Re: [gnso-vi-feb10] Joint Proposal

[Jon Nevett <jon@xxxxxxxxxx>]

Mike/Milton/Avri:

Thanks for offering your well thought-out proposal.  

One question I have about the proposal is whether you have consulted with the 
US Department of Justice (DOJ) directly or indirectly through the ICANN GC 
about the approval process?  In my prior conversations with DOJ staff members, 
they have indicated to me that they are not set up to offer advisory opinions 
in these circumstances.  Do we know if they would be in a position to approve 
or disapprove a request to exceed 15% cross ownership? I know that ICANN added 
these type of referrals to the relevant competition authority in the Registry 
Services Evaluation Process, but as far as I know that part of the process 
hasn't been tested in the US and these DOJ staff members have indicated that 
such a request would not be able to be honored.  Even if it could be honored, 
they said that the timelines would be way too short.  So the question is 
whether this part of the MMR proposal is viable in the US?  It might be viable 
in other jurisdictions, but absent a positive indication from the DOJ, I don't 
think that we should assume that it is in the US.  

Also, when you talk about 40% market share, how should the relevant market be 
defined?  In antitrust merger analyses (again in the US), one of the hardest 
and most fought out aspects of the issue is how to define the market.  So what 
did you have in mind -- would 40% be of all registries; gTLD registries; a 
specific geographic market (e.g., 40% of registrations in Canada); a specific 
substantive market (e.g., 40% of linguistic and cultural registries), etc.?    

Thanks.

Jon 


On Apr 12, 2010, at 1:10 AM, Michael D. Palage wrote:

> 
> Jeff E.,
> 
> I was the chief proponent of the 15% baseline in the proposal so allow me to
> explain my individual thinking. This new gTLD process will likely generate
> tens or potentially hundreds of millions of dollars in revenue. Therefore
> parties that feel that they have been denied an opportunity to fairly
> compete in that marketplace could litigate. Seeing how a lawsuit would
> potentially slow down the launch of the new gTLD process, I was looking for
> a legal construct that would create parity within the existing marketplace
> (going forward and retroactively) and maximize ICANN's ability to prevail in
> any lawsuit. 
> 
> Now when you look at the test that we have proposed it is highly unlikely
> that a competition agency would reject any co-ownership application (0-100%)
> from any entity with less than 40% market share. Therefore 15% could have
> effectively been 0%. However, by using a 15% baseline we created parity with
> the majority of the existing registry operator agreements. (This approach I
> believe was also articulated in Jon Nevett's proposal). It is this same
> concern for parity on why I began to have serious second thoughts on the 40%
> market share absolute bar in the original proposal.  
> 
> In discussing the history of VRSN 15% contractual requirement, it had
> nothing to do with creating competition, and was just a by-product of what
> minor ownership VeriSign retained after selling NSI. As we discussed in our
> group, competition had already been created in the registrar market place
> notwithstanding VeriSign owning the registry and registrar, in part because
> of the structural separation and no self dealing rules that had been in
> place since 1999. 
> 
> I would really encourage you and other entities interested on entering the
> marketplace to focus on the >15% threshold and how competition authorities
> will handle those situations. Is the 15% threshold an historical artifact -
> yes. However, any inconvenience by leaving it in this next draft agreement
> is clearly outweighed in my opinion by the parity it creates within the
> marketplace.  As my favorite ICANN General Counsel Louis Touton use to say,
> ICANN is about protecting competition, not protecting competitors.
> 
> Best regards,
> 
> Michael
> 
> 
> -----Original Message-----
> From: owner-gnso-vi-feb10@xxxxxxxxx [mailto:owner-gnso-vi-feb10@xxxxxxxxx]
> On Behalf Of Jeff Eckhaus
> Sent: Sunday, April 11, 2010 8:11 PM
> To: Gnso-vi-feb10@xxxxxxxxx
> Subject: RE: [gnso-vi-feb10] Joint Proposal
> 
> 
> Team MMA,
> 
> First off MMA is the best acronym yet,  now I think of Mixed Martial Arts
> competitions inside a steel cage. Thanks for that.
> 
> The proposal looks good and look forward to hearing the details tomorrow. 
> 
> I do not want to jump the gun on the list but would like to ask a question
> that I hope you can address in your presentation tomorrow. The 15% limit is
> a legacy number that I believe is contractually based and is rooted in the
> VeriSign / NSI sale and how they structured the deal. 
> 
> Could you discuss tomorrow the value of maintaining that 15% limit going
> forward ? Why is that the appropriate percentage of ownership?  How is 15%
> better than 5% or 51% or 100% ? 
> 
> 
> Thanks
> 
> Jeff E
> 
> 
> 
> ________________________________________
> From: owner-gnso-vi-feb10@xxxxxxxxx [owner-gnso-vi-feb10@xxxxxxxxx] On
> Behalf Of Michael D. Palage [michael@xxxxxxxxxx]
> Sent: Sunday, April 11, 2010 9:18 AM
> To: Gnso-vi-feb10@xxxxxxxxx
> Subject: [gnso-vi-feb10] Joint Proposal
> 
> Hello All,
> 
> Attached is the proposal which is being jointly submitted by Avri, Milton
> and myself to the working group for consideration.  We look forward to
> formally presenting this concept to the group on tomorrow's call, and
> answering any questions that you may have.
> 
> Best regards,
> 
> Michael Palage (on behalf of Team MMA)
> 
>