In the event we get to Agenda Item 3 tomorrow, below is a more refined version of the Compromise Proposal I circulated on July 1. 

I’d like to ask the Co-Chairs and Staff to add it to the working document so it is more easily displayed to those participating in the Zoom call tomorrow. 

Objective:
Increase transparency and accountability in contention resolution to improve the perception of ICANN and the new gTLD program.

Compromises contained

Some WG participants wanted an opportunity for creative resolutions to contentions via JVs and other corporate structuring.

• 90-day window to negotiate and announce those to ICANN.

Some WG participants expressed a strong desire for losers in auctions to get paid.  Others were concerned ICANN would “line its pockets” if all auctions were auctions of Last Resort.

• Parties in a contention set may opt for an ICANN administered 3^rd Party Auction where losers get paid as opposed to ICANN. 

Advocates for Vickery Auction wanted sealed bids submitted at time of application to eliminate possibility of collusion. Others raised concerns about the burden on applicants who would not be in a contention set.

• Only parties in contention sets will have to submit a sealed bid.  Bids will be submitted 30 days into the 90 Day Resolution Period. 
• While this does not eliminate the collusion concerns, it does narrow the window for that type of activity to occur.

Advocates for “applicant support” applicants and single TLD applicants were concerned with the 2012 practice of rolling private auctions proceeds from one auction to another to overwhelm a single applicant or applicants who receive applicant support.

• Conducting all 3^rd party Auctions at the same time eliminates this.

Benefits of the Compromise Proposal:

• Full transparency, ICANN oversight and competition authority review mitigate community concerns about nefarious activity and add legitimacy to the process.
• Unlike the 2012 round, access to data from this point forward can inform future policy making efforts in the program.
• Private Auctions are eliminated but applicants can still receive proceeds from a 3^rd Party Auction if all applicants in a contention set agree.
• Research shows sealed bids result in lower auction prices so decreased auctions proceeds to ICANN in Last Resort auctions.
• The compromise position increases efficiency and speeds up the process allowing more applicants to withdraw applications prior to evaluations resulting in greater refund amounts and faster processing of remaining applications.  In 2012 millions of dollars were wasted on evaluations of applications that never had a chance of operating a TLD and those applicants had to wait years to get significantly reduced refunds from withdrawing.

Proposed process:

• String Similarity evaluation completed
• On Reveal Day, ICANN announces contention sets including names of applicants.
• A 90-day Resolution Period begins
• Members of a contention set may
• Form a JV or other corporate structure
• Find a different creative resolution
• Withdraw
• Fail to resolve
• Members of a contention set may not
• Participate in a private auction or auction like mechanism.
• 30 days into the Resolution Period, all parties in a contention set will be required to submit a sealed bid for each string for which they are in a contention set.
• If a JV, other corporate structure, or different creative resolution process is utilized, bids are destroyed and never revealed.
• If at the end of the 90-day Resolution Period, parties chose one of the two auction paths, bids submitted will be used for the auction the contention set decides to participate in.
• As part of AGB and communications plan, ICANN must make potential applicants aware that they should be considering these bids, including securing financing where necessary, as part of their business planning and application process. 
• No later than the close of the 90-day Resolution Period, remaining contention sets will be required to provide ICANN with their decision on how to resolve the contention. They will have decided to:
• Agree to create a partnership or other form of joint venture that would allow two or more applicants within a contention set to jointly run and/or operate the applied for string.  Application Change Request requirements will apply, including public comment period and ICANN would have to approve.
• Agree to participate in a sealed bid “3^rd Party Auction” which is overseen by ICANN.  Proceeds are distributed amongst the losing applicants in the contention set.
• If parties are unable to agree to either of the two previous options, an ICANN Auction of Last Resort will be conducted using the sealed bids.  Proceeds go to ICANN Auctions Proceeds fund.
• Auctions of Last Resort and 3^rd Party Auctions will take place as soon as possible after the 90 day Private Resolution Period and before application evaluation takes place.
• For 3^rd Party Auctions
• All auctions are conducted as sealed bids by the same auction provider ICANN chooses for Last Resort auctions.  The applicant that submitted the highest sealed bid amount pays the second-highest bid amount. The auction provider and ICANN must attest that the participants fully disclosed all required information and followed the rules before the funds are released to the losers.
• As discussed previously, All bids for all unresolved contention sets are due on the same date, no more than 30 days after reveal of contention sets/into the resolution period.  Auctions for contention sets involving objections, CPE or other outstanding accountability challenges may be delayed but bids are still due no more than 30 days after reveal of contention sets/into the resolution period. 
• All auctions are to be conducted in an identical fashion using publicly available procedures.
• All results are disclosed on a similar timeline as ICANN auctions of last resort from 2012 round, which was typically 72 hours. All parties partaking in the auction as well as winning bidder and amount paid are disclosed.
• Auctions of Last Resort  
• If parties fail to form a JV or other Corporate structure, find a different creative resolution, or participate in a 3^rd Party Auction, bids submitted during the 90 Day Resolution Period will be used.  Auctions for contention sets involving objections, CPE or other outstanding accountability challenges may be delayed but bids are still due no more than 30 days after reveal of contention sets/into the resolution period.
• On the auction date, the applicant that submitted the highest sealed bid amount pays the second-highest bid amount.
• Once payment is received, the applicant may proceed to evaluation and eventually the Transition to Delegation.
• In the unlikely event that a winning bidder in either auction format does not pass evaluation (none failed in 2012), of fails because of a CPE determination or outstanding accountability challenge, the next highest bidder is selected for evaluation.

