UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


THOMAS, WILLIAM

v.

NETWORK SOLUTIONS


98-5502a

D.C. Cir. 1999


*	*	*


Randolph, Circuit Judge: This is an appeal from the  judgment of the
district court dismissing a complaint filed  against the National
Science Foundation ("NSF") and its  private contractor, Network
Solutions, Inc. Plaintiffs are  individuals and entities who
registered Internet domain  names through Network Solutions, Inc.,
paying a one-time  registration fee and yearly renewal fees
thereafter, a portion  of which the company paid over to NSF according
to the  terms of a government contract. The complaint alleged,  among
other things, that NSF had imposed and collected an  unconstitutional
tax, that Network Solutions had violated the  antitrust laws, and that
the amount of the fees charged  pursuant to the contract exceeded a


I


A


The Internet, "an international network of interconnected  computers,"
Reno v. ACLU, 117 S. Ct. 2329, 2334 (1997),  developed from the
ARPANET, a network the United States  military created in 1969 to link
its computers with those of  defense contractors and universities. See
63 Fed. Reg. 31,741  (1998). The ARPANET, which no longer exists,
served as a  model for similar nonmilitary networks. See id.; see also
63  Fed. Reg. 8826 (1998). These networks eventually linked  with each
other and coalesced into the backbone of the  modern Internet, see 63
Fed. Reg. at 8826, enabling tens of  millions of people to communicate
with one another and to 


gain access to vast amounts of information from around the  world, see
ACLU, 117 S. Ct. at 2334.


Internet use has grown dramatically in the past two dec- ades. The
number of networked "host" computers--those  that store information
and relay communications--increased  from about 300 in 1981 to
approximately 9.4 million in 1996.  See id. Roughly 60 percent of
these host computers are  located in the United States. See id. About
40 million people  used the Internet in 1996, a number expected to
rise to 200  million this year. See id.


Individuals generally obtain access to the Internet through  these host
computers, each of which has a numerical address,  or Internet
Protocol number, such as "98.37.241.30," that  allows other host
computers to identify and locate it.1 See 63  Fed. Reg. at 8826; see
also 63 Fed. Reg. at 31,741. When  the Internet was in its infancy,
Internet Protocol numbers  were assigned and maintained by the late
Dr. Jon Postel,  then a UCLA graduate student working under a contract
 between the Defense Department and the university. See 63  Fed. Reg.
at 31,741. When Dr. Postel moved from UCLA to  the Information
Sciences Institute at the University of South- ern California, he
continued to maintain the lists pursuant to  contracts with the
Defense Department. See id. As the lists  grew, Dr. Postel delegated
certain aspects of the list mainte- nance to what eventually became
known as the Internet  Assigned Numbers Authority. See id.


Because many numerical sequences are difficult to remem- ber, the
Internet community created a system allowing an 




__________

n 1 An Internet Protocol address consists of four numbers, each 
between 0 and 255, separated by periods. See PGMedia, Inc. v.  Network
Solutions, No. 97 Civ. 1946, slip op. at 3 (S.D.N.Y. Mar. 16,  1999);
see also Josh A. Goldfoot, Note, Antitrust Implications of  Internet
Administration, 84 Va. L. Rev. 909, 913 (1998). The first  number
signifies the computer's geographic region; the second  number a
specific Internet Service Provider; the third a specific  group of
computers; and the fourth a specific computer within that  group. See
G. Peter Albert, Jr., Eminent Domain Names: The  Struggle to Gain
Control of the Internet Domain Name System, 16  J. Marshall J.
Computers & Info. L. 781, 784 (1998).


Internet computer to be identified by a "domain name." See  62 Fed.
Reg. 35,896 (1997). The domain name system is a  hierarchy. See 63
Fed. Reg. at 8826. Top-level domains are  divided into second-level
domains, and so on. See id. More  than 200 national, or country-code,
top-level domains--e.g.,  ".us" for the United States, ".pa" for
Panama, ".uk" for the  United Kingdom, and so on--are administered by
their corre- sponding governments or by private entities with the
govern- ment's permission. See 63 Fed. Reg. at 31,742. A small set  of
generic top-level domains carry no national identifier, but  denote
the intended function of that portion of the domain  space: ".com" for
commercial users; ".org" for non-profit  organizations; ".net" for
network service providers; ".edu"  for educational institutions;
".gov" for United States govern- ment institutions; ".mil" for United
States military institu- tions; and ".int" for international
institutions. See 63 Fed.  Reg. at 31,742.


