Governments are requesting that new gTLD contention sets should not be settled via private auctions, a practice where tens of millions of dollars change hands. Instead, the Governmental Advisory Committee suggests that applicants should be forced to participate in ICANN-run "last resort" auctions, where ICANN receives all the money.



The concern is that companies without the intention of running a gTLD will apply for them to have a tradeable asset that can be sold at a huge profit. In the 2012 round, 224 contention sets were privately settled, with ICANN allowing and encouraging the practice. However, the GAC has advised ICANN to ban or strongly discourage private auctions.

Private auctions usually see unsuccessful applicants dividing the winning bid among themselves. Publicly listed Minds + Machines disclosed making tens of millions of income from losing private auctions, which some of was used in winning other auctions for gTLDs it intended to run. In the case of .web, Nu Do Co did not win any auctions apart from the ICANN-run "last resort" auction, where its $135 million bid was secretly funded by Verisign. Rival bidders urged NDC to go to private auction until almost the last moment, wanting a share of the bid. It remains the subject of legal disputes today.

Current GNSO "SubPro" policy recommendations do not ban private settlements, but suggest that applicants should confirm their intent to operate a TLD, under penalty of unspecified sanctions if they lie. There are suggested red flags that ICANN should look out for when trying to determine whether an applicant is attempting to game the system. ICANN directors have said repeatedly that they will be hiring an expert to investigate the best way to handle auctions and reduce gaming.

One aspect of ICANN's responsibilities includes overseeing the process of allocating generic top-level domain names (gTLDs) to private entities through a structured application process.

Private auctions often come into play when there are competing applications for a specific gTLD. In such cases, private parties may choose to participate in an auction to determine who will ultimately be awarded the rights to operate the desired gTLD. This approach aims to resolve conflicts and determine the most suitable operator by allowing market forces to come into play.

However, there have been ongoing debates regarding the use and impact of private auctions. Some argue that private auctions can lead to speculative behavior, where applicants participate solely for financial gain rather than intending to operate the gTLD in a beneficial manner for the community. Critics also claim that private auctions can disadvantage smaller organizations that cannot afford to participate, potentially leading to a concentration of power among larger players.

To address these concerns, proponents of banning or disincentivizing private auctions suggest alternative mechanisms for resolving competing applications. One proposed approach is to prioritize community-based applications or consider the merits of each applicant's proposal, focusing on factors such as the intended use, community benefits, and long-term sustainability.

Private auctions in the context of gTLD allocation have been a topic of discussion and debate within the ICANN community. While ICANN has not outright banned private auctions, efforts have been made to address the concerns surrounding their use.

One alternative that has been proposed is a "Community Priority Evaluation" (CPE) process. This approach prioritizes applications that demonstrate a strong commitment to serving a specific community's needs and interests. The CPE evaluates factors such as community support, purpose, usage, and intended benefits. If an applicant successfully passes the CPE, they are awarded the rights to operate the gTLD, without the need for a private auction.

Another perspective suggests that a more rigorous evaluation process for all applications could be implemented, which would take into account the applicant's plans for utilizing the gTLD and the potential benefits it would bring to the global Internet community. Such an approach may help reduce the focus on financial speculation and incentivize applicants to demonstrate genuine intent and capability to operate the gTLD effectively.

It is important to note that these ideas are still being discussed and evaluated within the ICANN community. Decisions regarding policy changes are made through a collaborative process involving input from various stakeholders, including governments, businesses, civil society organizations, and the general public.

As ICANN continues to evolve and adapt to the changing landscape of the Internet, the issue of private auctions and their impact on gTLD allocation will likely remain a topic of interest and deliberation.

Here are some additional points to consider regarding ICANN and private auctions:

1. Market-driven Approach: Private auctions for gTLDs are seen as a market-driven approach that allows competing applicants to determine the value of a particular domain name. This approach can result in a fair allocation process, as the highest bidder typically wins the rights to operate the gTLD.

2. Revenue Generation: Private auctions can generate significant revenue for both ICANN and the applicants involved. This additional revenue can be used by ICANN to fund its operations and support its various programs and initiatives.

3. Transparency and Accountability: Critics argue that private auctions lack transparency and accountability. The closed nature of these auctions means that details about the participants, bidding process, and outcomes may not be publicly disclosed. This lack of transparency can raise concerns about fairness and potential abuse of the process.

4. Applicant Diversity: Some believe that private auctions can disadvantage smaller or community-based applicants who may not have the financial resources to participate. In contrast, a more community-oriented approach, such as the CPE mentioned earlier, aims to promote diversity and encourage applicants who prioritize community benefits over financial gain.

5. Balancing Interests: ICANN faces the challenge of balancing various interests when it comes to the allocation of gTLDs. While private auctions may favor those with financial resources, they also provide an opportunity for competitive market dynamics to influence the outcome. Finding a balance between promoting competition and ensuring fairness is a complex task for ICANN.

It's important to remember that discussions around private auctions and gTLD allocation in ICANN are ongoing and subject to continuous evaluation and evolution. As the internet landscape evolves, ICANN will continue to adapt its policies and processes to best serve the global internet community.