The United States Court of Appeals for the Fifth Circuit has recently dealt with the intersection of the antitrust laws and cybersquatting. The dispute arose between a number of casinos operating in Tunica County, Mississippi and the owner of various domain names that could be used to advertise Tunica area businesses. The owners of the domain names claimed that the casinos refused to deal with her company in the hopes of driving down the value of the domain names so that the casinos could later acquire the names themselves. The Fifth Circuit made it clear that such a course of conduct could indeed violate the antitrust laws. The decision in Tunica Web Advertising, Inc. v. Tunica Casino Operators Association, 2007 WL 2297464 (5th Cir. 2007), is a reminder that companies acting to protect their domain names from competitors must consider the antitrust implications of their actions.
In November of 1999, Cherry Graziosi purchased the domain names “tunicamiss.com” and “tunicamississippi.com” from Network Solutions, Inc. for $140.00. Graziosi then leased the domain names to Circus Circus Mississippi, Inc. d/b/a Gold Strike Casino Resort. A user who entered either domain name was redirected to the Gold Strike Casino’s website. Graziosi later established Tunica Web Advertising, Inc. (“TWA”), which then acquired the domain name “tunica.com” from another company for approximately $20,000.00. TWA leased “tunica.com” to the Gold Strike Casino for $3000.00 per month. The Tunica County Tourism Commission (“TCTC”) sued Graziosi, alleging that she was a cybersquatter. The suit was settled, with Graziosi transferring the rights to “tunicamiss.com” and “tunicamississippi.com” to TCTC and TCTC relinquishing any claims to the domain name “tunica.com.”
In May of 2001, TWA made a proposal to the TCTC to lease “tunica.com” to all the Tunica County casinos collectively to advertise their businesses. Under the terms of the proposal, visitors to the domain would be redirected to the TCTC’s website, which already featured information about all the casinos. The proposal was referred to the Tunica Casino Operators Association (“TCOA”), a trade association formed by the Tunica casinos. At a meeting of the TCOA, none of the casinos agreed to TWA’s proposal. TWA later learned from a person present at the meeting that the casinos had entered into a “gentlemen’s agreement” not to do business with TWA. The apparent motivation for this agreement was to cause the value of the “tunica.com” domain name to decline so that it could later be acquired by the casinos themselves. Shortly thereafter, the Gold Strike terminated its existing relationship with TWA, and the casinos all turned down later proposals by TWA to advertise on a website TWA created using the “tunica.com” domain name.
TWA sued all the Tunica County casinos, the TCTC, and the TCOA in federal court alleging state and federal antitrust claims. The claims against the TCTC and TCOA were dismissed, and the district court granted summary judgment in favor of the defendants. The Fifth Circuit reversed the summary judgment order. The court concluded that there were triable issues of fact with respect to whether there was a conspiracy among the casinos. The casinos’ rejection of TWA’s initial proposal was not actionable because the proposal was made to them jointly. But the evidence of a “gentlemen’s agreement” not to do business with TWA and “tunica.com” was sufficient to survive summary judgment. In particular, the court pointed to evidence indicating that the casinos collectively hoped that if they did not do business with TWA, the value of the “tunica.com” domain name would decline and the casinos could buy it later. The court concluded that if TWA could substantiate these allegations, they would be enough to show either direct or circumstantial evidence of a concerted refusal to deal in violation of the antitrust laws.
The court also concluded that the casinos’ actions could constitute an illegal horizontal boycott that would be per se unlawful under the Sherman Act. Because the casinos are direct competitors of each other, an alleged agreement not to do business with TWA would clearly be a horizontal agreement. The court rejected the casinos’ contention that for a group boycott to be per se unlawful, at least one of the conspirators had to be a direct competitor. While direct competition with a victim is often part of a per se unlawful boycott, it is not an absolute prerequisite to a finding of per se illegality. The court concluded that to determine the applicability of the per se rule, the district court should analyze “(1) whether the casinos hold a dominant position in the relevant market; (2) whether the casinos control access to an element necessary to enable TWA to compete; and (3) whether there exist plausible arguments concerning pro-competitive effects.” The decision in Tunica Web Advertising certainly indicates that unrestrained battles over domain names can have significant antitrust consequences.
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Opinion Text: http://www.ca5.uscourts.gov/opinions/pub/06/06-60305-CV0.wpd.pdf