Domain names--e.g., bettyandnicks.com--consist of at least  two groups
of alphanumeric characters, each known as a  string, separated by a
period or dot. The last string--the  farthest to the right--denotes
the top-level domain. The  second-to-last string is the second-level
domain name and  identifies the person's or organization's Internet
computer  site. See Albert, supra note 1, at 783. Each string may 
contain up to 63 characters but the overall domain name must  be less
than 256 characters. See PGMedia, Inc., No. 97 Civ.  1946, slip op. at


For the domain name system to function, each domain  name must be
unique and correspond to a unique Internet  Protocol number. See 63
Fed. Reg. at 8826; see also Gold- foot, supra note 1, at 913. A new
user who wishes to have an  Internet site with a domain name address
first obtains an  Internet Protocol number (e.g., 1.23.456.7). See
PGMedia,  Inc., No. 97 Civ. 1946, slip op. at 5. The user then
registers a  domain name and it becomes linked with that Internet
Proto- col number. See id. at 5-6.


Before using a domain name to locate an Internet computer  site in
"cyberspace," a computer must match the domain 


name to the domain name's Internet Protocol number.2 The  match
information is stored on various Internet-connected  computers around
the world known as domain name servers.  The computer attempts to find
the match information by  sending out an address query.3 The goal of
the address  query is to find the particular domain name server
containing  the match information the user seeks. See id. at 4-5.


When ordered to translate an unknown domain name into  an Internet
Protocol number, a computer will ask its Internet  Service Provider's
server if it knows the domain name and  corresponding Internet
Protocol number. See Albert, supra  note 1, at 785. If that server
lacks the information, it will  pass the query to a "root server,"
also called a "root zone"  file, the authoritative and highest level
of the domain name  system database.4 See 63 Fed. Reg. at 8826. The
root zone  file directs the query to the proper top-level domain zone
file,  which contains the domain names in a given domain and their 
corresponding Internet Protocol numbers. See 63 Fed. Reg. 




__________

n 2 A domain name does not signal where a computer is physically 
located. A computer may be moved from one place to another  while
retaining the same domain name. Thus a domain name is not  an address
as typically understood but instead is a mark identifying  a specific
person's or organization's site on the Internet. See  Albert, supra
note 1, at 785.


3 A computer user typically initiates an address query by typing a 
domain name into an application such as a web browser. See  Albert,
supra note 1, at 785.


4 There are 13 root servers, named A through M, which together  contain
authoritative domain name databases. See 63 Fed. Reg. at  31,742.
Information that a domain name is associated with a  certain Internet
Protocol number goes on the A root server. See  PGMedia, Inc., No. 97
Civ. 1946, slip op. at 6. Servers B through  M download new domain
name registration and Internet Protocol  number information on a
voluntary and daily basis from the A root  server. See 63 Fed. Reg. at
31,742; see also PGMedia, Inc., No. 97  Civ. 1946, slip op. at 6. In
this way, no matter which root server a  user's computer utilizes to
commence an address inquiry, the query  can be completed successfully.
See PGMedia, Inc., No. 97 Civ.  1946, slip op. at 6.


at 8828. In the case of someone searching for the "bettyand- nicks.com"
home page, the root zone file sends the query to  the top-level domain
zone file with information about ".com"  domain names. The ".com" zone
file then refers the query to a  second-level domain name file with
all the second-level do- main names under ".com." This is where the
"bettyand- nicks.com" query ends: the second-level domain name file
has  the information matching the domain name to its associated 
Internet Protocol number. With the Internet Protocol num- ber, the
user's computer can connect the user to the request- ed Internet site.
The "bettyandnicks.com" home page will  appear, just as if the user
had typed in the Internet Protocol  number instead of the domain name.
See PGMedia, Inc., No.  97 Civ. 1946, slip op. at 5.


Initially, the Internet Assigned Numbers Authority re- tained
responsibility for both Internet Protocol number allo- cation and
domain name registration. See id. at 7. In 1991  and 1992, NSF, an
independent agency of the federal govern- ment, assumed responsibility
for coordinating and funding the  management of the nonmilitary
portion of the Internet infra- structure.5


In March 1992, NSF solicited competitive proposals to  provide a
variety of infrastructure services, including domain  name
registration services. NSF issued the solicitation pur- suant to the
National Science Foundation Act of 1950, 42  U.S.C. ss 1861-1887, as
amended, and the Federal Grant and  Cooperative Agreement Act, 31
U.S.C. ss 6301-6308.6 In  


