Vertical Integration Between Registries and Registrars - The Economic Pros and Cons

Vertical Integration Between
Registries and Registrars –
The Economic Pros and Cons
Sydney, Australia
22 June 2009
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Background
?? Issue debated since creation of ICANN
?? Originally generated because only one
(commonly owned) commercial registry
operator and registrar
?? Significant increase in competitive
alternatives at registry and (especially)
registrar level has not eliminated debates
?? New gTLD plans have brought issue to
forefront again
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Discussion Panel
?? Joe Sims – Moderator
?? Senior Antitrust Partner, Jones Day
?? Counsel to Jon Postel in creation of ICANN,
and outside counsel to ICANN since its
creation
?? Participants
?? Steve Salop
?? Joshua Wright
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Steve Salop
?? Professor of Law and Economics, Georgetown University
Law Center
??
Formerly Associate Director for Special Projects and Industry Analysis,
Bureau of Economics, US Federal Trade Commission
??
Formerly Economist at Civil Aeronautics Board/Federal Reserve Board
?? Prolific author and speaker; relevant publications
include:
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Krattenmaker and Salop, Antitrust Analysis of Anticompetitive
Exclusion: Raising Rivals’ Costs to Gain Power Over Price, 96 YALE
LAW JOURNAL 209 (1986)
??
Riordan and Salop, Evaluating Vertical Mergers: A Post-Chicago
Approach, 63 ANTITRUST L.J. 513 (1995)
??
Salop and Romaine, Preserving Monopoly: Economist Analysis, Legal
Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999)
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Josh Wright
?? Professor, George Mason University Department of
Economics
??
Assistant Professor of Law, George Mason University School of Law
??
Formerly Scholar in Residence, Bureau of Competition, Federal Trade
Commission
?? Author of several relevant publications on the economics
of vertical contractual arrangements:
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Antitrust Analysis of Exclusive Dealing and Tying Arrangements (with A.
Abbott), in THE LAW AND ECONOMICS OF ANTITRUST (Keith N. Hylton
ed. 2009)
??
The Economics of Slotting Contracts (with B. Klein), 50 JOURNAL OF
LAW AND ECONOMICS 421 (2007)
??
Slotting Contracts and Consumer Welfare, 74(2) ANTITRUST LAW
JOURNAL 439 (2007)
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Agenda
?? Presentation of vertical integration economics
and law by the panel
?? Purpose is to lay an educational foundation for
subsequent discussions at ICANN on this topic
?? Presentation (to best of our ability) will be
objective and neutral
?? More focused on principles than ICANN specifics
?? Application of these principles to ICANN-
specific issues, with participation from
registries and registrars
?? Discussion and questions from the floor
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Vertical Integration Basics
?? Vertical integration can be structural,
or by contract
?? Vertical integration can be
procompetitive or anticompetitive,
depending on the facts
?? Can lead to lower prices, higher quality and
better service
?? Can lead to higher prices, lower quality or
less product variety, or slower innovation 7

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Assessing Effects
?? Effects not limited to cross-ownership
?? Exclusive/preferential vertical contracts
?? Complex task
?? Effects depend on numerous factors
?? Not well suited to bright lines
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Potential Anticompetitive
Effects of Vertical Integration
?? Exclusion -- foreclosure/discrimination
?? Evasion of price caps
?? Exchange of sensitive competitive information
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Potential Consumer Benefits
from Vertical Integration
?? Lower prices
?? Facilitate new entry by Registries
?? Induce Registrar to provide specialized services
for Registry
?? Induce Registrar to promote Registry
?? Allow more scope for innovation in delivery of
products/services
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