History of Private Auctions in ICANN’s New gTLD Program
Ever since the 2012 ICANN New gTLD Program applications were submitted, private auctions have been a bone of… contention. Yes, that is a terrible pun, as private auctions were one means of breaking the tie in contention sets comprised of applicants who applied for the same gTLD string. At the time ICANN’s advised methods for breaking String Contention listed in the Applicant Guidebook, Module 4, were:
- Reach a Settlement
- Create a Joint venture (potentially requiring re-evaluation)
- Complete Community Priority Evaluation (if relevant – i.e., if an applicant in the contention set had submitted a community application)
- Enter an Auction of Last Resort (auctions where the winner paid the bid of the second-place party, and the proceeds went to ICANN for use in the community)
At the time, various third parties entered the auction space and provided what were termed ‘private auctions.’ Most of these auctions resulted in the losing applicants being awarded a portion of the winning bid (for example, if there were 5 applicants in a hypothetical auction and the winning bid was $4 million USD, the four losing applicants would each be awarded one-fourth of the winning bid, or $1 million USD each). As one would imagine this brought forth worries about fairness and gaming from various parts of the internet community. As such, ICANN and the broader community have since been trying to find an outcome in the policy development process that would lead away from this option (see correspondence from the ICANN Board, and guidance from the Governmental Advisory Committee and the At-Large Advisory Committee, among others).
Resolution of Contention Sets Without Private Auctions
At the ICANN Board’s Los Angeles Workshop in early September, the Board discussed the resolution of contention sets and came down with the following three outcomes:
- No private resolution: Private resolution of contention sets will not be permitted during the Next Round.
- Ability to submit alternate strings: Applicants should be permitted to submit one or more alternate strings at the time of application submission. During a short window after reveal day, an applicant could then switch to an alternate string — if their initial string is identical to another applied-for string — without creating an existing or forming a new contention set.
- Continue to use 2012 ascending clock second-price auction method: The Board agrees that auctions are a tested and effective method to allocate scarce resources and that introducing a raffle system is not preferable over the auction approach (see also “Economic Case for Auctions in New gTLDs.”) The Board is not aware of any specific concerns around the 2012 ascending clock second-price method that would warrant a change to the auction methodology.
So, all these years later private auctions are no longer a way to resolve a contention set.
What does this mean? Let’s go point by point:
No Private Auctions: There appears to be less incentive for well heeled applicants to apply for strings that they may not truly want as a means of arbitrage to win money in private auctions.
LIKELY WINNERS: Many applicants who may not have to build as big of a war chest as previously thought given that there may be theoretically less competitors for strings, as losing an auction now guarantees material money losses.
The Alternate String ‘Thing’: This is a hard one to read as there was nothing like this in the 2012 application round. This may well fall into the “law of unexpected consequences” camp as some sort of unforeseen results or behaviors seem likely to come out of this that no one sees at the moment.
LIKELY WINNERS: Potentially less money flush applicants who want to avoid high cost auctions but at least want to take a shot to see if anyone has the same idea they did; if they have no competition, great, they move along with a TLD they wanted, and, if there is competition, they can jump out of an expensive auction into a more reasonable gTLD with potentially no competition.
Same Old Auctions: At various points, different parts of the community wanted different auction types (e.g., Vickrey auctions). However, the ascending clock second-price auction method held steady.
LIKELY WINNERS: Fans of the ascending clock second-price auction method. Level-headed bidders that won’t accede to ‘auction frenzy’ and overbid their budgets.
No More Private Auctions in ICANN’s Next Round: The Big Takeaway
The issue of resolution of contention sets via private auction has been a thorn in ICANN’s side for years. The ICANN Board has come to this inflection point but still needs to take action to make the outcomes above formal. Once that is complete, it will remove uncertainty from the program and allows for the remaining implementation work of the community to go on. And that results in the current timeline for the 2026 Next Round application window to remain in play. Kudos to the community for pushing on this issue for years and kudos to the ICANN Board for making a decision that gets us one step closer to a new application round.
For more information about ICANN, the New gTLD Program, or domain policy, please reach out to me directly or to your Domain Portfolio Advisor and they will put you in touch with our Global Industry Relations team.