__________

n 5 The NSF's role in the Internet's evolution began even earlier.  In
1987, the NSF awarded grants to IBM, MCI, and Merit to  develop the
NSFNET, a national high-speed network based on  Internet protocols.
See 63 Fed. Reg. at 31,742. The NSFNET, the  largest of the
governmental networks, provided the "backbone" to  connect other
networks serving more than 4,000 research and  educational
institutions throughout the country. See id. In 1992,  Congress gave
the NSF statutory authority to allow commercial  activity on the
NSFNET. See id. This facilitated connections  between NSFNET and newly
forming commercial network service  providers, paving the way for


6 The solicitation did not anticipate the explosion in the volume of 
domain name registrations that would occur. Only 3,950 nonmili-


December 1992, after an independent review of the proposals  responsive
to the solicitation, NSF selected the bid from, and  entered into a
cooperative agreement with, Network Solu- tions, Inc., a private
company.


B


The dispute in this case turns partly on the terms of the  cooperative
agreement, which took effect January 1, 1993,  and, as amended, runs
through September 30, 2000, at the  latest. Network Solutions became
the exclusive registry and  exclusive registrar for the ".com,"
".org," ".net," and ".edu"  top-level domains. See 63 Fed. Reg. at
8828. As a registry,  Network Solutions maintains a top-level domain's
zone files,  the directory databases listing domain names and their
Inter- net Protocol numbers. See 63 Fed. Reg. at 8828. As regis- trar,
Network Solutions acts as go-between for domain-name  holders and the
registry, providing various services, including  the registration of
domain names on a first-come, first-served  basis. See 63 Fed. Reg. at
8828. The company also current- ly maintains the "A" root server, see
supra note 4.


The agreement provided that NSF would compensate Net- work Solutions in
accordance with a cost-plus-fixed-fee ar- rangement. The
cost-plus-fixed-fee arrangement ended on  September 14, 1995. Pursuant
to an amendment to the  agreement, Network Solutions started charging
domain name  registrants a one-time registration fee of $100 for
registration  services for the first two-year period, and $50 per year
 thereafter, with 70 percent of the fees going to Network  Solutions
as "consideration for the services provided" and 30  percent set
aside, in a custodial account held by Network  Solutions on NSF's
behalf, for preserving and enhancing the  "Intellectual Infrastructure
of the Internet." The 30 percent 




__________

n tary domain names were registered at the time of the solicitation, 
and monthly registrations averaged 229. By September 1997, the  rate
of registrations reached 125,000 per month, and there were  roughly
1.9 million names registered.


portion--the "Preservation Assessment"--was discontinued  for
registrations made on or after April 1, 1998.7


Plaintiffs are individuals and companies (collectively "regis- trants")
who paid fees to Network Solutions to register and  maintain their
domain names. They sued Network Solutions  and NSF claiming that the
domain name fees violated the  Constitution, the Sherman Act, the
Independent Offices Ap- propriation Act, and the Administrative
Procedure Act. They  sought damages, declaratory and injunctive
relief, refund of  the fees earmarked for the Preservation Assessment,
and  return of the above-cost portion of the fees they paid to 
Network Solutions between September 14, 1995, and March  31, 1998, for


On April 6, 1998, the district court dismissed most of the  claims, but
held that the Preservation Assessment was an  above-cost tax Congress
had not authorized and hence was  unconstitutional. See Thomas v.
Network Solutions, Inc., 2  F. Supp. 2d 22, 31-32 (D.D.C. 1998).
Within weeks, Congress  passed and the President signed into law s
8003 of the Fiscal  Year 1998 Supplemental Appropriations and
Rescissions Act,  Pub. L. No. 105-174, 112 Stat. 58. Section 8003 is


Ratification Of Internet Intellectual Infrastructure  Fee. (a) The 30
percent portion of the fee charged by  Network Solutions, Inc. between
September 14, 1995 and  March 31, 1998 for registration or renewal of
an Internet  second-level domain name, which portion was to be ex-
pended for the preservation and enhancement of the  intellectual
infrastructure of the Internet under a cooper- ative agreement with
the National Science Foundation,  and which portion was held to have
been collected with- out authority in William Thomas et al. v. Network
Solu- tions, Inc. and National Science Foundation, Civ. No.  97-2412,
is hereby legalized and ratified and confirmed 




__________

n 7 At that time, Network Solutions started charging $70 for regis-
tration services for the first two-year period, and $35 per year 
thereafter. Later in 1998, NSF transferred responsibility for ad-
ministering its cooperative agreement with Network Solutions to  the
Department of Commerce.


as fully to all intents and purposes as if the same had, by  prior act
of Congress, been specifically authorized and  directed.


