What's to stop domain registrars from price gouging renewals?

Question

Scenario

John Smith launches a social media startup called Turquoise Cow. He buys the Internet domain name "turquoise-cow.com" from GoDaddy. The price is $20 per year.

Years later, Turquoise Cow has become a leading social media platform, overtaking Facebook, Instagram, TikTok, etc. GoDaddy decides to exploit this opportunity, raising the yearly price to $2,000,000. John and his company feel like this new, exorbitant price is unfair. However, losing the domain name would severely harm the company, so they grudgingly pay GoDaddy the hefty sum.

Question

1. Can GoDaddy legally do this?
2. Does John and/or the company have any recourse?
3. If the answer to Q1 is "Yes", how do big companies (e.g., Google, Instagram, YouTube, etc.) avoid getting exploited like this? Surely they have buy their domain from some entity, so what's to stop said entity from price gouging? Considering that the loss of, say, "google.com", for example, would be a nightmare for Google, it seems the domain-selling entity would have significant leverage over Google during price negotiations.

Clarifications

• The domain name "turquoise-cow.com" is irrelevant to the question. I just made it up.
• The domain registrar, GoDaddy, is also irrelevant to the question. This was just another arbitrary choice by me. Feel free to replace GoDaddy with any other registrar of your choosing.
• I'm primarily interested in U.S. law, but answers regarding other jurisdictions are welcome as well, of course.

Answer 1

Domains can be transferred between registrars.

If a registrar is overcharging or providing poor service, the owner has the right to transfer the domain registration to a competing registrar. There are currently over 2,800 of them servicing at least one generic top-level domain (e.g. .com).

Normally, this can be done online. You start with the gaining registrar, who may require a numeric transfer code from the web interface of the losing registrar.

Big companies use specialized registrars that have extra levels of security (e.g. no web access to transfer) who also monitor for spoofing and automatically register their trademarks and typos under new TLDs.

Answer 2

This is actually a common business model, with little to no recourse in practice

It's not uncommon to have to pay hundreds of dollars for a domain that cost you a few bucks to renew a year earlier. This is especially prominent in obscure or new TLDs.

Sure, in theory you can transfer the domain at any time. The catch? The registrar has to give you an EPP code to do that.

Less reputable registrars will do everything in their power to withhold that code, like suddenly requiring you to undergo enhanced identity verification or jump through hoops with needless requirements - especially if they've sold the original domain at a loss. Want your auth code? Just send a signed form via registered mail to British Virgin Islands, where the registrar's office is located. Good luck fulfilling that in 30 days between getting the invoice and the domain expiring.

For original gTLDs, ICANN forbids putting additional obstacles in order to obtain the auth code, but many TLDs abide by their own regulations.

Answer 3

In addition to the answer from @user71659,

3. If the answer to Q1 is "Yes", how do big companies (e.g., Google, Instagram, YouTube, etc.) avoid getting exploited like this? Surely they have buy their domain from some entity, so what's to stop said entity from price gouging? Considering that the loss of, say, "google.com", for example, would be a nightmare for Google, it seems the domain-selling entity would have significant leverage over Google during price negotiations.

You should consider that it's not necessarily in the registrar's best interests to do this.

Given the number of registrars and registered domains, each probably has domains in the tens of thousands to millions. (GoDaddy currently claims the better part of 100 million.)

To single out one customer would take a lot of work. The mere act of finding the customers whom you should overcharge could cost more than the difference you could ever charge them.

Not because they're, "nice," or because they care for you, the people at GoDaddy aren't sitting around trying to dream up how much they can charge you or anyone else. They go to work every day and twist their brains into knots trying to figure out how to (continue to?) provide the most seamless and competitive service so more customers will sign with them than anyone else, and they will keep the customers they have.

Companies in general don't worry about domain name price gouging because it doesn't generally happen that way and it's not perceived that it will start to soon.

Also consider that you can't really register google.com unless you're Google. Domain name ownership is not possession-is-ownership, and registrars don't, "own," the name. Disputes happen, they are not decided based merely on ownership and the registrar is required to comply with the results.

Answer 4

It's possible, you have to read your contract carefully.

Some providers market themselves mainly as a hosting provider, and give you a "complimentary" domain name registration. The monthly fee for the hosting typically starts below the internal annual cost of a domain registration (minimum domain reg is 1 year). How does that work? They are the registered owner of the domain, and they effectively hold your domain hostage for payment of the monthly hosting dues.

You need to look at your contract with your registrar and see what you agreed to.

This is why I register my domains with a different company than I host with.