VeriSign Inc is still sending allegedly "deceptive" direct mail to customers of rival domain name registrars, despite being enjoined from doing so with one competitor, a "domain slamming" lawsuit filed this week by Go Daddy Software Inc claims, Kevin Murphy writes.
Go Daddy sued VeriSign in Arizona, claiming the company's recent direct mail marketing strategy constitutes deceptive advertising, consumer fraud, interference with customer relationships and misappropriation of trade secrets
The complaint follows a similar suit by BulkRegister.com Inc last month. BulkRegister won a preliminary injunction from a Maryland court, based on the same direct mailings, but VeriSign has apparently continued to send them, albeit only to customers of registrars other than BulkRegister.
"I can tell you that we have been in full compliance with court orders. Beyond that, we do not comment on ongoing litigation," said a VeriSign spokesperson.
Christine Jones, Go Daddy's general counsel, said VeriSign interpreted the preliminary injunction order to narrowly apply just to the customers of BulkRegister. VeriSign, she said, has continued to use the controversial mailings to solicit business from customers of other registrars, including Go Daddy.
The lawsuits are based on an aggressive customer acquisition campaign VeriSign mounted a few months ago. The company sends letters to the customers of other registrars that look like renewal notices for domains about to expire. Customers are asked to pay VeriSign $29.95 to "renew and transfer" for another year.
In fact, the letters are inviting the registrant to transfer their domain name business from their current registrar to VeriSign. A non-savvy customer could easily mistake them for official renewal notices, and many have, BulkRegister and Go Daddy say. Both companies charge about a third of VeriSign's price for an annual renewal.
The practice has been referred to as domain "slamming", a reference to the outlawed practice of tricking long-distance telephone customers into switching to an alternate provider. Go Daddy is asking for a restraining order and injunction against VeriSign sending these mailings.
"We're asking for something as broad as possible," said Jones. She said the firm will attempt to get a injunction against VeriSign mailing customers of any registrar with the offending material. This may not be legally possible, however.
BulkRegister VP of marketing Tom D'Alleva said he was unaware of VeriSign continuing to mail other registrars' customers. "If that's true it's shocking that a company enjoined from doing something bad in one place would continue to do it in another," he said. "Every registrar will come out and sue them."
D'Alleva also said that after VeriSign was enjoined from sending its mailshots, BulkRegister became aware of some customers that continued to receive them. This turned out to be due to a 10-day delay in the mass-mailing service VeriSign uses to send the letters, so BulkRegister did not pursue the matter. It is not known if this delay is also the cause of Go Daddy's customers receiving the letter recently.
Unlike BulkRegister, which sued primarily on deceptive advertising claims, Go Daddy is also making claims of misappropriation of trade secrets, and consumer fraud, Jones said. She said the consumer fraud claim is based on the fact that Go Daddy, which is a consumer of domain names itself, has also received the VeriSign mailings.
On the trade secrets claims, she said: "On a couple of occasions I formally requested VeriSign give us the source of the data used to make the mailings, and they refused to do it. Frankly, the only place to find that data is our Whois database."
Whois are the publicly accessible databases where all registrars are obliged to make their customers' contact information available. According to Go Daddy, people are prevented from mining Whois databases for the purposes of soliciting customers, under the accreditation contract all registrars are obliged to sign by the Internet Corp for Assigned Names and Numbers.
It's not as straightforward as that, however, according to knowledgeable sources. The ICANN Registrar Accreditation Agreement actually only obliges registrars to implement Whois access terms that prevent unscrupulous marketers from mining Whois for email, phone or fax numbers. Some registrars have been known to extend their terms to snailmail, although it is specifically and deliberately not banned under the RAA.
Go Daddy was the 47th-largest domain name registrar in the .com, .net and .org (CNO) space in March 2001, and has become the surprise success story of the industry, accelerating to sixth place in less than 18 months, primarily due to its deep-discounting. The company sells a one-year registration for about $9, compared to VeriSign's $30.
VeriSign, meanwhile, has gone from having a 100% CNO market share three years ago to 38% in April 2002, according to numbers from SnapNames.com Inc, which tracks the industry. Many of VeriSign's customer losses are believed to have been to low-end registrars, such as Go Daddy, which attract high-volume speculators.