(b) The National Science Foundation is authorized and  directed to
deposit all money remaining in the Internet  Intellectual
Infrastructure Fund into the Treasury and  credit that amount to its
Fiscal Year 1998 Research and  Related Activities appropriation to be
available until  expended for the support of networking activities,
includ- ing the Next Generation Internet.


112 Stat. 58, 93-94. Holding that s 8003 ratified the Preser- vation
Assessment and thus mooted the sole surviving claim,  the district
court dismissed the entire case on August 28,  1998. On October 23,
1998, plaintiffs moved for reconsidera- tion under Fed. R. Civ. P.
60(b). The district court heard  argument on the Rule 60(b) motion on
November 24, 1998,  ruling from the bench in defendants' favor.
Registrants now  appeal portions of the April 1998 and August 1998
district  court orders.8


II


To begin, we shall assume, arguendo, that the 30 percent  portion of
the domain name registration fee Network Solu- tions collected and
held for NSF constituted an illegal tax  because, as the district
court decided, NSF lacked congres- sional authorization. As all
parties agree, this is not neces- sarily fatal because legislation may
confirm and render lawful  otherwise unlawful federal agency actions
imposing charges  on others. An old Supreme Court case--rarely cited
but  never overruled--stands for the proposition that Congress  "has
the power to ratify the acts which it might have autho-




__________

n 8 Registrants have not appealed the district court's dismissal of 
their claims concerning the Administrative Procedure Act and  Article
IV, s 3 of the Constitution. At oral argument, they also  withdrew
their appeal of the district court's dismissal of their claim  under s
1 of the Sherman Act. See Kickapoo Tribe of Indians v.  Babbitt, 43
F.3d 1491, 1496 n.7 (D.C. Cir. 1995).


rized" in the first place, so long as the ratification "does not 
interfere with intervening rights." United States v. Heinszen  & Co.,
206 U.S. 370, 384 (1907).9


In view of Heinszen, registrants pose two questions: did  Congress, in
s 8003 of the 1998 supplemental appropriations  act, mean to ratify
the Preservation Assessment; and, if so,  was Congress barred from
ratifying NSF's action on the  ground that it could not have
authorized NSF to impose the  assessment at any time.


As to the first question, the argument against ratification  proceeds
on the basis that if Congress had wanted to confirm  the assessment s
8003 would have said "tax" rather than  "fee." We think this
difference between s 8003's description  and the district court's is
inconsequential. The effect of  s 8003 is the same as if it had used
the word "tax." In  Heinszen, Congress called the "tax" at issue there
a "duty,"  yet the Supreme Court still found a valid ratification. 206
 U.S. at 378, 381-82. In Skinner v. Mid-America Pipeline  Co., 490
U.S. 212, 214-15, 222-23 (1989), the Court sustained  Congress's
delegation of its taxing power in a provision,  entitled "Pipeline
safety user fees," directing the Secretary of  Transportation to
establish a system of "user fees" to cover  costs of administering
federal pipeline safety programs. See  also Florida Power & Light Co.
v. United States, 846 F.2d  765, 769, 776 (D.C. Cir. 1988). Here,
although the district  court found the Preservation Assessment to be a
"tax," we  are certain that s 8003 addresses the resulting fund of
money  collected for NSF's benefit between September 1995 and  March
1998. Section 8003 identifies this case by name and by  its district
court docket number; it accurately describes the  district court's
holding; it specifies the precise period when  the Preservation




__________

n 9 No party has drawn a distinction between congressional ratifica-
tion before a judicial decision and ratification--as here--after a 
decision (but before a final judgment) declaring the agency action 
unlawful. Cf. Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 219-25 
(1995). We will therefore assume that the two situations should be 
treated the same.


the language the district court used in suggesting ratification.  The
section's caption--"Ratification Of Internet Intellectu- al
Infrastructure Fee"--makes Congress's intent unmistak- able, and the
accompanying Conference report states that  s 8003 "serve[s] to ratify
and confirm Congressional intent  with respect to the collection and
use of funds by the National  Science Foundation....and the language
included in this new  section will statutorily correct the lack of
authority perceived  by the court."10 On the other hand, plaintiffs'
reading of  s 8003 renders the provision nonsensical. The district
court  had not held any "fee" illegal and so, if s 8003 ratified only 
user fees, it ratified nothing.


