[CPWG] Fwd: [Internet Policy] Americans for Financial Reform Asks FTC To Scrutinize .ORG Deal

Sat Feb 22 05:14:57 UTC 2020

Here’s the latest salvo in the .org saga....

---------- Forwarded message ---------
From: Ayden Férdeline via InternetPolicy <internetpolicy at elists.isoc.org>
Date: Fri, Feb 21, 2020 at 11:11 PM
Subject: [Internet Policy] Americans for Financial Reform Asks FTC To
Scrutinize .ORG Deal
To: internetpolicy at elists.isoc.org <InternetPolicy at elists.isoc.org>

An extremely important new development in the sale of the Public Interest
Registry:

https://www.eff.org/press/releases/eff-seeks-disclosure-secret-financing-details-behind-11-billion-org-sale-asks-ftc

<https://www.eff.org/press/releases/eff-seeks-disclosure-secret-financing-details-behind-11-billion-org-sale-asks-ftc>The
Electronic Frontier Foundation (EFF) and the Americans for Financial Reform
(AFR) Education Fund today called on ICANN and private equity firm Ethos
Capital to make public secret details—hidden costs, loan servicing fees,
and inducements to insiders—about financing the $1.1 billion sale of the
.ORG domain registry.

EFF
<https://www.eff.org/deeplinks/2019/12/we-need-save-org-arbitrary-censorship-halting-private-equity-buy-out>
and
AFR today also urged
<https://www.eff.org/document/eff-afref-letter-ftc-about-sale-pir> the
Federal Trade Commission (FTC) to review the leveraged buyout, which will
have profound effects on millions of charities, public interest
organizations, and nonprofits—and the consumers who rely on them—around the
world. The deal would turn the .ORG registry—run for 17 years by the
nonprofit Public Interest Registry (PIR) organization—into a for-profit
enterprise controlled by a private equity firm that is partially funding
the deal with a $360 million term loan.

The proposed transaction would increase the likelihood that the new
for-profit PIR LLC could unfairly exercise its monopoly power to
disadvantage non-profit organization consumers by reducing service levels,
imposing onerous terms of service, or otherwise interfering with their
operations. EFF, AFR, and 824 nonprofits <https://savedotorg.org/>—including
National Council of Nonprofits, Girl Scouts of America, and American Bible
Society—oppose the deal, as do 24,000 individuals and six members of
Congress
<https://www.warren.senate.gov/oversight/letters/lawmakers-urge-internet-governing-body-to-block-private-equity-firm-ethos-capital-from-taking-over-the-org-internet-domain-name-registry>
. AFR
<https://ourfinancialsecurity.org/2020/02/news-release-internet-federal-authorities-must-seek-answers-before-any-sale-of-dot-org/>
represents
a coalition of over 200 civil rights, faith-based, consumer, and community
groups and was formed after the 2008 financial crisis.

In a letter
<https://www.eff.org/document/eff-afref-letter-icann-about-sale-pir> to the
Internet Corporation for Assigned Names and Numbers, or ICANN
<https://www.eff.org/issues/icann>, which coordinates the operation and
maintenance of the internet’s domain name system, EFF and AFR said the deal
should be stopped
<https://www.eff.org/press/releases/eff-icann-stop-org-domain-registry-sale-private-equity-firm>
unless
and until ICANN
<https://www.eff.org/deeplinks/2020/01/icann-needs-ask-more-questions-about-sale-org>
can
fully assess, and make public, critical financial details of the
transaction. Ethos and other entities involved in the sale have provided
few details about financing, including how PIR, which has average annual
profits of just $35 million, will make interest payments on the massive
loan it will be saddled with and still provide sufficient services to the
nonprofits that use the .ORG domain to exist on the Internet.

What is known about the interest payments is they are $24 million a year,
about two-thirds of PIR’s annual profits. PIR will also be on the hook for
the balance of the $360 million loan. The registry will have to come up
with substantial additional money to keep up with these huge costs, forcing
it to either raise fees charged to nonprofits for use of .ORG, reduce
investments in technical upkeep, or take other steps to boost revenue. PIR
said today that it would restrict price increases and form a “stewardship
council” to address the concerns in the nonprofit world, but these steps
don’t go nearly far enough and have limited enforceability.

“Given the poor track record of private equity firms running vital services
for the public, these authorities need to take a close look at Ethos
Capital’s financial plans for .ORG, and the structure of the deal,” said
EFF Senior Staff Attorney Mitch Stoltz. “Establishing an advisory council
doesn't solve the problem, especially since PIR's new owners will appoint
the council, control what information its members will see and its power is
limited to only some non-financial considerations."

“A private equity transaction poses unique risks to the .ORG non-profit
community. The private equity firm seeking to acquire .ORG is using the
classic leveraged buyout strategy of saddling the new company with a
massive debt load,” said Patrick Woodall, senior researcher at Americans
for Financial Reform. “This formula often leads to disaster for the company
and can be especially corrosive for private equity takeovers of entities
with a public mission as is the case with .ORG. The public needs far more
information about the financial terms of this transaction before the
relevant authorities make a decision on whether it should proceed.”

“The changes announced today by Ethos do not provide the protections and
security that the community has been asking for over the last three
months,” said Amy Sample Ward, Chief Executive Officer of nonprofit
advocacy group NTEN. “The pricing clause that offers a 10% annual increase
on average and only for the first 8 years does not speak to the real
concerns raised by nonprofits around the world about pricing protections
for the long term.”

For the letter to ICANN:
https://www.eff.org/document/eff-afref-letter-icann-about-sale-pir

For the letter to the FTC:
https://www.eff.org/document/eff-afref-letter-ftc-about-sale-pir

For more about SAVE.ORG:
https://savedotorg.org/
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***********************************
Greg Shatan
President, ISOC-NY
“The Internet is for Everyone”
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