New gTLD Auction Rules

["Jannik Skou" <js@xxxxxxxxxxxxxxxxxxxxx>]

Re: New gTLD Auction Rules 

 

Dear ICANN
We are consultants of various new gTLD applicants who have been placed in
string contention sets and are eligible to receive Intent to Auction Notices
from ICANN. We appreciate the opportunity to comment on ICANN’s New gTLD
auctions rules and to reply to the comments that have already been
published. 
1.       Payment in case of Default 
Section 59 of the Auction rules states that “after a winner is declared in
default, the remaining Bidders will receive offers to have their
Applications accepted, one at a time, in descending order of and subject to
payment of its respective Exit bid. In this way, the next bidder would be
declared the winner subject to payment of its Exit Bid.” 
We do not think that in a contention set consisting of two or more
applicant, if the winner of the Contention is declared in default the
remaining bidders should be subject to the payment of their Exit Bids if
ICANN offers to accept their applications.   
In a contention set consisting of only two applicants there is no legitimate
reason why an applicant should be obliged to pay his Exit Bid to ICANN if
the competing applicant chooses not to pay the Winning Price. 
Let’s take, for example, the two concurrent applications for< .money>.
Applicant A submitted the highest Exit Bid of $ 5 M and is declared the
Winner of the Contention Set. Applicant B ’s Exit Bid is 4,5 M. Why should B
be under an obligation to pay 4,5 M for acceptance of its application if A
refuses to pay the Winning Price? We understand that such funds would be
passed on to charity, but we do not see a legitimate basis for such a
payment. 
One may say, the above scenario is “constructed”, as it is hard to imagine
why an applicant should decide not to pay the winning price when it faces a
penalty of 10% of the winning bid (max. 2m $) for defaulting on a winning
bid. However, the scenario might not be as unrealistic as it first appears,
if the two Applicants are portfolio applicants that are opposed in various
contention sets. In this case a portfolio applicant might well follow the
strategy to drive up the price with the intention to be declared in default
and leaving its competitor with a very expensive bid and no money for the
next auction. 
This strategy might also be followed in a contention set consisting of more
than two applicants. The applicant with the second highest Exit Bid should
therefore  not be obliged to pay its Exit Bid, but only the Continue Bid
which it placed in the Auction Round following the Exit of the applicant
which is next in the descending order. 
2.       Timing of the Auction 
We support  Valideus’ comment that clarity is needed on how far in advance
of an Auction ICANN intends to distribute Intent to Auction notices as this
triggers bidding deposit timelines. 
 
Thank you for considering our suggestions. 



 

 

Best regards / Mit freundlichen Grüssen

 

Jannik Skou, executive MBA

Partner

 

Thomsen Trampedach GmbH

Riedstrasse 1

CH-6343 Rotkreuz
Switzerland

 

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