FTC Opens Probe Into VeriSign Campaign

The Federal Trade Commission is investigating a recent marketing campaign conducted by the domain registrar unit of VeriSign .

The inquiry stems from a campaign launched this spring that saw VeriSign allegedly sending direct mail to the users of rival registrars. Allegedly, the mailings informed recipients that that their domain name was close to expiration, and that they could re-register by signing and returning the letter.

According to critics, the mailing didn’t adequately inform users that their domains would be transferred over to VeriSign’s control, and that they would be liable for any fees or changes in their annual rates as a result.

A VeriSign spokesman said the company had been asked by the government agency not to comment on the investigation.

“VeriSign has always taken its responsibilities under the law seriously and will, of course, cooperate fully with the FTC,” the spokesman said.

To date, VeriSign has been hit with four lawsuits stemming from the campaign. Two lawsuits were filed by VeriSign competitors Go Daddy and BulkRegister.com, who said their customers had been targeted in the campaign. (BulkRegister.com succeeded in getting an injunction). In March, a California consumer advocacy group filed a complaint, and in April, a law firm began proceedings to start a class action against the company.

The FTC also is investigating whether VeriSign used its relationship with domain host and name reseller Interland to dupe customers into switching domain name registrars. Network Solutions, which merged with VeriSign in 2000, owns a minority stake in Interland, which registers domain names for its clients on Network Solutions’ (now VeriSign’s) behalf.

Sources close to VeriSign said that the FTC is looking into whether Atlanta-based Interland also made mailings similar to VeriSign’s.

Interland declined to comment about whether it was being included in an FTC investigation, though the company’s vice president and general counsel, Allen Shulman, said in a statement that it “would not be surprising if any investigation of VeriSign included a request to Interland and others for information, since Interland is one of VeriSign’s partners, and has processed domain name registrations and renewals through VeriSign.”

“Given the publicity surrounding Verisign’s domain name renewal marketing, it is not surprising that the FTC would investigate their marketing practices,” Shulman said “Interland has a keen interest in ensuring that marketing practices industry-wide are fair, and that our customers are protected from deceptive practices.”

The FTC investigation comes on the heels of an inquiry begun in June by the United States Postal Inspection Service into whether the campaign violated the Mail Fraud and False Representations statute. The U.S. Postal investigation is still ongoing, sources close to the inquiry said.