EFF, Other Nonprofits, and California’s Attorney General Tell ICANN To Stop The Private Equity Takeover of .ORG

ICANN, the organization at the top of the Internet’s domain name system, may be close to deciding whether the takeover of the .ORG domain registry by a private equity firm can go forward. EFF, along with the Domain Name Rights Coalition, NTEN, Access Now, and others, wrote to ICANN this week urging them to stop the sale.

The world’s nonprofits are busy fighting the COVID-19 pandemic. That’s why ICANN needs to fight for them. Now is not the time to allow nonprofits’ home on the Internet to be sold to private investors who could squeeze them for cash or silence their voices for private gain. We’ve asked ICANN to halt the transfer of .ORG, and to begin an open bidding process to select a new steward for the domain.

Just today, the Attorney General of California (where ICANN is incorporated) wrote to ICANN urging it to reject the transfer, voicing the same concerns that EFF and others have raised. The Attorney General of Pennsylvania is still also investigating the deal and could step in to modify or block the sale regardless of what ICANN decides. Access Now and Packet Clearinghouse also wrote letters echoing this call.

Ethos Capital, a private equity firm founded less than a year ago, announced in November that it planned to buy Public Interest Registry (PIR), the nonprofit that runs the .ORG top-level domain, from its current owner, the Internet Society, for $1.135 billion. This happened just as ICANN and PIR agreed to remove price caps on .ORG registrations, allowing the cost of a .ORG domain name to rise. Ethos, which was created by domain industry insiders, including a former ICANN CEO, would be able to increase the price of .ORG domains. It could also engage in censorship-for-profit, taking away nonprofit organizations’ domain names and causing those organizations to disappear from the Internet at the request of powerful corporations or governments. This is especially worrisome, because .ORG is home to millions of nonprofit organizations and international NGOs.

Not surprisingly, the public outcry has been enormous. Over 800 nonprofit organizations, from global charities to local museums, have joined 25,000+ individuals on a petition to stop the sale. Internet luminaries, five members of the U.S. Congress, the government of France, the Attorney General of California, and many of the Internet Society’s own chapters have written to ICANN to express their concerns.

Originally due in January, ICANN’s review of the deal has been extended four times. The ICANN Board is meeting today to talk about the sale. ICANN has asked probing questions about the deal, but Ethos and PIR have not been forthcoming with answers. In particular, they have refused to reveal the names of the owners and directors who will control PIR if the deal goes through, or how their investors might extract cash from PIR, potentially leaving it unable to maintain the .ORG registry in a reliable way.

Instead, Ethos has conducted a vast public relations campaign, including Internet advertising, lobbyists, and several webinars, to focus the public’s attention on their promise to limit price increases, and their plan to create a “stewardship council” that they claim will protect free speech.

EFF’s letter asks ICANN to focus on the questionable finances of the deal, and Ethos’s steady resistance to answering questions about it:

PIR [has] not provided the names of the directors and officers who would control PIR, an explanation of how PIR will service the $360 million debt that Ethos plans to burden it with, nor information on how PIR will distribute capital to Ethos’s investors. This reluctance to provide relevant information should itself justify ICANN’s rejection of the change of control. If PIR and Ethos have resisted giving ICANN a complete picture of their financial and structural plans (even on a confidential basis) during ICANN’s review, how can the NGO community expect that PIR will be candid and transparent in the years to come?

We also pointed out the suspicious organizational structure that Ethos plans to create:

Ethos plans to place PIR within a tangled web of Delaware shell companies: Ethos Purpose GP, Purpose Domains Feeder I, Purpose Domains Direct, and Purpose Domains Holdings, in addition to Ethos Capital itself. This Byzantine structure, along with Ethos’s refusal to disclose the directors, officers, partnership agreements, or the allocation of control, suggests a concerted effort to hide the real parties who will control the .ORG domain post-transaction and insulate them from any real oversight by registrants and the multistakeholder community.

As for Ethos’s “stewardship council” proposal, we explained to ICANN that it’s a hollow promise. The council would have only one mechanism for responding to censorship-for-profit: a veto on “PIR policies proposed by PIR concerning appropriate limitations and safeguards regarding censorship of free expression.” But as we explained to ICANN, that power is so narrow as to be useless. An Ethos-owned PIR would get to determine which “policies” fall within the council’s review, and council could only act if PIR formally changes one of those policies. Since PIR’s existing “anti-abuse policy” already allows the registry to make websites go dark on the flimsiest of reasons, and without due process, if they choose to do that, the stewardship council could not stop PIR from selling censorship.

Even in the narrow circumstances where the stewardship council could act, a veto by the council would require a two-thirds supermajority. That means any three of the seven members could allow PIR and Ethos to do whatever they want with nonprofits’ freedom of expression. And because PIR would always have a veto over the appointment and re-appointment of new members, it will always be easy for them to get those three votes.

In short, the “stewardship council” proposal is toothless, and won’t stop Ethos from doing what it wants to do with nonprofits’ home on the Internet.

If ICANN doesn’t act to stop the sale, the fight will not be over. Because PIR is a nonprofit organization incorporated in Pennsylvania, the Attorney General of that state has the power to go to court to stop it becoming a for-profit company. But if ICANN doesn’t take responsibility, the world will take note. ICANN is independent of any government, and it only has authority over the domain name system for as long as Internet users trust it. Many already see ICANN as being too deferential to the domain registry and registrar companies it’s supposed to oversee. If ICANN proves powerless to stop a private equity takeover of the infrastructure of the public interest Internet, many people will wonder—why does ICANN exist?

https://www.eff.org/deeplinks/2020/04/eff-other-nonprofits-and-californias-ag-tell-icann-stop-private-equity-takeover