VeriSign, Inc., a leading domain name registrar, has been sued for a fourth time over its aggressive customer acquisition campaign. The campaign involves the mailing of controversial "Domain Name Expiration Notices" to customers of VeriSign’s competitors encouraging them to switch their registrations to VeriSign. The plaintiff, Go Daddy Software, Inc., filed its "domain slamming" lawsuit in federal court in Phoenix, Arizona, alleging consumer fraud, deceptive advertising and misappropriation of trade secrets. Go Daddy claims that VeriSign’s "notices" are marked with "Reply By" dates that bear no relation to users' actual domain expiration dates.
As we reported last month, the Go Daddy lawsuit comes on the heels of previous actions filed by BulkRegister, the California Consumer Action Network and a class action on behalf of all consumers making similar claims against VeriSign. On May 14, 2002, BulkRegister won a preliminary injunction in a Maryland federal court enjoining VeriSign from sending such notices to BulkRegister customers. Christine Jones, Go Daddy's General Counsel, said VeriSign interpreted the preliminary injunction order to narrowly apply just to the customers of BulkRegister, and is continuing to send the notices to other competitors’ customers. "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. Go Daddy seeks a restraining order enjoining VeriSign from sending these mailings to their customers or to any competitors’ customers.
Three years ago, VeriSign held one hundred percent of the .com/.net/.org (CNO) market, but was down to thirty-eight percent in April 2002, according to SnapNames.com Inc, which tracks the industry. In the meantime, Go Daddy zoomed from forty-seventh place to sixth place among CNO registrars in the past year-and-a-half, primarily due to its deep discounting. BulkRegister, which places fifth in the CNO rankings, claims it was unaware that VeriSign is continuing to mail the notices to 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," said BulkRegister Vice President Tom D’Alleva. "Every registrar will come out and sue them."
Why This Matters: VeriSign’s aggressive marketing tactics are not without risk. Despite its brand name advantage (possibly jeopardized by this negative publicity) VeriSign appears to be pursuing a high risk strategy to avoid a flat-out price war with its lower-priced competitors.
This article originally appeared in ADLAW By Request, a publication of Hall Dickler Kent Goldstein & Wood LLP.
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