Opinion ID: 1208697
Heading Depth: 3
Heading Rank: 1

Heading: Renewal

Text: CFIT challenged the renewal term in both the .com and .net contracts providing that VeriSign will receive automatic renewal upon expiration of each contract unless a court or arbitrator issues a final order finding VeriSign to be in breach of the Agreement, and VeriSign fails to cure the breach. CFIT alleged the renewal term unlawfully restrains competition because the provision that would trigger a competitive re-bid for the contract is illusory, and that at the time they executed the Agreement[s], both ICANN and VeriSign understood that [the provision] never would be triggered. CFIT alleged that the threat of losing each contract in a competitive re-bid is essential to protect competition in that it benefits consumers by keeping prices in check, ... by maintaining solid and reliable performance of the registry, and by preventing the registry from undertaking abusive practices that would financially benefit the registry at the expense of the end-user's experience. The district court found that CFIT's complaint was insufficient to state a challenge to the renewal provision, concluding that CFIT's allegation regarding the illusory nature of the re-bid provision was conclusory and speculative, and insufficient to allege a violation of antitrust law. We have expressly held, however, that concerted action between co-conspirators to eliminate competitive bidding for a contract is an actionable harm to competition. Harkins Amusement Enters., Inc. v. Gen. Cinema Corp., 850 F.2d 477, 487 (9th Cir. 1988). In Harkins, the defendants were distributors and exhibitors of films who rigged a bidding process in order to ensure that the exhibitors would obtain licenses to display films released by the distributors, thus excluding from competition the plaintiff, a rival film exhibitor. Id. at 487-88. We found a Section 1 violation for injury to competition even though the only entity harmed, in the particular circumstances of that case, was the plaintiff. Id. at 488. The allegation in this case regarding the elimination of competitive bidding at the expiration of each successive registry agreement means that any other potential registry operator is excluded from competition, making the alleged harm to competition in this case even more severe than that at issue in Harkins. CFIT's complaint is not limited to alleging that the renewal provision harms individual competitors in the DNS. Rather, CFIT alleged that competition itself has been eliminated as a result of VeriSign and ICANN's conspiratorial conduct. This is precisely the type of allegation required to state an injury to competition. Austin v. McNamara, 979 F.2d 728, 738 (9th Cir. 1992) (to state injury to competition, plaintiff must allege conduct that actually causes injury to competition, beyond the impact on the claimant). CFIT has also alleged that consumers are harmed by this anti-competitive restraint, in the form of higher prices for registration of domain names, and potentially lower-quality services. In combination with the allegations regarding the existence of the conspiracy between VeriSign and ICANN as well as the intent to restrain competition, these allegations of harm to competition are sufficient to state a claim under Section 1. Kendall, 518 F.3d at 1047. Because restraint of trade claims under Section 1 do require the showing of a conspiracy whose members intended to restrain trade, see id., we conclude that CFIT's allegations regarding the renewal provision in the contracts is made out only with respect to the .com contract. CFIT has adequately pled the existence of a conspiracy between VeriSign and ICANN, and that VeriSign had the intent to restrain trade when it entered into the .com contract. However, the .net contract was reached after a competitive bidding process. CFIT has not adequately alleged that conspiratorial conduct to restrain trade was involved in the making of the .net agreement. CFIT's allegations concerning ICANN and VeriSign's adoption of the presumptive renewal provision are therefore sufficient to make out a Section 1 claim for restraint of trade with respect to the 2006 .com Agreement alone.