VeriSign ordered to stop ‘deceptive’ marketing

Internet registrar VeriSign Inc. was ordered by a federal judge to stop engaging in a marketing practice that duped its competitors’ customers into switching their business to VeriSign.

Yesterday’s order stemmed from a lawsuit filed earlier this month against VeriSign by rival Go Daddy Software Inc. The lawsuit, filed in U.S. District Court in Phoenix, alleged that Mountain View, Calif.-based VeriSign had engaged in false and deceptive practices, interfered with customer relationships and misappropriated trade secrets.

Scottsdale, Ariz.-based Go Daddy also accused VeriSign, which maintains the central registry of .com, .org and .net Web names, of consumer fraud.

According to the court order, VeriSign agreed to stop the practice. However, Christine Jones, Go Daddy’s general counsel, said the company was moving forward with the lawsuit to recover damages from VeriSign’s past actions.

VeriSign spokeswoman Cheryl Regan had no comment on the court order.

Jones said the order was important because VeriSign agreed to stop targeting the customers of all its rivals, not just Go Daddy’s customers.

“This lays out what’s OK and what’s not OK,” Jones said. “It will send a message to the rest of the industry to clean up their advertising act.”

Go Daddy’s lawsuit was triggered by letters that VeriSign sent to Go Daddy’s customers marked “Domain Name Expiration Notices.” The letters encouraged customers to send US$29 to VeriSign to renew each domain name or risk losing those names, Go Daddy said.

However, Go Daddy said, the “reply by” dates on those notices didn’t correlate with actual domain name expiration dates. By signing and returning the form, Go Daddy’s customers inadvertently transferred their business to VeriSign and at a higher price, according to Go Daddy. Go Daddy’s charges its customers $8.95 per year per domain name.

VeriSign has also been sued by other companies and consumer groups, including Baltimore-based, for similar practices.

In May, a federal judge in Maryland ordered VeriSign and its bulk-mailing contractors to stop sending mailings to customers (see story). The judge ruled that had been hurt by the mailings and that the damage would continue if the mailing weren’t stopped.

Regan said the company is complying with that order.

VeriSign is also facing several class-action lawsuits by shareholders who have accused the company of misleading them about its business and financial condition.