San Francisco—The Electronic Frontier Foundation (EFF) and the Americans for Financial Reform (AFR) Education Fund today called on ICANN and private equity firm Ethos Capital to make public secret details—hidden costs, loan servicing fees, and inducements to insiders—about financing the $1.1 billion sale of the .ORG domain registry.

EFF and AFR today also urged the Federal Trade Commission (FTC) to review the leveraged buyout, which will have profound effects on millions of charities, public interest organizations, and nonprofits—and the consumers who rely on them—around the world. The deal would turn the .ORG registry—run for 17 years by the nonprofit Public Interest Registry (PIR) organization—into a for-profit enterprise controlled by a private equity firm that is partially funding the deal with a $360 million term loan.

The proposed transaction would increase the likelihood that the new for-profit PIR LLC could unfairly exercise its monopoly power to disadvantage non-profit organization consumers by reducing service levels, imposing onerous terms of service, or otherwise interfering with their operations. EFF, AFR, and 824 nonprofits—including National Council of Nonprofits, Girl Scouts of America, and American Bible Society—oppose the deal, as do 24,000 individuals and six members of Congress. AFR represents a coalition of over 200 civil rights, faith-based, consumer, and community groups and was formed after the 2008 financial crisis.

In a letter to the Internet Corporation for Assigned Names and Numbers, or ICANN, which coordinates the operation and maintenance of the internet’s domain name system, EFF and AFR said the deal should be stopped unless and until ICANN can fully assess, and make public, critical financial details of the transaction. Ethos and other entities involved in the sale have provided few details about financing, including how PIR, which has average annual profits of just $35 million, will make interest payments on the massive loan it will be saddled with and still provide sufficient services to the nonprofits that use the .ORG domain to exist on the Internet.

What is known about the interest payments is they are $24 million a year, about two-thirds of PIR’s annual profits. PIR will also be on the hook for the balance of the $360 million loan. The registry will have to come up with substantial additional money to keep up with these huge costs, forcing it to either raise fees charged to nonprofits for use of .ORG, reduce investments in technical upkeep, or take other steps to boost revenue. PIR said today that it would restrict price increases and form a “stewardship council” to address the concerns in the nonprofit world, but these steps don’t go nearly far enough and have limited enforceability.

“Given the poor track record of private equity firms running vital services for the public, these authorities need to take a close look at Ethos Capital’s financial plans for .ORG, and the structure of the deal,” said EFF Senior Staff Attorney Mitch Stoltz. “Establishing an advisory council doesn't solve the problem, especially since PIR's new owners will appoint the council, control what information its members will see and its power is limited to only some non-financial considerations."

“A private equity transaction poses unique risks to the .ORG non-profit community. The private equity firm seeking to acquire .ORG is using the classic leveraged buyout strategy of saddling the new company with a massive debt load,” said Patrick Woodall, senior researcher at Americans for Financial Reform. “This formula often leads to disaster for the company and can be especially corrosive for private equity takeovers of entities with a public mission as is the case with .ORG. The public needs far more information about the financial terms of this transaction before the relevant authorities make a decision on whether it should proceed.”

“The changes announced today by Ethos do not provide the protections and security that the community has been asking for over the last three months,” said Amy Sample Ward, Chief Executive Officer of nonprofit advocacy group NTEN. “The pricing clause that offers a 10% annual increase on average and only for the first 8 years does not speak to the real concerns raised by nonprofits around the world about pricing protections for the long term.”

For the letter to ICANN:

For the letter to the FTC:

For more about SAVE.ORG: