In response to accusations lodged yesterday in a post on the DomainState forum, NSI has issued a statement which essentially admits that it engages in a form of domain front running. No one has challenged domain Front Running by registrars in the courts, likely because the practice is new and since the loss of a single domain would not typically generate a level of damages to support litigation. But litigation over this arguably fraudulent domain practice by registrars is both viable and likely inevitable as noted below and further analyzed at this post on the Traverse Legal domain name blog here.

While NSI states it is merely holding the domain for the consumer at issue, other registrars are accused of actually registering and reselling the domains at inflated prices.

Every US state has a Consumer Protection Act which would make this practice illegal. It amounts to outright fraud. The registrar deceives the consumer into using its domain availability or Whois search so they can presumably have the option of registering the domain. The search feature is really a search tool for the registrar to see whether there is interest in the domain name. The registrar runs software which instantly registers the domain for itself and either offers it for sale or, at a minimum, makes it impossible for the consumer to register the domain through another register. Some registrars continue to deny the practice but litigation subpoenas offer the advantage of obtaining real data and documents from registrars concerning the inner workings of domain front running.

Because penalty damages and attorney fees are available under state Consumer Protection laws, we believe it is just a matter of time before this practice finds its way to court. It is certainly clear that ICANN has no intention of acting quickly to curb this domain registration abuse.