VeriSign Settles Marketing Lawsuit

Domain registrar giant VeriSign Monday has settled its lawsuit with smaller Scottsdale, Ariz.-based rival Go Daddy. According to terms of the settlement, the Mountain View, Calif.-based company will no longer send “renewal notices” to customers of Scottsdale, Ariz.-based Go Daddy Software, a smaller, discount-priced competitor in the aggressive field for domain name registration.

Filed in June, the suit accused VeriSign of consumer fraud and deceptive advertising from its practice of sending the notices to customers of competing registrars, including Go Daddy and Baltimore-based BulkRegister.

According to the other registrars, the domains owned by the notices’ recipients weren’t necessarily about to expire. Additionally, the registrars said, when domain registrants used the “renewal” form attached to the mailing, management of their domains were switched to VeriSign — and they were charged a fee for changing registrars. BulkRegister settled its case against VeriSign in early August.

VeriSign, which began the mailing in late April, has not sent out any of the notices since Arizona federal judge Mary Murguia issued a preliminary ruling. VeriSign officials would not publicly comment on either case.

Specific details of the Go Daddy settlement were kept confidential, but general counsel Christine Jones told internetnews.com that the company was pleased with the outcome.

“Bottom line is that we got what we wanted,” Jones said. “The whole point was to get them to stop doing it. The best thing is that this sets a precedent. We think competition is great but not in an underhanded manner.”

Go Daddy said it had been forced to take the issue to court when VeriSign refused to respond to two formal requests to stop the mailings and comply with the ICANN Registrar Accreditation Agreement. The agreement limits the use of a registrar’s customer contact database — Whois — to lawful purposes such as the inquiries necessary to register domain names or modify existing registrations.

In addition to the suits by Go Daddy and BulkRegister, VeriSign also faces a lawsuit filed in California that aims to win class-action status, and a complaint from the non-profit California Consumers Action Network. The Federal Trade Commission and the U.S. Postal Inspection Service also are investigating the campaign.

The company’s aggressive marketing tactics, ironically, came about in an effort to improve its business as the market for domain names continues to tighten since the heyday of the dot-com boom.

In May, during the company’s annual investor day, executives announced that the company would be stepping up its marketing efforts as a way to recapture market share lost to newer, smaller players in the narrowing domain name space.

That move followed lower-than expected first-quarter revenues and layoffs in April. Also that month, the company said its total registered domain names had fallen by 12 percent, to 12 million at the end of the first quarter, and that domain name renewal rates had dropped from 54 percent to 40 percent during the quarter.

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