[SubPro-IRT] GAC Advice on Private Auctions and ICANN Last-Resort Auctions

[trachtenbergm at gtlaw.com]

Personally,  I think that permitting private auctions in the next round will completely distort and destroy it as the majority of applications will be speculative in nature trying to get a payout via private auction.  We already know anecdotally that there are a number of people setting up funds to do this and many others have already publicly expressed an interest in doing this.  And certain strings are obvious targets.  This will junk up the process, waste ICANN resources, and increase time and cost for all applicants, and be detrimental to the general public.  Frankly, I don’t know anyone that thinks permitting private auctions is a good idea and will be beneficial other than those who have expressed interest in participating in them.

Of course it is a different question of how to prohibit private auctions. I am not sure how this can be effectively accomplished.  Maybe we prohibit all private resolution of contention sets for monetary (or equivalent) consideration other than the ICANN  auction of last resort.  Could applicants still do this secretly – of course.  But if they wee found out, the winner could lose its TLD. If we all think that having private auctions is detrimental then we should take steps here to prohibit them, as ICANN is not doing so (although they have expressed concern) and have kicked it back to the GNSO.  Yes of course there will be ways to game any method we choose but the possibility of gaming is too often used in ICANN-land as a reason/excuse not to do things and to keep the status quo.  The reality is that any system/rule/process can be gamed and the best we can do is try to set up the process to reduce opportunities for gaming and increase penalties for doing so.

Best regards,

Marc H. Trachtenberg
Shareholder
Chair, Internet, Domain Name, e-Commerce and Social Media Practice
Greenberg Traurig, LLP
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From: SubPro-IRT <subpro-irt-bounces at icann.org> On Behalf Of Sam Lanfranco
Sent: Thursday, June 20, 2024 1:20 PM
To: subpro-irt at icann.org
Subject: [SubPro-IRT] GAC Advice on Private Auctions and ICANN Last-Resort Auctions

*EXTERNAL TO GT*
Comment by Sam Lanfranco
I do not believe that the GAC understands the complexities in its advice with regard to not using auctions in the resolution of contention sets.
FIRST: Once a contention set is determined, there is really no mechanism by which the contenders can work out a resolution on their own that can be prevented by ICANN. In a contention set an agreed payment scheme would avoid an auction, but an auction ban could not be enforced. Even insisting on an ICANN auction of last resort could not prevent a prior agreement between contending parties, and the ICANN auction would just a formality in terms of a private agreement.
SECOND:  Auctions exist to solve a problem of excess demand for unique (non-fungible) commodities. A gTLD is a unique supply of one item, the thing being sought is right to be the registry for that one item (vertical supply line at Q = 1). Money as the numéraire in which the price is expressed and the auction as a way of selecting a buyer when there are competing interests are a “form follows function” solution to the competing interests. It was invented precisely for this purpose when there is no overriding reason to award the "item" (gTLD registry) to any one contender.
GAC proposed no alternatives to resolving the contention set without an auction. Any alternative would require a consensus on an outside agent who would have neither regulatory guidelines not case law to reach a decision. That would mean that there are no objective criteria for selecting an outside agent.
My view here would be to explain this to GAC, and politely ask if they have guidance on how an acceptable outside agent might be identified. In the end I see no way around an ICANN auction of last resort, even if there is a way of preventing a private resolution within the contenders in the contention set. This situation is precisely why humans with agency created auctions in the first place.
Sam Lanfranco

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