Registrants cannot, as they suppose, derive support for  their
interpretation of s 8003 from the Internet Tax Freedom  Act, Title XI
of the Omnibus Consolidated and Emergency  Supplemental Appropriations
Act, 1999, Pub. L. No. 105-277,  112 Stat. 2681 (1998). The Internet
Tax Freedom Act be- came law after the district court's dismissal of
this case; it  does not repeal s 8003; in fact it does not even
mention  s 8003; the tax moratorium it enacts deals with prospective 
taxes imposed by states or political subdivisions thereof; it 
excludes from its coverage "liability for taxes accrued and  enforced
before the date of enactment of this Act"; and it  specifically
exempts "ongoing litigation relating to such tax- es."


This brings us to the second question raised in light of 
Heinszen--whether Congress could have authorized NSF to  collect the
assessment from the beginning (if it could not have  done so, it
cannot ratify NSF's actions after the fact). Regis-




__________

n 10 Registrants also make much of a letter from a Member of the  House
of Representatives and a letter from three Senators written  after
Congress passed s 8003. Such isolated post-enactment state- ments, to
the extent that they are legislative history, carry little  weight,
see Landgraf v. USI Film Products, 511 U.S. 244, 262, 262- 63 n.15
(1994), and in any event, do not alter the plain meaning of  this
statute. It is clear that Congress meant to ratify the Preserva- tion
Assessment. Even these legislators do not appear to contest  this. All
they dispute is the Preservation Assessment's label--tax  or fee.


trants start this part of their argument with the proposition  that
"Congress can never delegate the unfettered power to  legislate," from
which they conclude that Congress could not  have delegated to NSF the
power "to fix Internet taxes"  before the 30 percent assessment went
into effect. Appel- lants' Brief at 23-24. We think registrants'
argument mis- casts not only what Congress did, but also what Congress
 could have done initially. Section 8003 delegated to NSF no 
discretionary authority, much less the power to enact tax  legislation
or to fix tax rates. When Congress passed this  provision in May 1998,
the rate had already been set, the  assessments already collected.
Congress then knew how  much Network Solutions had been charging
registrants, the  period during which the charges had been imposed
(Septem- ber 14, 1995, through March 31, 1998), and what portion of 
the charges--30 percent--had gone to NSF and for what  purpose. It was
this "fee" that, in the words of s 8003,  Congress "legalized and
ratified and confirmed as fully to all  intents and purposes as if the
same had, by prior act of  Congress, been specifically authorized and
directed." If a  prior act of Congress had directed NSF to collect $30
for  each new registration and $15 thereafter and to retain the  funds
in order to support the Internet, we perceive no  reason--registrants
have offered none--why such legislation  would not have been within
Congress's constitutional power  under Article I, s 8. See Federal
Power Comm'n v. New  England Power Co., 415 U.S. 345, 349 (1974);
Seafarers Int'l  Union of N. Am. v. United States Coast Guard, 81 F.3d


III


Count 10 of the amended complaint charges that Network  Solutions, in
violation of s 2 of the Sherman Act, 15 U.S.C.,  abused its alleged
monopoly power in the domain name  registration market by refusing to
allow potential competitors  to introduce additional top-level domains
into the "Configura- tion File"--the "A" root server--"the Essential
Facility con-


trolled by [Network Solutions]."11 The district court dis- missed this
claim for failure to state a cause of action, on the  ground that a
"federal instrumentality doctrine" gave Net- work Solutions the same
immunity from antitrust liability as  that enjoyed by NSF.


Whether there is, or should be, any such "federal instru- mentality
doctrine" in this context is not clearly settled. The  Department of
Justice, representing NSF in this appeal, has  taken no position on
the question. Network Solutions, seeking  to convince us of its
immunity, starts with the point that NSF  is itself outside the reach
of the Sherman Act. This is clear  enough. NSF is part of the federal
government. The Su- preme Court has interpreted the word "person" in s
2 of the  Sherman Act to exclude the United States from liability. See
 United States v. Cooper Corp., 312 U.S. 600 (1941). We  therefore
held in Sea-Land Service, Inc. v. Alaska Railroad,  659 F.2d 243 (D.C.
Cir. 1981), that the Alaska Railroad, an  entity wholly owned and
operated by the federal government,  was not subject to Sherman Act
liability. Given NSF's  antitrust immunity, Network Solutions
maintains that it also  has immunity so long as its alleged
anti-competitive actions  were "taken pursuant to the Cooperative
Agreement." Net- work Solutions' Brief at 34. In agreeing with this
conclusion,  the district court relied on Southern Motor Carriers Rate
 Conference, Inc. v. United States, 471 U.S. 48, 58-65 (1985).  But as
Network Solutions now acknowledges, Southern Mo- tor Carriers arose in
a different setting. The Supreme Court  was there interpreting the
effect of Parker v. Brown, 317  U.S. 341, 352 (1943), which recognized
the immunity of States  under the Sherman Act for imposing a restraint
on trade "as  an act of government." As to entities under State
regulation,  Southern Motor Carriers held that if they take action




