A Drop-Catcher’s Quandary

An interesting situation has been brought to light in recent times with regards to Registrars drop-catching domains for new clients.

With Drop, if anyone (new or old) who has an approved account wins a domain name on the drops, they become the registrant. And the registrant contact email address is whatever they nominated.

With Netfleet, a new client becomes the registrant – however the registrant contact email address now goes to a default email address of holding@netfleet.com.au. It automatically changes to the registrant’s email address when they have paid for the domain. (Long established client accounts are not affected by this. As with any business, some clients have their own terms of trade in place).

The other dropcatcher Domain Shield has now adopted Netfleet’s practise.

I wasn’t sure whether this “holding@netfleet.com.au” was actually permissible under the auDA policy, so I asked a couple of other registrars and they said “technically no”. An initial phone call to the auDA received a similar response.

This is the actual policy; and the relevant clauses are below:

4.2 Registrars and resellers are not permitted to use their own contact details as registrant contact information, unless they have received express written consent from the registrant in that regard.

4.3 Where a registrar is notified by auDA that a reseller is using their own contact details as registrant contact information, without express written consent from the registrant, the registrar must update the registrant contact information to be compliant with this policy.

So I then spoke with Jonathan from Netfleet, and he told me that Netfleet had sought permission from the auDA back in September last year. They had done so due to some possible fraudulent activity by newly signed up accounts. He said that Netfleet received written consent to do so, provided that clients had agreed in writing to these terms and conditions.

I rang my original contact at auDA again to try and get to the bottom of the matter. Given that I was going to be writing about the situation, they suggested I put my request in writing to get an official response. I have done so today.

My Opinion

I can totally understand (and empathise) why drop-catchers would want to protect themselves. After all, they have invested huge sums of money into developing their platforms. Nothing would be more frustrating than a “newly minted account” winning a domain or domains and then not paying for it / them.

(Bear in mind that currently it is easy to sign up for an account on Drop and Netfleet. People can choose any name they want; perhaps “borrow” an ABN to establish eligibility; use a throwaway email address; and pay the initial fee on a supermarket debit card that perhaps has $50 credit on it).

Even more frustrating would be when that “new client” wins a domain and then transfers it out to another registrar. They then sell it on to a 3rd party. The dropcatcher is then basically stuffed. What a scam that is. And I know from talking to Drop and Netfleet that this has actually happened.

This type of conduct also affects the general integrity of the marketplace. Imagine if you were the underbidder on a domain, and a “new client” wins the domain and doesn’t pay for it. Frustrating!

So I totally support dropcatchers taking whatever legitimate steps they can to stamp out unwelcome practises like these.

Questions That Come To Mind

Obviously there are some issues that arise from this. Here are a few that I can think of.

  • If a “new client” doesn’t pay, what happens to the domain?
  • If an offer comes in on the domain immediately after auction, this would obviously go to (say) holding@netfleet.com.au. Does Netfleet pass this on to the “new client” (or would they)?
  • Does it get awarded to the underbidder after a period of time? (Though I can see massive problems with that strategy in a sealed bid environment).
  • Or does it get deleted after say 30 days and go back on the expired auctions? This could be potentially very unfair to the original dropcatcher if they don’t win it the second time around.
  • Or could the dropcatcher act like a “mortgagee in possession” and auction the domain privately after a period of time?

I’d be really interested as to what others think about this situation.

 

16 thoughts on “A Drop-Catcher’s Quandary

  • January 25, 2016 at 12:04 pm
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    Can certainly appreciate why they’d implement such a measure, and why they may be ignoring auDA policy. It would be good to have those questions clarified, and then the resulting policy published on each drop catchers website.

    • Ned O'Meara
      January 25, 2016 at 2:51 pm
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      This is the actual policy Richard:

      http://auda.org.au/policies/2010-07/

      And these clauses in particular:

      4.2 Registrars and resellers are not permitted to use their own contact details as registrant contact information, unless they have received express written consent from the registrant in that regard.

      4.3 Where a registrar is notified by auDA that a reseller is using their own contact details as registrant contact information, without express written consent from the registrant, the registrar must update the registrant contact information to be compliant with this policy.

    • January 25, 2016 at 5:58 pm
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      Is it ignoring policy though?

