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Scenario

John Smith launches a social media startup called Turquoise Cow. He buys the Internet domain name "turquoise-cow.com" from GoDaddy. The price is $20 per year.

Years later, Turquoise Cow has become a leading social media platform, overtaking Facebook, Instagram, TikTok, etc. GoDaddy decides to exploit this opportunity, raising the yearly price to $2,000,000. John and his company feel like this new, exorbitant price is unfair. However, losing the domain name would severely harm the company, so they grudgingly pay GoDaddy the hefty sum.

Question

  1. Can GoDaddy legally do this?
  2. Does John and/or the company have any recourse?
  3. If the answer to Q1 is "Yes", how do big companies (e.g., Google, Instagram, YouTube, etc.) avoid getting exploited like this? Surely they have buy their domain from some entity, so what's to stop said entity from price gouging? Considering that the loss of, say, "google.com", for example, would be a nightmare for Google, it seems the domain-selling entity would have significant leverage over Google during price negotiations.

Clarifications

  • The domain name "turquoise-cow.com" is irrelevant to the question. I just made it up.
  • The domain registrar, GoDaddy, is also irrelevant to the question. This was just another arbitrary choice by me. Feel free to replace GoDaddy with any other registrar of your choosing.
  • I'm primarily interested in U.S. law, but answers regarding other jurisdictions are welcome as well, of course.
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    Try a web search for "can I renew my domain with another registrar" or "how to transfer my domain to another registrar".
    – Lag
    Apr 10 at 17:01
  • Regarding your third point, being a nuisance to the likes of Google or Facebook seems like a very bad business model for... well anybody, but especially anybody relying on online advertising.
    – Cadence
    Apr 11 at 4:12

4 Answers 4

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Domains can be transferred between registrars.

If a registrar is overcharging or providing poor service, the owner has the right to transfer the domain registration to a competing registrar. There are currently over 2,800 of them servicing at least one generic top-level domain (e.g. .com).

Normally, this can be done online. You start with the gaining registrar, who may require a numeric transfer code from the web interface of the losing registrar.

Big companies use specialized registrars that have extra levels of security (e.g. no web access to transfer) who also monitor for spoofing and automatically register their trademarks and typos under new TLDs.

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  • Are there multiple registrars for all domains? Certainly there are for .com, but what about others? Is there (e.g.) a .cow domain such that it was turquoise.cow instead of turquoise-cow.com the registrants would be a the whims of a single registrar? Or would that be against the rules?
    – R.M.
    Apr 11 at 15:01
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    I think your last point is most relevant... Once your website has reached a point where it has become a bigger than Facebook, etc... You will want a different registrar that provides different services, because your domain name is now a target for bad actors taht didn't care about it when it was small.
    – Questor
    Apr 11 at 23:28
  • @TylerW There's much more competition than that because thousands more registrars use big platforms like OpenSRS (operated by Tucows, no endorsement) to access all sorts of TLDs including gTLDs. That's basically a service which provides an API for registrars to register and sell domain names in various TLDs without having to become an accredited registrar in every single one of them (Tucows does that for you).
    – TooTea
    Apr 12 at 9:50
  • Small companies can also use registrars that have extra security. I know more than one company that would not be considered "big" by most standards (around 500 employees, revenue in the low tens of millions or less) that use registrars with additional security features. Apr 13 at 3:15
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This is actually a common business model, with little to no recourse in practice

It's not uncommon to have to pay hundreds of dollars for a domain that cost you a few bucks to renew a year earlier. This is especially prominent in obscure or new TLDs.

Sure, in theory you can transfer the domain at any time. The catch? The registrar has to give you an EPP code to do that.

Less reputable registrars will do everything in their power to withhold that code, like suddenly requiring you to undergo enhanced identity verification or jump through hoops with needless requirements - especially if they've sold the original domain at a loss. Want your auth code? Just send a signed form via registered mail to British Virgin Islands, where the registrar's office is located. Good luck fulfilling that in 30 days between getting the invoice and the domain expiring.

For original gTLDs, ICANN forbids putting additional obstacles in order to obtain the auth code, but many TLDs abide by their own regulations.

