Hello All, John Jeffrey has made the posting below on the ICANN blog. Attached is the relevant advice that was provided to ICANN by external economists - Steven Salop and Joshua Wright. The key issue discussed is whether a registrar can own a significant ownership interest in a registry or vice-versa. The economists advised: "We believe that, given all the circumstances, the most reasonable approach to this issue would be to permit an existing registry to apply to acquire a significant ownership interest in any new or existing registrar and a registrar to apply to acquire a significant ownership interest in any registry. (This approach would not regulate contracts where there is no significant ownership interest.) Upon receipt of this application, ICANN staff would calculate the market share of the applying registry or registrar. If the market share exceeds a critical threshold, ICANN would take a certain action. If this approach is adopted, there are two relevant variables that must be decided: the relevant market share threshold, and the action that would be taken if a registrar or registry exceeds that share." It is essentially an approach similar to the Registry Services approach, where a registry or registrar applies to ICANN for approval. THe paper then proposes some processes ICANN could use to make a decision. The economists favoured two options: "Option 2 (Notification and Potential Stay): If the share of the registrar or the registry that applies to acquire a significant ownership interest in any new or existing entity at the other vertical level exceeds the relevant market share threshold, then ICANN will notify the appropriate governmental competition enforcement agency or agencies. ICANN will place the application on hold for a period not to exceed 45 days. This matches the existing waiting period for new registry services that might raise competitive issues. See http://www.icann.org/en/registries/rsep/rsep.html. If the agency or agencies notify ICANN and the registry or registrar during that 45 day period that the acquisition of the entity at the other vertical level may violate its competition laws, ICANN will place the application on hold for another period not to exceed 120 days to allow the agency or agencies and the applicant to resolve any concerns. At the end of this period, or sooner if notified by the agency or agencies that any issues have been resolved, ICANN will resume processing the application." "Option 3 (Notification Only): If the share of the registrar or the registry exceeds the relevant market share threshold, then ICANN will notify the appropriate governmental competition enforcement agency or agencies. ICANN will place the application on hold for a period not to exceed 45 days to allow the agency or agencies to take whatever action, if any, it or they deem appropriate. At the end of that 45 day period, ICANN will continue to process the application, and the registrar or registry will bear the risk of any subsequent enforcement action." Note that option 3 is similar to the Registry Services Evaluation Policy at: http://www.icann.org/en/registries/rsep/rsep.html which states: "In the event ICANN reasonably determines during the 15 calendar day "preliminary determination" period that the Registry Service might raise significant competition issues, ICANN shall refer the issue to the appropriate governmental competition authority or authorities with jurisdiction over the matter within five business days of making its determination, or two business days following the expiration of such 15 day period, whichever is earlier, with notice to Registry Operator. Any such referral communication shall be posted on ICANN's website on the date of transmittal. Following such referral, ICANN shall have no further responsibility, and Registry Operator shall have no further obligation to ICANN, with respect to any competition issues relating to the Registry Service. If such a referral occurs, the Registry Operator will not deploy the Registry Service until 45 calendar days following the referral, unless earlier cleared by the referred governmental competition authority (See Implementation Note Step 5)." See below for the blog posting. Regards, Bruce Tonkin From: http://blog.icann.org/ Vertical Integration Options Report Available to Community by John Jeffrey on March 8, 2010 The paper entitled "Registry-Registrar Separation: Vertical Integration Options" [PDF, 44K] was produced for review by the ICANN Board during its 4 February 2010 Board Meeting (as was discussed in the preliminary report of that meeting at http://www.icann.org/en/minutes/prelim-report-04feb10-en.htm). It was requested that the paper be produced to the community to provide further information on this topic. As a result of discussions surrounding the implementation of the new gTLD policy recommendations, ICANN Staff commissioned an economic review of vertical integration issues relating to new gTLDs in the registry and registrar marketplace. ICANN engaged Steven Salop (Professor of Economics and Law, Georgetown University Law Center) and Joshua Wright (Assistant Professor of Law and Economics, George Mason University) were selected for their notable reputations and diversity of viewpoints in the issue area. They have also participated and presented in an ICANN Meeting forum in Sydney, Australia. The report is being produced for public consideration as part of the broader dialogue and inputs on the related issues. The ICANN Board assented to the publication of the report during its workshop in Nairobi on 7 March 2010. It is important to note that publication of the report should not be considered as a validation of the information or positions contained therein. Also, it is not offered as the viewpoint of ICANN, the ICANN Board of Directors or ICANN Management, but is being offered to inform the public debate on the topic.