Domain Auction Ethics – the Tucows Response
There’s been a fair bit of discussion surrounding a number of issues that happened around the time Tucows announced our transition from using our in-house auction service to working with Afternic.com to provide expired domain name auction services.
In reality, there are three separate issues here, and while they are seemingly related, in fact, they all took place independently and coincidentally.
- First, there was an incident involving domain names that were won by bidders at our in-house auction service, and then withdrawn.
- Second, there was a technical issue with our integration with Afternic.com that resulted in the withdrawal of a small number of domain names from Afternic.com after they had received Pre-Orders (but before the Live Auction process had begun).
- Third, there’s an ongoing discussion about employee participation in auctions.
In this post, I’m going to focus almost entirely on the problem we had with our in-house auction service. Read the Afternic blog for more on the second issue. We'll address our policy for employee participation in auctions in a follow-up blog post later today.
Before I explain what happened with our in-house auction, I’m going to quickly summarize the lifecycle and rules of our in-house auction. When I refer to “in-house auction,” I mean the ‘old’ Tucows auction platform at http://www.tucowsauction.com/. We’re working towards the final shut down of this service right now because, as of June 12, we've teamed with Afternic for expired domain name auction services.
When a domain name that had been registered through Tucows expired, it used to end up in our in-house auction. Domains that were sold in our in-house auction were not transferred immediately to the winning bidder. They were, in fact, placed on hold for 60 days (referred to as the “Escrow period”) so that if the Original Registrant wanted to reinstate the domain name they would have the ability to do that.
In short, that means the Original Registrant could reclaim the domain even after it sold at auction.
If this reinstatement happened, the winning bidder was automatically refunded the amount they paid for the domain name. Specifically, if the winning bidder paid by credit card, the refund happened almost immediately as a reverse charge on their credit card. If the winning bidder paid using their Tucows Reseller account, that account was credited the next month.
Once the 60 day “Escrow period” passed, and if the domain had not been reinstated by the Original Registrant, only then was the domain transferred to the winning bidder.
This policy of our in-house auction is very clearly documented at http://documentation.tucows.com/domainauction/enduser/index.html. This was also clearly documented in the auction documentation available to Resellers in our Reseller Resource Center (RRC).
These rules have been in place since the auction service was first launched in 2006.
Quoting from the documentation:
If won in auction, a domain is placed in escrow and held for 100 days total from the expiry date, with a 24 – 48 hour margin. The domain will be released to the winning bidder at the end of the escrow period.
Note: The original registrant can redeem the domain during the escrow period. If the original owner redeems the domain, the winner of the auction will not be granted the domain, but will be refunded the bid amount paid.
What Happened in this Incident
While we were working on the technical transition between our in-house auction and our new Afternic.com solution, a number of domains – approximately 5,800 – from Tucows’ own Domain Portfolio of over 150,000 domain names accidentally expired. Unfortunately, the script that we normally run to handle renewals of these domain names every month failed. Because of this script failure, approximately 2,800 of the 5,800 names were subsequently and automatically listed in our in-house auction.
To be clear: all of the domains in question were ones that prior to expiry and listing in the auction were owned by Tucows, not a third-party. These were domains that had been a part of the Tucows’ Domain Portfolio for at least a year.
Of those approximately 2,800 domains that mistakenly went into our in-house auction service, approximately 260 received bids from approximately 25 different bidders.
When the Domain Portfolio team realized what had happened, and that a substantial number of valuable domains had mistakenly been allowed to expire, we immediately attempted to reinstate all these domain names through the various methods available to us, as the Original Registrant. Those methods included simple Registry renewals and redemptions.
In the case of the domains that had been won at auction, when the names were reinstated the winning bidder was notified automatically that the Original Registrant had reclaimed the name.
This reclaiming of the names was completely within our rights as the Original Registrant, and within the publicly stated, publicly available rules of our in-house auction service.
This was all done during the window of time (Escrow period) that the Original Registrant has to reinstate a domain name that was sold in our in-house auction.
Three of the approximately 25 winning bidders contacted us about this, and we replied to each of them and explained the situation to them.
That explains what happened, and it explains how we reclaimed the names that were mistakenly allowed to expiry.
Do we regret that this happened? You bet. And we’ve made sure it won’t ever happen again. But, mistakes do happen, and I’m sure you’d understand that we have a duty to our shareholders, as a publicly traded company, to protect the value of the assets contained in the Tucows Domain Portfolio.
There’s not a lot we can do to change the perception that some might have about this incident, other than to explain it fully. I think I’ve done that here, and I’ve tried to make it very clear that we acted in a way that was consistent with our rights as the Original Registrant of the domain names, and in a way that was within the publicly stated rules of our in-house auction service.
Tucows and Afternic.com Team Up for Expired Domain Auction
Tucows has just announced that it is collaborating with Afternic to auction Tucows’ large daily inventory of expired domain names. You can read the full news release with further details or visit our Reseller services site for further information.
To answer some of the questions our Resellers may have about expired domain name auctions, we’ve prepared a video with Bill Sweetman, General Manager, Domain Portfolio, Tucows.