IP/99/596 Brussels, 29 July 1999 Commission investigates Internet agreements under eu competition rules

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Brussels, 29 July 1999

Commission investigates Internet agreements under EU competition rules

The European Commissioner responsible for competition, Mr Karel Van Miert, has ordered his services to look into the licensing agreements between Network Solutions Inc. (NSI) and test bed registrars of second-level Internet domain names in the .com, .org and .net domains. These licensing agreements are set to be temporary and to be amended and approved by the United States (US) Department of Commerce before the end of the test bed period, which now postponed until 16 July 1999, instead of 25 June 1999. This new anti-trust inquiry is part of an overall monitoring of on-going developments in the management of generic Top-Level Domain Names such as .com and of the Commission's efforts to guarantee the openness of the Internet.

Mr Van Miert wants to ascertain whether the licensing agreements fall within the scope of Article 81 (1) EC Treaty (formerly Article 85 (1) of the founding Treaty of Rome) and of Article 53 of the European Economic Area (EEA) Agreement, which prohibit agreements restrictive of competition. Certain provisions in the agreements or related actions taken by NSI might also constitute an abuse of NSI’s dominant position under Article 82 EC Treaty (formerly Article 85 (1) of the founding Treaty of Rome) and Article 54 of the EEA Agreement.

The Commission’s Directorate-General for Competition (DG IV) has informed the US Department of Justice (US DoJ) and the US Department of Commerce (US DoC) that it has opened a procedure enclosing a number of concerns and questions related to the licensing agreements as well as details on some recent related developments in the Internet field. DG IV hopes that raising such questions and concerns regarding the current standard NSI-Registrar Licensing Agreement will help the US DoC in its negotiations with NSI regarding its review.

DG IV wrote to Ms Becky Burr, Associate Administrator of the Office of International Affairs within the National Telecommunications & Information Administration of the US DoC, on 21 June 1999. In that letter, DG IV stated its awareness of the US DoC joint efforts together with ICANN to create a competitive environment for the registration of second-level domain names in the generic Top-Level Domains and its full support of such efforts. In particular, DG IV expressed concerns related to:

  • the lack of safeguards to prevent NSI registry from discriminating against competing registrars in favour of NSI registrar;

  • the fact that NSI as a registrar is not subject to the conditions and obligations set out in ICANN accreditation agreements and NSI-Registrar Licensing agreements, as NSI has not been accredited by ICANN as a registrar. However, DG IV believes that NSI should be required to get accreditation from ICANN and be subject at least to the same obligations as competing registrars as stemming from those accreditation rules;

  • certain requirements to enter the market, e.g. a performance bond of USD 100,000, which could constitute barriers to market entry; and

  • the domain names portability rules and NSI’s related policy, which DGIV believes could act as strong deterrents for SLD holders to transfer their SLD to another competing registrar.

Mr Van Miert decided to open an informal inquiry after receiving a number of informal complaints against the licensing agreements itself, against problems in the implementation of the agreements and against alleged abuses of a dominant position by NSI. DG IV will investigate these allegations in close co-operation with the US DoJ whilst continuing to fully monitor NSI’s operations with a view to ensuring that EU competition rules are respected.


The Internet Domain Name System maps user-friendly names onto the difficult to remember numbers that identify computers connected to the Internet. For commercial organisations on the Internet, the .com generic Top Level Domain (gTLD) is the most important and most widely used, in comparison with country code Top Level Domains (ccTLD) such as .be or .fr, and is increasingly valued while e-commerce is taking off.

Until beginning of October 98, the gTLDs system was operated by the Internet Assigned Numbers Authority (IANA) and Network Solutions Inc. (NSI), the latter under contract from the US Government (USG) (the NSI-USG co-operative agreement), acting as a monopolistic registry and registrar of .com, .net and .org world-wide. The registry functions consists in the operation (e.g. administration, maintenance and up-dating) of the database into which registrants details as well as the second-level domains details are registered. The registrar function consists in the registration in that database and allocation of second-level domain names to registrants, as well as all related marketing, billing and other related activities.

As provided for in the US Government’s White Paper, a private not-for-profit corporation called ICANN (Internet Corporation for Assigned Names and Numbers) was incorporated in the US on 1 October 1998 to administer policy for the Internet Name and Address System and succeed to IANA in that role.

The NSI-USG co-operative agreement expired at the end of September 1998, and was renewed while amended on 7 October 1998, for a period running until 30 September 2000, by so-called ‘Amendment 11’, which set out a first timetable for a stepwise liberalisation of the registration system for gTLDs.

The timetable under which the stepwise liberalisation was to be implemented was amended twice, first through Amendment 12 on 12 March 1999, and further on 25 June 1999 by the US DoC. Thereafter, NSI was by 26 April 1999 to establish a test bed supporting actual registrations in .com, .net, and .org with 5 registrars to be accredited by ICANN (“Test bed Registrars”) (Phase 1) by that date in accordance with ICANN’s published accreditation guidelines. Phase 2 with an unlimited number of competing registrars to be accredited by ICANN (“Accredited Registrars”) is currently set to start on 16 July 1999.

That liberalisation is to be implemented thanks to a system called the Shared Registration System (“SRS”). To implement this system and allow for competing registrars, NSI was (directly or indirectly) to develop a protocol and associated software supporting a system that permits multiple registrars to provide registration services for the registry of the existing gTLDs.

The licensing by NSI to registrars of such protocol and software is the purpose of the NSI-registrar standard licensing agreement published on 21 April 1999 by the US Department of Commerce (US DoC) as an annex to Amendment 13 to the NSI-USG co-operative agreement.

On the basis of that standard Licensing agreement, NSI has entered into agreements with the five test bed registrars selected and accredited by ICANN. These licensing agreements are aimed at enabling the latter to register second-level domain names within the registry of Top-Level Domain Names managed by NSI such as .com, .org and .net. Thereby NSI licences to those companies the necessary software, application programming interfaces and protocols enabling these companies to access the NSI Shared Registry System.

DGIV has identified a certain number of clauses in that standard NSI-Registrar licensing agreement that may raise anti-competitive concerns.

Under Amendment 13 to the NSI-US Government Co-operative Agreement of 21 April 1999, this standard agreement is intended for being used only during the test-bed period (Phase I).

Apart from the five test bed registrars, ICANN has approved until now fifty-two other companies to be accredited as registrars. These companies also include a number of EEA based companies. As of 9 July 1999, still only two out of the five test bed Registrars have started offering registration services.

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