Ethics of Domain Drop Auctions: TDNAM and NameJet called out Yesterday: Today We call out Tucows

Yesterday domainnamewire.com reported that employees of TDNAM.com and NameJet.com were allowed to bid on domains that were in their own company’s dropping auction service.

In the article, domainnamewire.com sited some discussions on NamePros about GoDaddy employees, including Adam Dicker, who runs Godaddy aftermarket service, bidding on and winning auctions from their own system.

Troubling for sure.

Today we are calling out Tucows.

Although Tucows in-house domain drop auction ended this week, some disturbing conduct of Tucows came to light.

We have participated in the Tucows in-House auction for over 2 years spending in the six figures each year.

On Thursday we received notice from Tucows that 23 domains that we had won at their auction had been redeemed by their owner.  Under the Tucows auction, domains were auctioned after they expired but the registrant was given 70 days to redeem the domains back.  In the event the domain owner did redeem the domain back then winner of the auction was refunded his bid and the domain went back to the domain owner. But 23 names all in one day. We were suspicious.

Upon further investigation we learned that all 23 names that got take back from us, were owned by Tucows itself.

So it seems that Tucows ran the domain drop auction and the domains in this case were Tucows owned domains.

Again a major conflict of interest

Troubling.

A registry with its own auction platform has a fiduciary relationship to the domain holders and to the bidders.

Going back to my law school days it was instilled in me that not only could I not engage in any unethical or illegal activity, but that I must at all times avoid the “appearance of impropriety”.

Why?

Because once you place yourself in a situation where your motivations and actions can be questioned, they can and will be.

The motives of TDNAM employees were questioned yesterday in the NamePro’s forum.

Do these employee’s have insider information?  Do they pay full price or do they receive an employee discount which would enable them to receive the domain for less than you or I.  Are the employees of the domain drop auction company’s responsible for increasing the amount of the bids by bidding?

All are fair questions.

Did Tucows make a mistake and release domain into an auction that they owned and let expire?

Maybe.

Maybe not.

In a letter we wrote to Tucows on Thursday, we pointed out that when someone owns a domain and the auction platform it is sold on, there are certain abuses the domain/auction owner could engage in.

For example the domain/auction owner could proxy bid the domain up.  The worst thing that can happen is the domain/auction owner winds up with the domain back.  They could keep the domain or let it drop the following year back into the auction platform knowing what bid the domain bought the previous year. The best thing that could happen is that the price of the auction gets driven up and the domain is sold for much more than it would have.

Another, stronger possibility is that a domain gets placed in the drop auction by the domain/auction owner.  If the domain sells for a price the domain/auction owner is satisfied with, the domain sale is allowed to go through, if the price is not sufficient, the domain/auction owner reclaims it.  Once again it’s a no-lose situation for the domain/auction owner.

Of course we are not saying this is what Tucows did. We cannot know their motives.

That is the problem.

That is where the appearance of impropriety comes into play.

Just like none of us can say for sure what effect permitting employees of an auction house to bid on domains in their auction actually has, when put yourself in a situation where these questions can be asked, it places the credibility of the whole auction system in doubt.

We have no idea of how many other domain auction sales were reversed by Tucows, when they redeemed their own domains, but it would be silly to think that we were the only victim of this situation.

We would urge anyone who participated in the Tucows drop auction who had a domain taken back in the last week or two to see who now owns the domain, and if it’s Tucows we would love to hear about it.

We suggested to Tucows, even if they made an honest mistake and placed their own names  in  auction they should honor the sales to keep the integrity of the auction platform intact.

In response to our concerns, Tucows basically answered that they, as the domain owner had the right to redeem their domains, like any other domain owner.

Of course this is not a satisfactory resolution.

They are not like any other domain owner.

Matter of fact they are like no other domain owner, they own the auction.

However in all fairness to make up for the issue they did offer to buy me a drink at the next show.

Well, I can buy my own fucking drinks.

I don’t need a domain drop auction house to buy me a drink.

I do need them to run an auction is a fair manner and above reproach.

So here we are.

Left questioning the ethics of domain drop auction houses that we all spend a ton of money at.

What can be done?

Well as domainers we can vote with our wallets.

If they are going to play games, they can play with themselves (Pun Intended)

I for one will never bid on a Tucow expired domain again. (now moved to Afternic)

I will keep my money in my pocket.

The six figures we spent a year is history.

Not only will they miss our winning bids but our participation.

By participating in these auction we all increase the final sales price. Without our participation over the years, hundreds of thousands more dollars were generated on domains we bid on, but were outbid on.

If we as a group stopped bidding for just one week at these domain auctions these guys would have to listen to us, rather than ignore us.

After all we are their customers and their revenue source.

If we all just took a little time off, they wouldn’t get away with it.

Ask yourself this question, if all the loss of our business meant to them was the price of a drink, what is your business worth to them?