__________

n 11 Count 10 might be read to allege another, distinct claim-- namely,
that Network Solutions denied access to the Configuration  File to
some unnamed potential competitors purportedly seeking to  register
domain names containing the customary top level domains.  At oral
argument registrants seemed to eschew such a reading. In  any event,
our treatment of Count 10 applies equally to this  potentially


ant to a "clearly articulated and affirmatively expressed"  State
policy, even a policy simply permitting the anti- competitive conduct,
and if the State actively supervises the  conduct, such private
parties are also immune from antitrust  liability. 471 U.S. at 62. The
Court's reasoning rested, in  part, on considerations of federalism,
considerations obviously  not present when federal regulation is
involved. See id. at 61;  compare Ricci v. Chicago Mercantile Exch.,
409 U.S. 289,  300-01 (1973), with IA Phillip E. Areeda & Herbert
Hoven- camp, Antitrust Laws s 248, at 116-18 (1997 ed.).


Just as important, Southern Motor Carriers dealt only with  state
regulation of private entities. See also Greensboro  Lumber Co. v.
Georgia Power Co., 844 F.2d 1538 (11th Cir.  1988). Here we have
instead a contractual relationship be- tween a federal government
agency and a private party.12 It  is not obvious to us, particularly
in view of Otter Tail Power  Co. v. United States, 410 U.S. 366, reh'g
denied, 411 U.S. 910  (1973), that a private contractor automatically
shares the  federal agency's immunity simply because the contractor's 
allegedly anti-competitive conduct occurred--as Network So- lutions
puts it and some courts suggest13--"pursuant" to a  government
contract. A contractor might be free to perform  the contract in any
number of ways, only one of which is anti- competitive.14




__________

n 12 The complex subject of antitrust immunity for private parties, 
after the Supreme Court's decision in Parker v. Brown, is discussed 
at length in 1 Phillip E. Areeda & Herbert Hovencamp, Antitrust  Laws
ss 221-231, at 356-540 (revised ed. 1997).


13 See, e.g., PGMedia, Inc., No. 97 Civ. 1946, slip op. at 20;  Beverly
v. Network Solutions, Inc., No. C-98-0337, 1998 WL  320829, at *4
(N.D. Cal. June 12, 1998); Medical Ass'n of Ala. v.  Schweiker, 554 F.
Supp. 955, 966 (M.D. Ala. 1983).


14 In Otter Tail, an electric utility company sought to avoid  Sherman
Act liability partly on the ground that its anti-competitive  actions
were pursuant to its contract with the Bureau of Reclama- tion, a
federal agency. The Court rejected this defense, agreeing  with the
Solicitor General that "government contracting officers do  not have
the power to grant immunity from the Sherman Act." 410 


Whether and under what circumstances a federal contrac- tor has
antitrust immunity are questions we leave to another  day. A firmer
ground for resolving this aspect of the case is  presented; although
it was neither raised nor decided in the  district court, it has been
argued on appeal and prudence  dictates that we consider it. Count 10
of the complaint  states, as the registrants agree, an "essential
facilities" claim.  See generally 3A Phillip E. Areeda & Herbert
Hovencamp,  Antitrust Laws ss 771-774, at 172-228 (1996); Phillip E. 
Areeda & Herbert Hovencamp, Antitrust Laws 654-60 (1995  Supp.).
Network Solutions, for the first time on appeal,  contends that
plaintiffs lack "standing" to raise their "essen- tial facilities"
claim. Caribbean Broadcasting System, Ltd. v.  Cable & Wireless PLC,
148 F.3d 1080, 1088 (D.C. Cir. 1998),  decided after the district
court's decision in this case, held  that among the "elements of an
antitrust claim for denial of  access to an essential facility are (1)
a monopolist who com- petes with the plaintiff controls an essential
facility" and "(3)  the monopolist denied the plaintiffs use of the
facility...."  The plaintiffs here are those who registered their
domain  names for a fee. They are not, according to their amended 
complaint, competitors of Network Solutions. It follows that  they
have failed to satisfy two of the elements set forth in  Caribbean
Broadcasting. Does this mean they lack "anti- trust standing," see
Associated General Contractors of Cali- fornia, Inc. v. California
State Council of Carpenters, 459  U.S. 519, 535 n.31 (1983), as
Network Solutions claims, or  does it mean that have they failed to
state a cause of action?  Our decision in Caribbean Broadcasting holds