Requirements:

• Add T&Cs warning applicants that they may not participate in any of the following activities (Prohibited Application Activities):
• They shall not submit applications largely for the purpose of financially benefiting from the resolution of contention sets
• During the 90-day Resolution Period, they will not participate in the resolution of contention sets where non-winning applicants receive financial benefit to withdraw and not participate in the operation of the TLD.
• The Registry Agreement must include a mandatory Public Interest Commitment stating that the registry:
• has not submitted applications for the purpose of financially benefiting from the resolution of contention sets.
• has not participated in an auction or auction like mechanisms outside of the ICANN 3^rd Party and ICANN Auction of Last Resort.
• Agrees to punitive measures for violations listed above, which may include the potential loss of the registry as well as a bar on participation in any future rounds (both for the individuals as well as the entities (and their affiliates) involved.
• The auction provider must agree to fully disclose all information about the auctions as requested by ICANN.
• The auction provider and ICANN must assert that all rules were followed before releasing auction funds.
• All contention set resolutions including JVs, creative resolutions, 3^rd Party Auction and ICANN Auctions of last resort must be referred by ICANN to relevant competition authorities for review.

Jim Prendergast

The Galway Strategy Group

+1 202-285-3699

From: Gnso-newgtld-wg <gnso-newgtld-wg-bounces@icann.org> On Behalf Of Julie Hedlund
Sent: Monday, July 6, 2020 2:50 PM
To: gnso-newgtld-wg@icann.org
Subject: [Gnso-newgtld-wg] Proposed Agenda - New gTLD Subsequent Procedures PDP WG - Thursday, 09 July at 20:00 UTC for 90 Minutes

Dear WG Members,

Please find below the proposed agenda for the WG meeting on Thursday, 09 July 2020 at 20:00 UTC for 90 minutes.

Proposed Agenda:

1. Review Agenda/Updates to Statements of Interest
2. Review the updated Predictability Framework, see: https://docs.google.com/document/d/1vBckhFQCCQ-zyvfGGcDB3NWQhodVsffdqbyb6kTwXL4/edit?usp=sharing. Also attached, please find the updated concerns/mitigation document and process flow.
3. Review Private Resolutions/Auctions: Hybrid Proposal 2+ and Proposal 4: https://docs.google.com/document/d/1X8F8zHkgMzQg2WqGHpuoEP78rhpDkFOjD2qKrZZzjHw/edit?usp=sharing
4. AOB

If you need a dial out or would like to submit an apology, please email gnso-secs@icann.org.

Best,

Julie

Julie Hedlund, Policy Director