The topic of Vertical Integration (VI) between domain name registries and registrars has been one of the many hot-button issues surrounding the approval of ICANN’s New gTLD Program. In addition to question of whether VI will be permitted in new gTLDs, ICANN has previously indicated that it may allow existing registries to integrate with registrars.

As reported by Domain Name Wire, earlier this month, the U.S. Department of Justice’s (DoJ) Antitrust Division advised ICANN to stop plans to allow existing gTLD registries to own registrars, after Larry Strickling, Administrator of the National Telecommunications and Information Administration (NTIA) had requested that the DoJ look into the plan. The DoJ concluded that allowing cross-ownership on existing gTLDs that have price caps in place could have a harmful effect on competition.

In its letter to Strickling, the DoJ pointed out that “a gTLD subject to a price cap could develop or purchase a registrar, grant it an exclusive contract, and exercise its market power by increasing the registrar’s price.” This price then gets passed down to registrants, who would ultimately suffer the effects of this proposed policy.

ICANN has made no indication that it will prevent VI or put price caps in place for new gTLD registries. The DoJ believes that this will not have the same negative impact on competition because new gTLDs are unlikely to obtain market power like existing gTLDs (namely .COM) have. Permitting VI in new gTLDs could actually benefit businesses that plan to apply for a new gTLD, because it means that those businesses can control who is allowed to register second-level domain names in their gTLDs.

Strickling presented these findings in a letter to Peter Dengate-Thrush, who until last week was serving as Chair of the ICANN Board of Directors. He also admonished ICANN to remember the promise it made to address issues of competition in its Affirmation of Commitments.