IP Law Daily, TECHNOLOGY/INTERNET NEWS: Ethos Capital unveils ‘.org’ commitments; groups urge ICANN, FTC scrutiny, (Feb 24, 2020)

By Lynn Stanton,TR Daily

Electronic Frontier Foundation and the Americans for Financial Reform Education Fund call for ICANN and Ethos Capital to reveal financing details about the $1.1 billion sale of the Public Interest Registry.

Investment firm Ethos Capital on February 21 announced legally binding public interest commitments with respect to its acquisition of the Public Interest Registry, which operates the ".org"’ top-level domain (TLD), while two nonprofit groups urged the Internet Corporation for Assigned Names and Numbers and the Federal Trade Commission to take a close look at the planned transaction.

The commitments announced by Ethos include a 10% average annual increase on .org registrations for eight years and the establishment of a .ORG Stewardship Council that can veto PIR policies regarding censorship, freedom of expression, and use of .org registrant and user data.

Ethos also said it had made a legally binding commitment to establish a Community Enablement Fund to support initiatives benefitting .org registrants that are approved by the Stewardship Council. Finally, it said it had committed to issue an annual public report on its compliance with the commitments, which will become part of a legally binding commitment to PIR’s registry agreement with ICANN.

"Ethos’ investment in PIR will deliver significant benefits to the .ORG community, including investment in value-added products and services that will strengthen and grow the .ORG brand. PIR will conduct market studies and surveys to help identify the products and services that can further build the online presence of mission-driven organizations around the world," Ethos said in a joint press release with the Internet Society, which is the current owner of PIR.

"The Internet Society will invest the proceeds from the transaction and use the resulting investment income to power the organization’s mission of an Internet that is open, globally-connected, trustworthy and secure. The sustainable funding offered by the investments will ensure the Internet Society community efforts to build, promote, and defend the Internet can continue, and that these efforts reach far and wide. By decoupling from its reliance on revenue from the domain name industry, the Internet Society will also achieve a greater degree of independence, allowing it to be a more vocal champion for an open and inclusive Internet that is a force for good for everyone," the press release said.

Meanwhile, the Electronic Frontier Foundation and the Americans for Financial Reform Education Fund called on ICANN and 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."

"It seems overwhelmingly likely that the private equity-imposed debt load would prevent PIR LLC from relying solely on PIR’s existing business model of charging modest annual fees to non-profit organizations for .ORG domain registrations, especially given PIR’s recent announcement that it will limit itself to fee increases of no more than 10 percent, compounded annually. PIR LLC will have to generate substantial additional revenue to service the debt, which could force PIR LLC to take advantage of its monopoly position to raise prices; impose new service charges; reduce technical upkeep that could impair web connectivity or non-profit email traffic; or pursue other business strategies that could undermine the independence of non-profits, including suspending or transferring domain names in a censorship-for-profit strategy that has been used by other domain registries and internet companies. Ethos Capital may have other, as yet undisclosed, strategies to extract new revenues from additional services or conditions on its customers," EFF and the AFR Education Fund said in a letter to ICANN dated February 21.

They added, "Unless the parties can clearly demonstrate that the transaction will not imperil the future operation of .ORG, ICANN should exercise its power to withhold support for the change of control, terminate its registry agreement with PIR, and begin a public process to find a new capable and trustworthy steward for the .ORG domain."

In addition, the two nonprofit groups wrote to the FTC to ask it to "carefully investigate and scrutinize the proposed transaction to determine whether it runs afoul of antitrust, consumer protection, or other competition-related statutes or regulations."

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