.EU Registry Slammed for Accrediting ‘Phantom’ Registrars

Parsons’s complaint centered on the requirements for becoming a .eu registrar, which he claimed were “just too easy.” Companies seeking to sell .eu domains had to attest they were individual business entities and were applying for only one registrar accreditation. They also had to agree to offer registrations to their customers on an equal basis and deposit around $12,000 with the registry. The problem, said Parsons, was that EURid never verified the registrars were really registrars and were ICANN-accredited.

On its surface, the land rush looked fair, but it was marred by a serious flaw, Parsons said. “A few sly companies, the most notorious being a company I'll call company ‘X'-- which is believed to be backed by North American mega-millionaires -- saw a loophole in the process,” he wrote. Instead of registering their real, active registrars, these companies created hundreds of “phantom” registrars. They in turn “hijacked” the system by getting more than their fair share of domains as the selection process passed through the list of registrars. Registrars were entitled to one request for a .eu name per pass-through. “Legitimate” registrars like GoDaddy got the one request to win a desired name, while the hundreds of bogus registrars created by company X had a much-increased chance of doing so, Parsons said. Parsons wouldn’t identify company X any further.

Company X will “make a fortune at the expense of the Europeans,” Parsons said. The names cost them $12.50 each from EURid (around 10). A customer seeking only one name paid 50-75 ($60-$90). A name sought by more than one customer will be auctioned off by company X to the highest bidder, many for thousands of dollars, and many ultimately being owned by company X and for later sale.

GoDaddy “saw this whole scam coming” and tried to warn EURid about the potential for abuse, Parsons wrote. There have since been “complaints filed by dozens of other legitimate registrars” about the process, complaints EURid has “stopped responding to,” choosing to “hunker down for the storm.”

It’s not too late to fix the problem, Parsons said. He urged EURid to: (1) Finish the land rush. (2) Temporarily freeze all registrations until the registry vets the registrar to be sure it’s legal. (3) Decredit all previously accredited registrars that didn’t take .eu land rush applications and weren’t previously active registrars. (4) Cancel all .eu names registered by decredited registrars. (5) Unfreeze the names registered during the land rush by accredited registrars. (6) Run a 2nd land rush for the remaining accredited registrars, giving everyone access to the cancelled registrations.

GoDaddy is looking at what its options are if EURid doesn’t act, Parsons told us. His research indicates the scope of the problem is even worse than he thought. He originally estimated about 600 phantom registrars but told us there were likely more involved in the land rush. Many of the suspect registrars have no website, a particularly damning piece of evidence for a company that makes its money selling domains, he said. Many resolve to the same phone number. Parsons said he would reveal even more information about the laxity of EURid’s process today (Tues.)

Parsons was asked if he can quantify the damage to his company. GoDaddy has 3 legitimate registrar businesses, he said. There should have been around 400 registrars taking orders for .eu domains, and, as the largest registrar in the world, GoDaddy’s success rate should have been much higher than it was. His margins on domains are small, Parsons said, so the loser in all this is really the customer.

EURid checked each would-be registrar to ensure it complied with the accreditation requirements, a spokesman told us. EURid registrars don’t need ICANN accreditation, and those that took part in the land rush met the conditions set by EU rules. Distinguishing between “real” and phantom registrars doesn’t make sense, the spokesman said, because all registrars taking part in the land rush were approved.

Barring new companies from selling names would favor only the established registrars like GoDaddy, which would definitely be unfair, the registry spokesman said. Moreover, if EURid followed Parsons’s advice, what would happen to the customers whose domains were cancelled and thrown back in the pot?

The land rush process didn’t use a queueing system, the registry spokesman said. Each registrar was entitled to 5 IP addresses they could register with EURid. Each IP address was limited to one connection attempt per second, so in theory, every registrar could make 5 tries for names at the same time. Moreover, he said, domain names were registered to customers, not the registrars themselves, so resale of a particular domain after the land rush would be up to the customer, not the registrar.

The registry also questioned Parsons’s claim the process was hurting Europeans seeking .eu domains, saying only Europe-based applicants are entitled to the names in the first place.

“It’s a free market,” said Ross Rader, dir.-research & innovation for Tucows, an established registrar accredited by ICANN and EURid. The loopholes were “well known in registrar circles and I'm not sure that anyone is really surprised that well-financed players took this approach to increasing their pay-off rate in the land rush.” The pay-off rate is the conversion rate between names customers have applied for before the land rush and names registrars were able to snap up for them. “Thirty thousand pre-orders might convert to 7,000 actual registrations,” Rader said.

While Rader agreed the situation isn’t in the best interests of the European public, he said “the heavy-handed regulatory interference” Parsons proposes as a solution “is probably worse than the problem itself.”