News: GoDaddy allows executives to bid against own customers in auctions

When a GoDaddy customer forgets or otherwise fails to renew a domain, GoDaddy sells it off to the highest bidder through their TDNAM subsidiary.  Some registrars--even Network Solutions--give the domain owner a percentage of the proceeds of such auctions.  But GoDaddy keeps all the spoils to themselves.  Anyway, it was recently discovered that the Vice President of TDNAM has been bidding on (and sometimes winning) TDNAM's own auctions.  This drives up the prices for normal customers and also leads to conflict of interest issues since normal bidders need to trust TDNAM to keep various information secret, such as their proxy bids, bidding history, the domains on their watch list.  Also, GoDaddy doesn't tell you when your bid price was inflated due to TDNAM executives bidding against you.  They are one of the few auction services which don't even give you the nicknames of competing bidders.

DomainNameWire contacted other domain auction services, and none allow unrestricted employee bidding on their own auctions like GoDaddy does.  Enom (a patner in NameJet) notes that "We definitely do NOT let employees compete in auctions. Even if controlled, that practice has bad news written all over it."  Yet GoDaddy seems to think it is fine for executives to inflate their auction prices by bidding against customers.  They responded to DomainNameWire that they allow this.  There is a big risk that these employees have access to private information of the normal bidders, that they get special discounts, or that they may sometimes shill bid to increase prices without trying to actually win.

Slashdot has picked up this story: http://tech.slashdot.org/article.pl?no_d2=1&sid=08/06/29/0625249

Meanwhile in reply to Twatter:

your source if off a forum and totally baseless.  i cant believe this crap gets attention.  1 person on the internet says whatever and its fact?  please...  i can tell you two facts however.  dicker is not the VP of TDNAM and dicker is not on the payroll. 

Twatter, we do check out stories before we run them.
"Adam Dicker, the owner of HighImpactSites and DNForum has joined GoDaddy as the new VP of Domain Name Aftermarket (TDNAM)."
http://www.adamdicker.com/adam-dicker-joins-godaddy.html <==== STRAIGHT FROM THE HORSES MOUTH!

So has Digg
http://digg.com/software/GoDaddy_VP_Caught_Bidding_Against_Customers

Errr...what does Godaddy say about this matter, if he's just joined then his previous bids shouldn't mean a whole lot...

Errr...what does Godaddy say about this matter, if he's just joined then his previous bids shouldn't mean a whole lot...

I'm not too sure where this comes from but it was posted as a comment on Digg:

"Go Daddy has reviewed the auction and found nothing improper.

Adam Dicker's knowledge on the auction was no different from what any customer coming to our TDNAM site would have had.

To ensure customer confidence and to avoid any possible future questions of impropriety all GD employees are now and in the future prohibited from participating in TDNAM auctions, purchasing, sales & back orders."

- Christine Jones, Go Daddy General Counsel & Corporate Secretary

The "Go Daddy has reviewed the auction and found nothing improper" comment was posted by GoDaddyPR at Digg. That Digg Userid describes themself as "Melanie Schmitt (GoDaddyPR) = A 25 year-old female from Scottsdale, AZ (US) who joined Digg on March 27th, 2008". They copypasted the same comment on multiple-threads in Digg: http://digg.com/users/GoDaddyPR

A similar comment was posted on Slashdot by user Elonline claiming

Re:Its legal (Score:2, Funny)
by Elonline (937406) on Sunday June 29, @03:25PM (#23992635)
My name is Elizabeth L. Driscoll/Go Daddy PR VP. I am posting this comment on behalf of Go Daddy General Counsel, Christine Jones. "Go Daddy has reviewed the auction and found nothing improper. Adam Dicker's knowledge on the auction was no different from what any customer coming to our TDNAM site would have had. To ensure customer confidence and to avoid any possible future questions of impropriety all GD employees are now and in the future prohibited from participating in TDNAM auctions, purchasing, sales & back orders." - Christine Jones, Go Daddy General Counsel & Corporate Secretary

http://tech.slashdot.org/comments.pl?sid=598685&no_d2=1&cid=23992635 http://slashdot.org/~Elonline

I assume that this is GoDaddy's idea of Damage Control, although Slashdot users tagged her post as 'Funny'.

GoDaddy isn't bad. If the guy wants to buy a domain then let him.

last week,
i found a keyword rich domain name ( definetly good ) with http://www.iyiz.com/free-domain-name-business-tools/ , and i check it on Godaddy to see it is available and 2 minute later as soon as i logged in , i saw that the domain name was purchased by Godaddy 

[Assistant U.S. Attorney Christopher Sonderby also said he feels the guilty pleas "send a message." "Shill bidding on Internet auctions is not a game; it's a felony," Sonderby said.]

