Ethos Capital is back. In 2019, this secretive private equity firm that includes domain name industry insiders tried to buy the nonprofit that manages the .ORG domain. A huge coalition of non-profit organizations and users have spoken. Governments expressed their concern and ICANN (the entity in charge of the Internet domain name system) blocked the sale. Now Ethos is buying a majority stake in Donuts, the largest operator of “new generic top-level domains”. Donuts controls much of the domain name space. And through a recent acquisition, it also manages the technical operations of the .ORG domain. This acquisition poses the threat of increased censorship for profit: suspending or transferring domain names against the user’s will at the behest of powerful corporations or governments. That’s why we’re calling on the ICANN Board to require changes to Donuts’ registry agreements to protect its users’ speech rights.
Donuts are big. It operates around 240 top-level domains, including .charity, .community, .fund, .healthcare, .news, .republican, and .university. And last year he Afilias purchased, another registry company that also manages the technical operations of the .ORG domain. Donuts already has questionable practices when it comes to protecting the expression rights of its users. Its contracts with ICANN contain unusual provisions that give Donuts an irrevocable and effectively unlimited right to suspend domain names, bringing down websites and other Internet services.
Relying on these contracts, Donuts has aligned itself with powerful commercial interests at the expense of its users. In 2016, Donuts reached an agreement with the Motion Picture Association to suspend the domain names of websites that MPA accused of copyright infringement, without any legal process or right of appeal. These suspensions occur without transparency: Donuts and MPA have not even disclosed the number of domains that have been suspended by their agreement since 2017.
Donuts also gives trademark owners the ability to pay to block domain name registration on all Donuts top-level domains. In effect, it allows trademark holders to “own” words and prevent others from using them as domain names, even in top-level domains that have nothing to do with the goods or services for which a mark is used. This is a legal right that is not part of any country’s trademark law, and it has been reviewed and rejected by ICANN’s multi-stakeholder decision-making community.
These practices could accelerate and develop with Ethos Capital at the helm. As we learned last year in the fight for .ORG, Ethos expects to deliver high returns to its investors while preserving its ability to change the rules for registrants, potentially detrimental way. Ethos refused meaningful dialogue with domain name users, instead proposing an illusion of public oversight and promoting it with a shrewd PR campaign. And private equity investors have a sordid track record of buying up vital institutions like hospitals, burdening them with debt and leaving them financially fragile or even insolvent.
Although the acquisition of Donuts by Ethos seems to have been approved by regulators, ICANN should still intervene. Like all registry operators, Donuts has contracts with ICANN that allow it to manage registry databases for its domains. ICANN should pay as much attention to this acquisition as Ethos’ attempt to buy .ORG. And to prevent Ethos and Donuts from selling censorship as a service at the expense of domain name users, ICANN should insist on removing the broad concessions of censorship power from Donuts registry agreements. ICANN did the right thing last year in the face of the .ORG takeover. We hope he does the right thing again by mastering Ethos and Donuts.