Reserve Policy, even in its new form and implementation, creates more problems than it solves.  But give credit where credit is due.  Network Solutions actively participated in the debate, issuing public statements and giving interviews to explain its policy and rationale. From a  legal standpoint, there were two serious problems with NSI's reservation policy.  The first was that, by failing to provide notice that serached domains would be 'reserved,' they were in potential violation of consumer protection laws for deceptive practices.  The second was that they were putting up parking pages with adlinks on the 'reserved' domains, opening themselves up to cybersquatting allegations by trademark holders. In response to pressure and threatened legal action, NSI modified its Reserve Policy by pulling the reserved domains out of its monetization program (parking pages with adword links) and, as importantly, increasing the level of notice it provides to consumers using its availability service.

The NSI home page now contains this notice, which is no doubt legally adequate and relieving some concerns about consumer deception.

Clicking on the "New Protection Measures" link takes you to a page with this information.  There is little doubt that the information on this page again meets the legal requirements of notice.

There is little doubt that a majority of consumers won't see or read the notice until it is too late. But in an internet world where user policies pushed to the bottom of web page footers and/ or never read by consumers, at least NSI put its notice close to the search box on the front page. The market will decide what happens next. Some consumers (like me) will avoid using NSI's availability search unless seeking to lock a domain for 4 days in order to consider options and alternatives.  Other registrars will see opportunity in what NSI has done here. Someone will offer a 'domain search and lock' service which markets the simple notion that the 5 days grace period allows anyone - not just domain tasters or other evil-doers - to reserve a domain for 5 days. 

NSI's credibility  and consumer protection justification will remain heavily debated.  But there is always a mix of company self interest in any product or service offering. That's called capitalism.  NSI could improve its credibility and avoid further alienation of many by offering two distinct services, one for its labeled "Find A Domain" availability search (mislabeled above since consumers are doing more than finding available domains with the present service) and another for "Reserve a Domain."  This would truly give consumers a conspicuous choice about whether they want to lock or reserve a domain in the first place; i.e. whether the consumer wants to be protected by NSI's otherwise unilateral and commercially advantageous reserve / locking.  This would also have the added benefit of leaving the vast majority of domains in the market, available to other registrants without the 4 day lock.

Someday, ICANN will step in and do what it should have done long ago, end the 5 grace period altogether. Until then, the market and threats of potential liability will be the only safeguards against Registrars who go too far, or seek to intentionally leverage their position  for commercial gain without adequate  consumer justification.

NSI May Be Legally Liable For Alleged Front Running

Ari Goldberger over at the Direct Navigation Blog picked up on a story on DomainState.com and on DomainNameNews.com that once again suggests that people searching for domain availability at certain registrars are being registered by the registrar.  The registrar thereby prevents a registrant from purchasing it at any other registrar other than the Registrar whose web site was used to check domain availability. This, from our point of view, amounts to fraud and domain theft at the registrar level and has earned the term domain "Front Running" a term picked up from illegal stock broker practices using the same model. Domain Name Front Running (DNFR) is believed to be caused when registrars or ISPs sell domain availability search traffic that runs through their network to front runners, who register the domain before the consumer is able to complete registration.  The DNFR then tries to sell the domain to the original availability searcher, or to another third party. 

Frank Schilling posted an excellent article on the history of domain tasting, a related practice, titled The Closing Window: A Historical Analysis of Domain Tasting which is an excellent overview of these types of problems and how they occur.

Network Solutions (NSI) has now been accused of front running domains, a shocking accusation given NSI's domain industry leader status.

No one has challenged domain Front Running by registrars in the courts, likely because the practice is new and since the loss of a single domain would  not typically generate a level of damages to support litigation. But litigation over this fraudulent domain practice by registrars is both viable and likely inevitable as noted below. While NSI's explanation -- below -- may be legitimate, there is little doubt that some registrars are engaging in front running practices.