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    They could try that. Note, however that ICANN regulations state they must allow the transfer. Plus, I think they are required to publish their prices with certain notice in advance.
    – Ángel
    Apr 11 at 2:19
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    "Less reputable registrars will do everything in their power to withhold that code" while this might be likely the case, could you provide some references to back up this claim? Stack Exchange encourages factual info rather than opinionated statements.
    – Andrew T.
    Apr 11 at 3:36
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    This is mainly a problem for smaller companies who are now burdened to pay hundreds of dollars instead of dozens. But not a problem for a multibillion megacorporation (like the example in the question must be if they are rivaling Facebook, Instagram, tiktok, etc.) which has ample resources to solve the issue or even buy or create their own registrar.
    – vsz
    Apr 11 at 4:16
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    I'm not saying this has never happened, but I'm dubious of the "common business model" claim. Certainly, IME, transferring domain names has been easy. Apr 11 at 6:04
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    You can successfully sue a domain name squatter in court. The squatters almost always lose when push comes to shove.
    – ohwilleke
    Apr 11 at 20:02
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In addition to the answer from @user71659,

  1. If the answer to Q1 is "Yes", how do big companies (e.g., Google, Instagram, YouTube, etc.) avoid getting exploited like this? Surely they have buy their domain from some entity, so what's to stop said entity from price gouging? Considering that the loss of, say, "google.com", for example, would be a nightmare for Google, it seems the domain-selling entity would have significant leverage over Google during price negotiations.

You should consider that it's not necessarily in the registrar's best interests to do this.

Given the number of registrars and registered domains, each probably has domains in the tens of thousands to millions. (GoDaddy currently claims the better part of 100 million.)

To single out one customer would take a lot of work. The mere act of finding the customers whom you should overcharge could cost more than the difference you could ever charge them.

Not because they're, "nice," or because they care for you, the people at GoDaddy aren't sitting around trying to dream up how much they can charge you or anyone else. They go to work every day and twist their brains into knots trying to figure out how to (continue to?) provide the most seamless and competitive service so more customers will sign with them than anyone else, and they will keep the customers they have.

Companies in general don't worry about domain name price gouging because it doesn't generally happen that way and it's not perceived that it will start to soon.

Also consider that you can't really register google.com unless you're Google. Domain name ownership is not possession-is-ownership, and registrars don't, "own," the name. Disputes happen, they are not decided based merely on ownership and the registrar is required to comply with the results.

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  • To GoDaddy's unhappy former customers (among which I count myself), this is quite the example of economic theory that fails to accord itself with practice. Ideally, you'd want companies to compete on good service... but sometimes they compete on other factors such as marketing instead, and you get folks who talk a good game in ads sufficient to attract new customers but don't deliver particularly well to the ones they already have... while not being quite bad enough to justify the hassle in switching away for enough of the customer base to keep a significant market position. Apr 12 at 17:31
  • You've never dealt with a vendor purchased by private equity, I take it.
    – JimmyJames
    Apr 12 at 20:28
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    > The mere act of finding the customers whom you should overcharge could cost more than the difference you could ever charge them. I'm pretty sure this is false -- it can and likely has been automated, just like some restaurants use software to set their menu prices to steer people towards more profitable dishes, or how national landlords use software to fix prices. Even before this brave new era of ChatGPT, consumers have long ago lost whatever protection may once have been afforded by "prohibitive effort."
    – Tom
    Apr 13 at 1:58
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    Also, technology and platform companies do in fact very often have teams of people whose entire job is to find ways to extract more money from existing customers. Such a team pays for itself, because extracting $2 more from each of millions of customers across the board adds up to real money. Source: I work in software and have multiple times been assigned to a task that came from such a team, and they had to explain the rationale to me so I could build my piece right.
    – Tom
    Apr 13 at 2:00
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It's possible, you have to read your contract carefully.

Some providers market themselves mainly as a hosting provider, and give you a "complimentary" domain name registration. The monthly fee for the hosting typically starts below the internal annual cost of a domain registration (minimum domain reg is 1 year). How does that work? They are the registered owner of the domain, and they effectively hold your domain hostage for payment of the monthly hosting dues.

You need to look at your contract with your registrar and see what you agreed to.

This is why I register my domains with a different company than I host with.

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