      If a Registrar puts into their T&C’s something like, “You agree that until such time as your registration / auction invoice for a domain is paid in full, the Registrant contact information will reflect that of the Registrar.”

      That seems to satisfy policy and gives Registrars some much needed protection.

       

      • January 25, 2016 at 6:16 pm
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        Nice idea in principle but would that not be in breach of the following auDA policy?

         

        http://www.auda.org.au/policies/2008-11/).

         

        “[The Registrar must not] be involved in any activity which involves the acquisition or accumulation of Domain Names which are not connected to the provision of Registrar Services under [the Registrar Agreement], for the purposes of removing them from the availability of others, transferring them for a direct or indirect, immediate or deferred gain or profit or for any other reason which can be considered to be done in bad faith”.

         

         

        • January 25, 2016 at 6:21 pm
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          Also maybe this one?

          http://www.auda.org.au/policies/2012-04/
          “Prohibition on registering domain names for sole purpose of resale
          8. A registrant may not register a domain name for the sole purpose of resale or transfer to another entity.”

          • Ned O'Meara
            January 26, 2016 at 10:34 am
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            @Andrew

            Some good points you raise. As I mentioned in my article, I have written to auDA (Lujia Chen) and asked for clarification. She is on holidays until tomorrow though!

          • January 27, 2016 at 10:13 am
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            If the Registrar is only changing the “Registrant Contact Email” field, you could argue that the Registrar is not “registering” a domain so neither of those policies apply.

            The Registrant Name, Registrant ID and Elibitility details remain the “real” Registrant for the purposes of policy compliance.

            Would be nice if auDA could clarify.

            • January 27, 2016 at 6:24 pm
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              What happens if the original bidder doesn’t pay? You can’t change the original registration details without their permission  – the only recourse under current policy would be to delete the domain.

              Current policy wasn’t written with drop catchers profitability in mind unfortunately…

  • January 25, 2016 at 12:25 pm
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    I have a problem with Registrar’s making unilateral decisions with existing accounts (i.e. without notice)

  • January 25, 2016 at 6:12 pm
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    In my instance I was alerted to the fact that the admin email was not accurate with names I had acquired

    I had not been notified of this change in policy

    • Ned O'Meara
      January 26, 2016 at 10:32 am
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      @Greg

      Nothing beats a unilateral decision by a Registrar. How to win friends and influence people. 😉

  • January 26, 2016 at 11:01 am
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    Granted, there’s an apparent discrepancy between NetFleet’s policy and the registry’s.  And not just NetFleet but DomainShield as well.  This article does a good job of explaining why that’s desirable from the registrar’s perspective.  Conversely, it brings up a number of concerns from the vantage point of registrants and non-winning bidders.

    Given all that, what I’d like to know is what solution customers prefer?

    • Ned O'Meara
      January 26, 2016 at 12:02 pm
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      @Joseph

      Obviously there are substantially different rules for .com as opposed to .com.au. So a couple of questions please. 🙂

      1. Do any dropcatchers in the USA offer terms to bigger clients?

      2. What happens if the domain is ultimately not paid for?

  • January 26, 2016 at 2:00 pm
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    There are a fair number of different drop catchers for gTLDs like .COM – some of the biggest being NameJet, SnapNames, DropCatch.com, and Pheenix.  Their policies vary, but by way of example:

    1. Yes, I believe better terms are offered by some drop catchers to bigger clients.  In the past, I have heard that SnapNames gives discounts when people prepay.  So a deposit f funds into one’s account might be given at some percentage discount – say pay $2k, get $2.5k on credit.  I don’t know whether that’s still done.  (Backorders would normally be at a $69 minimum with bidding going as high as one likes.)

    2. At NameJet, when someone fails to pay for an auction, the domain is typically re-auctioned a few days later with the previous bidders automatically enrolled at their earlier backorder amount.

    • January 27, 2016 at 1:37 pm
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      I just won a great name on Namejet. It specifically said I had 5 days to pay or else the name would be re-auctioned. I much prefer the American .com drop catching systems over the Australian systems. Everything seems way more streamlined and fool proof. I regularly use all the drop catchers Joseph mentioned above and have never had any problems. That’s every week for over a year now.

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