Litigation will find those registrars engaging in the practice. Every US state has a Consumer Protection Act which would make this practice illegal.  It amounts to outright fraud.  The registrar deceives the consumer into using its domain availability or Whois search so they can presumably have the option of registering the domain.  The search feature is really a search tool for the registrar to see whether there is interest in the domain name. The registrar runs software which instantly registers the domain for itself and either offers it for sale or, at a minimum, makes it impossible for the consumer to register the domain through another register.  Registrars continue to deny the practice but litigation subpoenas offer the advantage of obtaining real data and documents from registrars concerning the inner workings of domain front running.

Because penalty damages and attorney fees are available under state Consumer Protection laws, we believe it is just a matter of time before litigation exposes this fraudulent practice.  It is certainly clear that ICANN has no intention of acting quickly to curb this domain registration abuse.

While the focus on NSI may prove  inappropriate, an analysis provided by the DomainNameNews, the following commentary explains the basics of domain Front Running:

The domains are likely being purchased and held in NSI ownership until the potential registrant comes back to purchase the name through NSI. If the purchase is not made at NSI within 5 days, NSI uses the same 5 day grace period that domain tasting operations use and they delete the domain. Once a search for a domain is conducted at NSI the domain name is registered and only available to be purchased by a registrant at NSI. It is not clear if NSI has increased prices on domains that have received multiple whois searches and that they are front running.

NSI also apparently has no problem taking over control of trademark domains using this practice as well. Searches for names such as microsoft-dell.com and ibm-microsoft-dell.com all appear as registered now by NSI and only available for purchase at NSI.

Front running domain names is a bold move by any registrar as it breaks a certain level of trust that the general public places in using a whois search. ICANN SSAC has conducted a “study” on front running recently in which they wrote “ICANN’s Registrar Accreditation Agreement and Registry Agreements do not expressly prohibit registrars and registries from monitoring and collecting WHOIS query of domain name availability query data and either selling this information or using it directly,” Warehousing domains in order to sell them to “potentially interested parties” isn’t specifically forbidden in the registrar contract with ICANN but is addressed in points 3.7.9 and 4.2.5 of the contract in which they leave room for new rules or revisions to the contract. In a quick look search it appears that other registries have addressed this issue. As an example, the SGNIC for example has a contract that expressly addresses this issue.

Network Solutions has responded to the accusations through a statement by Jonathon Nevett, Vice President of Policy at Network Solutions.

“I’d like to clarify what we are doing. In response to customer concerns about Domain Name Front Running (domains being registered by someone else just after they have conducted a domain name search), we have implemented a security measure to protect our customers. The measure will kick in when a customer searches for an available domain name at our website, but decides not to purchase the name immediately after conducting the search.

After the search ends, we will put the domain name on reserve. During this reservation period, the name is not active and we do not monetize the traffic on these domains. If a customer searches for the domain again during the next 4 days at networksolutions.com, the domain will be available to register. If the domain name is not purchased within 4 days, it will be released back to the registry and will be generally available for registration.

This protection measure provides our customers the opportunity to register domains they have previously searched without the fear that the name will be already taken through Front Running.

You are correct that we are trying to take an arrow out of the quiver of the tasters. As you know, domain tasters are the largest Front Runners. Due to no fault of registrars, Front Runners purchase search data from Internet Service Providers and/or registries and then taste those names. Some folks may not agree with our approach, but we are trying to prevent this malicious activity from impacting our customers.”

NSI is admitting that it registers / holds the domain, but suggests that this is a security measure to protect consumers.  Of course, this supposed measure precludes the registrant from registering the domain with any other registrar at a cheaper price.

Here is a comprehensive list of links to blog posts and stories about DNFR and NSI:

• Original Domain State BBS Post advising of  the issue.
• Conceptualist Blog Post Early In the story
• DotSauce Post with Response From NSI Employee
• http://www.circleid.com/posts/81082_network_solutions_front_running/
  
• InfoWorld Article
• Nominet Position Paper on Front Running, Circle ID Post by Michele Neylon
• Domain Registrar Network Solutions Front Running On Whois Searches, Domain Name News
• Network Solutions Faces PR Nightmare Over Domain FrontRunning, Domain News Wire
• Larry Seltzer Post 18 Months Ago on Whois Hijacking aka DNFR
• ICANN Watch Post