Earlier this week the domain name industry was rocked by a shill bidding scandal at SnapNames. The company made the right early moves by admitting the problem and promising refunds, plus interest, to customers. Now, though, they are forcing customers to release them from liability to get the refund. We this this is a mistake.

SnapNames acquires expiring domain names from registries and then auctions them off to interested buyers. When everything goes well people are happy. SnapNames gets a good return on investment, and the domains go to the buyer who values them the highest.

But it turns out things most certainly have not gone well. Since 2005 a substantial number of domain auctions had shill bidding by a SnapNames employee.

This isn’t run of the mill eBay shill bidding. On eBay a seller may try to participate in the auction to drive overall bidding higher. But for the most part pricing doesn’t get out of control because most stuff sold on eBay isn’t particularly unique and price boundaries are well established.

What happened at SnapNames is much worse. The co