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Internet Adult Entertainment Antitrust Suit Passes Scrutiny

Posted  September 4, 2012

The Internet Corporation for Assigned Names and Numbers (ICANN) and ICM Registry, the sole operator of the .XXX domain name registry, are going to have to continue litigating antitrust claims brought by adult filmmaker Digital Playground Inc. and Manwin Licensing International SARL.

Judge Phillip S. Gutierrez of the U.S. District Court for the Northern District of California is permitting plaintiffs in Manwin Licensing International S.A.R.L., et al. v. ICM Registry, LLC, et al. to proceed with their antitrust claims after granting in part and denying in part defendants’ motion to dismiss the complaint.

Plaintiffs allege that ICANN – the nonprofit organization responsible for management of Internet domain names – awarded ICM registry contracts without competition, and that ICM charges above-market .XXX prices, imposes other anticompetitive .XXX sales restrictions and has used its ICANN contract to block other adult-oriented top-level domains from operating.

ICANN had argued that it does not engage in commercial activity since it is a nonprofit organization.  The court disagreed, finding that ICM’s payment of money to ICANN for a grant of sole authority to operate .XXX domain names was “‘quintessential’ commercial activity and it falls within the broad scope of the Sherman Act.”  The Court also found that plaintiffs had adequately pled other elements of a Sherman Act claim, including a relevant market, antitrust injury and anticompetitive and predatory conduct.

The court did, however, dismiss two causes of action, conspiracy to attempt to monopolize and attempted monopolization.  Judge Gutierrez found the complaint failed to include all the product substitutions when defining the affirmative registration market that was allegedly the subject of the attempted monopolization.

For instance, ICM and ICANN agreed to limit new adult domains, but they did not conspire to limit the adult entertainment industry across all domains. Judge Gutierrez even used Manwin-owned to show that adult websites still have the option of using other top-level domains.

Plaintiffs have until September 9 to file an amended complaint.

Tagged in: Antitrust Litigation, Monopolization,