MIAMI—A class action lawsuit was filed in Miami-Dade County Monday on behalf of lead Plaintiff Carlos A. Cueto and others who participated in online auctions for domain names, according to a press release issued by the Cueto Law Group. The suit alleges that an executive of domain auctioneer SnapNames.com, a subsidiary of Los Angeles-based Oversee.Net, Inc., secretly bid on domain names over the past four years, manipulating prices and driving up costs for other bidders.
According to the release, “It is alleged that the company executive set up an account on the Defendants' system under a false name and, under the name, bid in online domain auctions run by SnapNames.Com, Inc. and Oversee.Net. As a result of the internal employee bidding, the suit alleges the prices to purchase a domain name were falsely inflated, leading to higher costs to buyers and greater profit for the defendants.”
The suit is the first brought on the heels of the recent acknowledgment by SnapNames that one of its top executives secretly bid on tens of thousands of domain name auctions over the past four years. On Nov. 4, Mason Cole, vice president of Oversee corporate communications, announced that the executive had been dismissed the previous Monday.
“The company Wednesday [Nov. 4] began notifying affected customers via e-mail, stating that ‘in every auction where the employee's fictitious account submitted a bid which resulted in a higher price being paid by the winning bidder, SnapNames will offer a rebate, with 5.22 percent interest (the highest applicable federal rate during the affected time period), to affect customers for the difference between the prices they actually paid and the prices they would have paid, had the employee not bid in the auctions,’” the Washington Post reported.
Cole estimated that as many as 50,000 domain name auctions may have been affected by the employee's unauthorized activity, which occurred on auctions between 2005 and 2007. Alleging that the employee's bidding impacted only about 5 percent of the auctions since 2005, Oversee claimed that the incremental value from the bidding represented approximately 1 percent of SnapNames' auction revenue during that same time.
Oversee has reportedly not yet decided whether to pursue legal action against the unnamed former executive. "He had pretty deep insight into our system," Cole told the Post. "I don't know whether he was one of the founding employees [at SnapNames], but he was one of the first."
In August, Oversee named Craig Snyder general manager of its registrar and aftermarket divisions, which include SnapNames.com and Moniker.com. According to Domain Name Wire, “Snyder will report to Peter Celeste, Oversee’s Senior Vice President for Domain Services. He will face the challenge of reinvigorating SnapNames as it moves from a primarily expired domain service to a complete aftermarket solution, and boosting Moniker’s top and bottom line in the face of declining auction revenue.”
According to Plaintiff Cueto, self-regulation by the industry is so clearly non-existent that his will probably not be the last lawsuit filed by those intent on creating a level playing field in the aftermarket domain business.
"The domain name industry is the wild west of intellectual property because it remains unregulated,” he said. “The online community has been up in arms over what they feel has been an opaque system that just begs for transparency. It is impossible to know whether you are bidding against someone that isn't working or affiliated with the company conducting the auction.
"Domain names are the last frontier for the average person to stake their claim on some very valuable property,” he added. “The Defendants' conduct has made it harder for people to do so and we intend to put a stop to this practice, which we perceive as being a major concern in the industry.”