Wired has a follow-up to this story:

http://blog.wired.com/business/2008/06/godaddy-vp-caug.html

The story is mainly about Dicker having his finger in many pies. It also includes a reply from GoDaddy:

The company adds that Dicker didn't hide his identity in any way, and even though he did nothing wrong, they decided to "'go above and beyond' to show our commitment to the customer.... even though forbidding employees to participate in a transparent auction is a little like telling a 'brick and mortar' retail worker he or she can't shop at their own store."

That's an unconvincing analogy. Auctions especially web auctions are nothing like a "bricks and mortar" retail store. A better analogy would be Christie's And Sotheby's telling the auction master he's not allowed to bid in his own auctions.

Go Daddy says Adam Dicker had "NO ACCESS to 'inside information,'... no more access than you would have had in the auction."

Dicker may NOT HAVE LOOKED at the 'inside information', but as VP of the company, he would have had access to it unless GoDaddy specifically built protections into their domain auction system to STOP an executive from getting 'inside information' on auctions. But a bit of common sense should have told them (and Dicker) that no VP should be bidding in their own auctions anyway. Do GoDaddy have auction trails for access to information on their system? Did they check those? Or did Dicker just tell them he didn't look at it.

There's another point here too. "Kenneth Walton" and his conspirators placed 'Shill bids' on eBay auctions. Walton wasn't an eBay employee, so didn't have access to 'inside information' either but and was tried and convicted of fraud as a result. Walton was doing many dubious things, but Shill bidding is what they got him for. CNET has this quote regarding Shill Bidding:

Assistant U.S. Attorney Christopher Sonderby also said he feels the guilty pleas "send a message."

"Shill bidding on Internet auctions is not a game; it's a felony," Sonderby said.

http://news.cnet.com/2100-1017-255959.html

I can see the potential for conflict of interest but I also see the other side of the coin, in that it doesn't make sense to me to prohibit so many potential buyers from bidding on auctions.

 I'm sure that Godaddy employees have an interest in domains and would like to buy some great domains for themselves personally.  While most TDNAM domains are probably ones that expired at GoDaddy, domain owners also use TDNAM to sell their own domains.  I'm sure they would want domain buyers to be able to bid on their domains, whether they work for Godaddy or not.

Ebay has over 13,000 employees.  If I'm selling something on Ebay, I want it to go to the highest bidder, and not exclude 13,000 possible buyers from the auction.

I can see the potential for conflict of interest but I also see the other side of the coin, in that it doesn't make sense to me to prohibit so many potential buyers from bidding on auctions.

The problem is that potential buyers like Dicker *could* get access to inside information to give themselves an advantage over other bidders *AND* the seller (An insider wants to pay just enough to deter the other bidders, but not a cent more). On the other hand if the insider doesn't win the bid but pushes the price up for the seller anyway, his company will benefit financially since the ultimate buyer pays more than they would have and the auctioneer collects a commission from that. That's why "Shill Bidding" is considered fraud.

I have t say that I have used TDNAM a lot i the past with great success. I have paid more than i wanted to for some of the domain names that i won, but never bothered to look up who i had been bidding against. such is the way of auctions, it shouldnt matter who you are bidding against, the point is they have to sign a legally binding contract to pay for the item regardless if it is bob parsons himself.

I dont see what the big deal is. GoDaddy is the largest registrar of domain names by far! 30 million compared to 8 million with Enom. so it is more than likely that good domain names will be registered there. I dot see why everyone is getting so upset about this issue. what insider information could Dicker possibly get that would make him such an unfair bidding opponent. even assuming he could look into the domain name and see other people's high bids, he would still have to be willing to pay for the domain name he wins. and if the first bidder really wanted the name, then maybe they should have bid a higher dollar amount in the first place.

i mean what is the difference between him looking at the high bid and then biding a dollar more, or me sitting here and bidding in $1 increments until it says i am the high bidder. the only difference is the time it takes to get to the same place.

I like Godaddy, but this has BAD NEWS written all over. This to me appears to be almost like insider trading, but we aren't talking shares here.

thanks

last week,
i found a keyword rich domain name ( definetly good ) with http://www.iyiz.com/free-domain-name-business-tools/ , and i check it on Godaddy to see it is available and 2 minute later as soon as i logged in , i saw that the domain name was purchased by Godaddy 

GoDaddy purchases any domain that is checked for availability, unless the person proceeds all the way though checkout. Login before you check, or you'll lose your domain.

While you're logged out, check the availability of godaddyisreallyjustabigscam.com or something similar, then leave their site, and check the WHOIS info for that domain. You'll find it is now registered by GoDaddy and owned by DomainsByProxy.