__________

n U.S. at 378-79. To this firm statement, the Court added what  might
be perceived as qualifiers:


Such contracts stand on their own footing and are valid or not, 
depending on the statutory framework within which the federal  agency
operates. The Solicitor General tells us that these  restrictive
provisions [in the contract] operate as a "hindrance"  to the Bureau
and were "agreed to by the Bureau only at Otter  Tail's insistence,"
as the District Court found. The evidence  supports that finding.


Id. at 379.


tor status is simply an element of the cause of action, in the 
absence of which the claim should be dismissed under Rule  12(b)(6),
Fed. R. Civ. P. See 148 F.3d at 1089. While this  does not necessarily
preclude also treating the matter in  terms of standing,15 and thus as
a question that may be raised  at any time, we have determined to rely
on Caribbean Broad- casting and its treatment of non-competitor status
even if we  are dealing not with standing but with a defense on the 
merits. As we have said, Caribbean Broadcasting came  down after the
decision below. If we ignored Caribbean  Broadcasting and sent the
case back to the district court,  either because we disagreed with the
district court's finding  of immunity, or because we thought further
factual develop- ment was in order, see Otter Tail Power Co., 410 U.S.
at 379,  Network Solutions would be free to invoke Caribbean Broad-
casting in its answer, which it has not yet filed, or in a motion  for
summary judgment, or both. The district court would  then have to rule
in favor of Network Solutions because the  plaintiffs are not
competitors. There is no reason to postpone  the inevitable. In these
rather exceptional circumstances we  have discretion to consider a
claim neither raised nor decided  in the district court. See
Granfinanciera, S.A. v. Nordberg,  492 U.S. 33, 38-39 (1989); Heckler
v. Campbell, 461 U.S. 458,  468-69 n.12 (1983); Animal Legal Defense
Fund v. Espy, 23  F.3d 496, 499 (D.C. Cir. 1994). On the basis of
Caribbean  Broadcasting we therefore will affirm the district court's 


IV


The final issue deals with the Independent Offices Appro- priation Act
("Act"), 31 U.S.C. s 9701, a statute requiring  that fees charged for
federal agency services comport with 




__________

n 15 See Steel Co. v. Citizens for a Better Env't, 118 S. Ct. 1003, 
1013 n.2 (1998): "The question whether this plaintiff has a cause of 
action under the statute, and the question whether any plaintiff has 
a cause of action under the statute are closely connected--indeed, 
depending upon the asserted basis for lack of statutory standing, 
they are sometimes identical, so that it would be exceedingly 
artificial to draw a distinction between the two."


set criteria.16 Registrants claim that the above-cost portion  of the
fees Network Solutions charged for its registration and  renewal
services violated the Act.


Government agencies cannot escape responsibility for fail- ing to
perform their statutory duties by hiring private parties  to perform
those duties. If a statute required NSF to  register domain names, and
NSF farmed this out to Network  Solutions, the Act might apply. But
that is not the situation  before us. The key governing statute is 42
U.S.C. s 1862(g).  While s 1862(g) may, or may not, permit NSF to
register and  renew domain names--we do not need to reach this ques-
tion--we are certain that it does not require NSF to do so.  It merely
directs NSF "to foster and support access ... to  computer networks."
42 U.S.C. s 1862(g). One way to fulfill 




__________

n 16 Section 9701 states in full:


Fees and charges for Government services and things of val- ue[:]


(a) It is the sense of Congress that each service or thing of  value
provided by an agency (except a mixed-ownership Gov- ernment
corporation) to a person (except a person on official  business of the
United States Government) is to be self- sustaining to the extent


(b) The head of each agency (except a mixed-ownership  Government
corporation) may prescribe regulations establish- ing the charge for a
service or thing of value provided by the  agency. Regulations
prescribed by the heads of executive  agencies are subject to policies
prescribed by the President and  shall be as uniform as practicable.
Each charge shall be--(1)  fair; and (2) based on--(A) the costs to
the Government; (B)  the value of the service or thing to the
recipient; (C) public  policy or interest served; and (D) other


(c) This section does not affect a law of the United States-- (1)
prohibiting the determination and collection of charges and  the
disposition of those charges; and (2) prescribing bases for 
determining charges, but a charge may be redetermined under  this
section consistent with the prescribed bases.


such a broad mandate, NSF apparently decided, was to enter  into a
cooperative agreement with Network Solutions to have  the company
register and maintain second-level domain  names.


