View source for Vertical Integration

===Separation to Integration===
Some believe that vertical separation is one of the most important methods used by ICANN to maintain its commitment to promote competition, which is one of the founding principles of the organization. On March 12, 2002, the [[ICANN Board]] passed a resolution stating the organization's strong position for the implementation of "strict separation" of registries and registrars for new gTLDs. The ICANN Board also stated that co-ownership will be prohibited. However, the ICANN Board also indicated, ''"if a policy becomes available from the [[GNSO]], and approved by the Board prior to the launch of the new gTLD program, that policy will be considered by the Board for adoption as part of the New gTLD Program."''<ref>[http://www.icann.org/en/groups/board/documents/resolutions-12mar10-en.htm#5 Adopted Board Resolutions|Nairobi], ICANN.org. Published 12 March 2010.</ref>

Many of the initial steps that ICANN took to introduce competition in the marketplace, including vertical separation, were directed at working to expand the number of registry and registrar companies beyond the single entity, [[Network Solutions]], that managed most major [[TLD]]s before the introduction of [[ICANN]]. After contract negotiations allowed that market control to be broken up, the case for reversal of the vertical separation became stronger. In 2008, ICANN commissioned an independent assessment of the separation/integration issue; the findings suggested that ICANN move "slowly, but deliberately and in consultation with the industry, towards permitting integration of registry and registrar services under many, but not all, circumstances."  This resulted in two years of [[Working Groups]], workshops [[PDP]]s, where the [[ICANN Board]] deferred the issue to the [[GNSO]]. In that time, the [[GNSO]] was unable to come to a consensus, and as a result, the Board considered many other reports, recommendations, and inputs, and came to its own decision. According to .nxt, "In adopting its resolution, the Board concluded that - so long as certain restrictions were put into place on the conduct of registries and registrars, specifically as they relate to data, and so long as competition review remained available in the event of concerns regarding market power - there was no economic or competition rationale to prohibit, on an across-the-board basis, registries from holding ownership interests in registrars, and vice versa."<ref>[http://news.dot-nxt.com/2010/10/25/icann-ec-letter-vertical-integration ICANN EC Letter Vertical Integration], Dot-Nxt.com. Published 25 October 2010.</ref>

During a Special Meeting on Novemer 5, 2010, the ICANN Board changed its position regarding the vertical separation of registries and registrars. The Board removed the restriction on cross ownership in the Registry Agreements and replaced it with ''"requirements and restrictions on any inappropriate or abusive conduct arising out of registry-registrar cross ownership..."'' These abusive conducts are not limited to misuse of data and violations of a registry code of conduct. In addition, ICANN also stated that it will include additional enforcement mechanisms such as self-auditing requirements, contractual termination and punitive damages. Moreover, it also emphasized that "it will have the ability to refer issues to relevant competition authorities."<ref>[http://www.icann.org/en/groups/board/documents/resolutions-05nov10-en.htm Special Meeting of the ICANN Board of Directors, ICANN's Silicon Valley Office, Palo Alto, California, USA], ICANN.org. Published 5 November 2010.</ref>

====10 Justifications for Integration====
The ICANN Board enumerated ten reasons to support its policy change on vertical separation:<ref>
[http://archive.icann.org/en/topics/new-gtlds/gac-board-registry-registrar-separation-21feb11-en.pdf ICANN Board-GAC Consultation:Registry-Registrar Separation], ICANN.org. Published 21 February 2011.</ref>
# None of the proposals submitted by the GNSO reflected a consensus opinion; as a result, the Board supported a model based on its own factual investigation, expert analysis, and concerns expressed by stakeholders and community.
# ICANN's position and mission must be focused on creating more competition as opposed to having rules that restrict competition and innovation.
# Rules permitting cross-ownership foster greater diversity in business models and enhance opportunities offered by new TLDs.
# Rules prohibiting cross-ownership require more enforcement and can easily be circumvented.
# Preventing cross-ownership would create more exposure to ICANN via lawsuits, including anti-trust lawsuits, which are costly to defend even if ICANN believes (as it does) that it has no proper exposure to such litigation.
# Rules permitting cross-ownership enhance efficiency and almost certainly will result in benefits to consumers in the form of lower prices and enhanced services.
# The Rules of Conduct, which is to be part of the base agreement for all new gTLDs, include adequate protections designed to address behavior the Board wants to discourage, including abuses of data and market power.
# Case-by-case re-negotiations of existing contracts to reflect the new cross ownership rules will permit ICANN to address the risk of abuse of market power contractually.
# In the event ICANN has competition concerns, ICANN will have the ability to refer those concerns to relevant antitrust authorities.
# ICANN can amend contracts to address harms that may arise as a direct or indirect result of the new cross-ownership rules.