Court Bars Canadian Company from Misleading Consumers in Marketing of Internet Domain Name Services

The Federal Trade Commission has requested that a federal district court enjoin Domain Registry of America, Inc., an Internet domain name re-seller, from making misrepresentations in the marketing of its domain name registration services and require it to pay redress to consumers. According to the FTC, the company told consumers that their domain registrations were expiring, leading many consumers unwittingly to switch their domain name registrar. The company also allegedly did not disclose that it would charge a processing fee to consumers if their transfer request was not competed – for any reason – and failed to provide consumers refunds in a timely manner. Under the terms of the stipulated final order announced today, Domain Registry of America (DROA), based in Ontario, Canada, may be required to provide redress to up to 50,000 consumers, is prohibited from engaging in similar conduct in the future, and is subject to stringent monitoring by the Commission to ensure its compliance with the court order.

DROA’s Business Practices

DROA is a re-seller of domain name registration services for a company called eNom, Inc. (eNom), an accredited registrar of Internet domain names. It allegedly conducts business by sending mass-marketed direct mail to U.S. consumers, soliciting them to transfer their domain name registrations from their current Internet domain name registrar to eNom. According to the FTC, DROA’s mail solicitations to consumers appear to be renewal notices or invoices from the consumers’ current registrars, advising them that their domain names are about to expire, and requesting payment for “renewal” of the domain name registration. The Commission contends that DROA has mailed millions of such “renewal” notices captioned “IMPORTANT NOTICE,” to urge consumers to act quickly to avoid “Register Lock” or “loss of your online identity.” The company further warns, according to the FTC, that if consumers “lose their domain namem” it may be “impossible for you to get it back.”

The Commission’s Complaint

According to the Commission’s complaint, in marketing its domain name registration services, DROA has violated the FTC Act in several ways. First, it allegedly uses notices/invoices that mislead consumers into thinking that they are renewing their registrations with their current registrar when, instead, they are transferring their registrations to DROA’s registrar, eNom. DROA also allegedly fails to disclose to consumers that it charges a $4.50 processing fee for any transfer requests that are not completed, even when the failure occurs without any fault of the consumers. The FTC also contends that DROA fails to issue promised refunds in a timely manner, in violation of the Truth in Lending Act (TILA), sometimes delaying refunds for months.

Terms of the Stipulated Order

The stipulated final order announced today addresses DROA’s allegedly illegal conduct, requires the payment of consumer redress, and ensures that the Commission can monitor its future conduct. First, the order bars DROA from making false or misleading representations in connection with the advertising, marketing, and promotion of domain name services. It also bars DROA from failing to disclose, clearly and conspicuously, any cancellation or processing fees, and any limitations or restrictions on cancelling domain name services. Finally, the order requires DROA to comply fully with the TILA when selling its services to consumers.

In addition, the stipulated order calls for monetary redress to reimburse consumers that DROA misled. It requires DROA to provide two forms of redress to consumers. DROA first must provide a full refund, including any administrative or cancellation fees, to any consumer who cancelled a transfer request during which a transfer was pending. Second, DROA must give current customers who were acquired from other domain name registrars and who have not yet renewed their registrations the opportunity to transfer their registration away from DROA, and must pay $6 to each customer to defray the costs of this transfer. It is anticipated that approximately 50,000 DROA customers will have the opportunity to transfer to another registrar under this provision.

Finally, the stipulated order contains terms requiring DROA to: 1) maintain its business records for four years; 2) provide notice of changes to business addresses and employment status; 3) permit the monitoring of its business practices to ensure its compliance with the order, including allowing access to is premises; and 4) distribute the order to its management and sales personnel. The Commission vote to approve the order was 5-0. It was filed in the U.S. District Court for the Southern District of New York on December 19, 2003, and requires the signature of the judge.

NOTE: This stipulated final judgment is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Stipulated judgments have the force of law when signed by the judge.

Copies of the Commission’s complaint and stipulated final judgment are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

(FTC File No. X040014; Civ. No. 03 CV 10075)