Registrants argue that because a federal agency hired  Network
Solutions, the Act must cover the domain name fees.  By its terms, the
Act applies only to "a service or thing of  value provided by an
agency." 31 U.S.C. s 9701(a) (emphasis  added). Here, a private party
(Network Solutions) per- formed the domain name registration
services--and did so as  it saw fit. Registrants' amended complaint
acknowledges  Network Solutions' near total command over domain name 
registrations: "NSF has not and does not directly supervise  or manage
any NSI activities pertaining to the Domain Name  registration
process. The only 'control' and 'oversight' exer- cised by NSF over
NSI and the Domain Name registration  process is the contractual
requirement that NSF submit  certain limited quarterly and annual
reports."17 This might  seem sufficient to indicate that the Act does
not apply. But if  we give the section a broader interpretation, see
Ayuda, Inc.  v. Attorney General, 848 F.2d 1297, 1299-1300 (D.C. Cir. 
1988), the question becomes whether domain name registra- tion is a
government service or thing of value within the Act's  meaning. The
answer, we believe, is no. As we said, Con- gress chose not to require
NSF or any other agency of the  federal government to register domain
names. Simply be- cause NSF might have been able to perform domain
name  registration does not transform this activity into a govern-
ment service or thing of value. A recent and novel function  such as
domain name registration hardly strikes us as a  "quintessential"




__________

n 17 Registrants' admission that Network Solutions--not NSF--
controlled the domain name registration process negates regis- trants'
claim that Network Solutions was merely NSF's agent.


18 Registrants also stress the "public purpose" of domain name 
registration. But as the Supreme Court has said, albeit in a  slightly
different context: "[T]hat a private party performs a func- tion which
serves the public does not make its acts governmental."  San Francisco
Arts & Athletics, Inc. v. United States Olympic  Comm., 483 U.S. 522,
543-44 (1987) (citation omitted).


Indeed, it was not the government but the Internet Assigned  Numbers
Authority--headed by the late Dr. Postel at USC,  see 63 Fed. Reg. at
8826--that originally maintained host  computer name lists.


The two Comptroller General decisions registrants cite do  not alter
this conclusion. In In re: FEC-Sales of Microfilm  Copies of Candidate
and Committee Reports, 61 Comp. Gen.  285 (1982), and In re: Retention
of Fees Received by EPA  Contractors Providing Information Services to
the Public,  1975 WL 7967 (Comp. Gen. Oct. 20, 1975), federal agencies
 hired private firms to produce agency records on the agen- cies'
behalf. Both cases involved services that statutes re- quired the
agencies to perform. There is no such statutory  mandate here.


The Act is a nonfit in other ways. The Act applies to  monies bound for
the federal treasury. In its original form,  the Act stated that "any
amount" from fees or charges for  government services "shall be
collected and paid into the  Treasury" as miscellaneous receipts. Pub.
L. No. 137, tit. V,  65 Stat. 268, 290, formerly codified at 31 U.S.C.
s 483a,  recodified at 31 U.S.C. s 9701. The 1982 recodification of
the  Act omitted this requirement but only because s 3302(a)  made it
"unnecessary." 31 U.S.C. s 9701, Explanatory  Notes. Section 3302
provides that any official or agent who  receives money for the
government from any source shall  keep the money safe, see s 3302(a),
and deposit the money in  the Treasury, see s 3302(b). The monies at
issue here--the  70 percent portion of the domain name fees--were paid
to  Network Solutions for its services. The company is under no  duty
to turn over any portion to the federal government. To  the contrary,
according to the cooperative agreement and  federal law, see 58 Fed.
Reg. 62,992, 62,995, 62,998 (1993), as  amended by 62 Fed. Reg. 45,934
(1997), the monies belong to  Network Solutions. Any remaining doubt
is laid to rest by  considering the penalty for noncompliance with s
3302. An  official or agent who receives money for the government and 
does not deposit such money promptly in the Treasury may  be removed
from office. See id. s 3302(d). This sanction 


makes no sense with respect to a private actor like Network 
Solutions.


For all these reasons we hold that the Independent Offices 
Appropriation Act does not cover the fees Network Solutions  charged
for its services.


* * *


We have considered and rejected registrants' other conten- tions.


Affirmed.