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The Court of Appeals for the D.C. Circuit recently ruled in favor of Network Solutions, a domain name registration organization, in a lawsuit brought by a group of domain name registrants, Thomas v. Network Solutions, Inc., 176 F.3d 500 (D.C. Cir. 1999). The plaintiffs alleged that the fee they paid for registering their internet domain names constituted an unconstitutional tax and exceeded the ceiling imposed by federal statute. The plaintiffs also alleged that Network Solutions violated Section 2 of the Sherman Antitrust Act.

The plaintiffs based their antitrust claim on the fact that Network Solutions exercised exclusive control over the so-called A root server and registration in several key, generic, top-level internet domains. Most top level domain names denote a country location, but a small subset designates the intended function of the domain. For example, .com denotes commerce, .net denotes network providers, and .edu denotes educational institutions. Network Solutions, a private company, administers this subset of top-level domains pursuant to a contract with an agency of the federal government – the National Science Foundation (NSF).

The plaintiffs complained that Network Solutions possessed unlawful monopoly power in the domain name registration market, and used that power to prevent competitors from adding additional generic top-level domains to the A root server under the Essential Facilities Doctrine. The trial court originally dismissed the complaint, holding that Networks Solutions was immune from antitrust liability since its conduct was undertaken pursuant to a contract with a federal agency – the NSF.

Although declining to rule on this issue, the D.C. Circuit observed that this “federal instrumentality” defense should not automatically shield a private company from antitrust liability. The D.C. Circuit instead dismissed the antitrust count because the plaintiffs did not properly allege all elements of a complaint under the Essential Facilities Doctrine.

The elements of an antitrust claim under the Essential Facilities Doctrine are:

1. that a monopolist who competes with the plaintiff controls an essential facility;
2. that the plaintiff cannot duplicate that facility;
3. that the monopolist denied the plaintiff use of the facility; and
4. that the monopolist could feasibly have granted the plaintiff use of the facility.

In Network Solutions, the court held that a necessary element of an Essential Facilities claim is that the plaintiff be a competitor of the defendant. Since the plaintiffs were domain name registrants, and not competitors of Network Solutions, the D.C Circuit ruled in favor of the defendants and affirmed the lower courts dismissal of the case.

This ruling leaves open the question of whether, and to what extent, a federal contractor is protected under the Federal Instrumentality Doctrine, and limits the scope of a monopolists liability under the Essential Facilities Doctrine.