A discussion draft of the Online Sales Tax Simplification Act of 2016 is expected to be introduced in Congress soon.
But the groups, which worry about costs and confusion, may be too late.
U.S.-based trade groups whose members are involved in online marketing are slamming a proposed change to the Internet addressing system that could result in migraines and skinnier bank accounts for web retailers large and small. The surge of public opposition to the changes, however, comes only four months before ICANN, the organization that oversees the Internet address system, starts to accept applications for new top-level web domains.
The Internet Corporation for Assigned Names and Numbers voted earlier this year to allow companies and organizations to apply for new top-level domains in addition to the 22 domains already in existence, such as .com, .gov, .org and .net. The vote came after years of discussion. Manufacturers and retailers could create domains based on their categories or their own names, such as .cameras and .Nike. Other types of organizations have expressed interest in subject domains such as .eco and location addresses such as .Paris.
ICANN is set to accept application for the new domains between Jan. 12, 2012 and April 12, 2012. The application fee runs $185,000, meaning many if not most small- and medium-sized retailers will find themselves priced out of controlling a domain like .camera, although they could still register the sub-domain, such as Acme.camera from the organization that controls the .camera domain. Companies that want to challenge a registration likely will have to pay between $30,000 and $50,000 for each challenge, says Michael Graham, an attorney specializing in how trademarks are represented on the Internet, and who works at Chicago-based Marshall, Gerstein & Borun LLP.
The cost of registering a subdomain, such as Acme.camera is likely to be a few hundred dollars during the initial period when trademark holders get first rights to bid on names, and much lower, perhaps $25, for names not taken during the initial period, says Elisa Cooper, director of product marketing at MarkMonitor, a company that acts as an Internet domain registrar and also provides online brand-protection services to large companies.
However, even those sub-domain fees could add up for a big company that would want to control its brand in all the new domains that emerge, whether it’s .golf, .eco, .NewYorkCity, or the many others that could be created. ICANN has not set a limit, although ICANN is only expected to approve a few hundred at most in the first round.
The costs of registering and protecting web brands under the upcoming ICANN regime is why the Direct Marketing Association this week announced its “strong opposition” to the plan. “We fail to see the value of this program to our members,” says Larry Kimmel, president and CEO of the group, which represents some 3,600 companies. “In fact, we foresee it costing them excessive time and money. We hope ICANN will back away from this program and the headaches it will cause, not only to our members, but the overall business community as well.”
A spokeswoman for the DMA tells Internet Retailer the group only recently became aware of how important the ICANN plan is to the trade group's members. “We are working with a consortium of advertising trade associations and advertisers, and, of course, our members” to work against the plan, she adds.
Those other groups include the American Advertising Federation, American Association of Advertising Agencies, the World Federation of Advertisers and the Association of National Advertisers, or ANA. The ANA, which says it has 400 members who collectively manage some $250 billion of marketing each year, says it has been publically objecting to the proposal since at least June 29. “We hope the global opposition will cause ICANN to reconsider the program and not go forward with it. It would not be a solution to simply delay its introduction,” Doug Wood, the group’s general counsel, tells Internet Retailer.
“I hope such opposition will delay it,” Esther Dyson, a journalist and commenter who served as ICANN founding chairman between 1998 and 2000, tells Internet Retailer. In general, she anticipates that the new web domain system will result in redundant domain names that will waste time and money and increase confusion, especially as more consumers get to sites via social media or mobile apps. She urged those opposing the plan to protest ICANN’s next scheduled meeting, Oct. 23 to 28 in Dakar, Senegal.
Graham is skeptical that the ICANN proposal can be delayed outright, if only because it represents years of work. “It was a very lengthy process,” says Graham, who says he was part of a committee tasked to review what became the ICANN proposal. “I am not sure if any associations were involved or spoke up during the process.”
He says the recent public opposition seems more focused on a general request for ICANN to stop the entire proposal, rather than calls to reconsider specific proposals—which further dims the outlook for major changes favorable to the trade groups. “ICANN is more likely to amend than to pause the process,” he says.
ICANN provided no immediate comment.