For years, the tech sector has functioned as a de facto Wild West, an economic landscape thriving thanks to a clear lack of regulation. Even as industry leaders such as Mark Zuckerberg have advocated for stricter rules, until recently, few steps were taken to impose further regulatory measures. Last week, a judge handed down a historic ruling against one of Silicon Valley’s most powerful companies. According to a verdict from the U.S. District Court for the District of Columbia, Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) has violated antitrust laws by abusing its monopoly on internet searching through rival stifling measures.

However, Google isn’t the only big name currently facing antitrust action. Another company is levying a similar case against GoDaddy (NYSE:GDDY). If it succeeds, GDDY stock could be severely compromised as the alleged monopoly upon which its empire is built collapses.

If you’ve ever tried to register a domain name, there’s a decent chance you’ve used GoDaddy.com. The company boasts that it has helped more than 20 million customers register more than 84 million web domains. However, some industry experts claim that GoDaddy has a history of using its power to create a costly and complicated user experience that benefits itself at the expense of its customers. And that’s not the only reason that Abe Storey, founder and CEO of custom domain startup Entri, is taking a stand against the domain registration leader’s monopoly before it goes any further.

GDDY Stock Alert: Is GoDaddy the Next Google?

Most companies would love to be compared to Google. After all, the industry-leading company has truly redefined the ways the world searches for anything online and provided resources for just about everything else. Yet the recent antitrust ruling suggests that the tech sector giant may be nearing a tipping point, especially as the U.S. Department of Justice is already taking steps to break up the Google monopoly. If GoDaddy is guilty of the actions that Entri’s lawsuit alleges, GDDY stock could be heading for a fall.

GoDaddy is the first name many consumers turn to when they need to register a domain name. However, as Storey and others have noted, the company limits the ability of web domain owners to automatically build out their sites. By contrast, Entri’s platform allows users to instantly connect software as a service (SaaS) applications to custom domains through domain name system (DNS) configurations. 

The argument behind Entri’s lawsuit against GoDaddy, filed on July 11, 2024, centers around the notion that the larger company is abusing its power by attempting to block its former partner’s progress. As The Register reports of the lawsuit:

“Entri alleges that GoDaddy changed its stance on the partnership late last year, first telling customers that Entri Connect could no longer be used to update GoDaddy-registered domains, and then updating its terms of use to block Entri from updating DNS settings.”

The Case Against GoDaddy

Storey spoke to InvestorPlace about the case against the domain giant and why it should matter to everyone, from investors to small business owners. He broke down the accusations, stating that GoDaddy has threatened Entri’s customers, failed to honor previous agreements with them and taken steps to implement a series of technological measures designed to exclude them from the market. The lawsuit states that GoDaddy has “threatened Entri with legal action, theorizing a host of frivolous claims in a transparent scare tactic.”

Storey notes that GoDaddy has gone so far as to threaten Entri with criminal statutes for violating the Computer Fraud and Abuse Act (CFAA), highlighting that his company disputes all such claims. As he sees it, these problems with GoDaddy’s means of operation stand to stifle innovation by severely limiting the power of everyone who purchases a domain name from them, often the first step in launching a new business. 

“If you register your domain on GoDaddy, you no longer have the choice to use the third-party software that you want to use,” he states. “And that’s not good. Not only is that not good for Entri, that’s not good for the internet, that’s not good for small businesses.”

Claims of GoDaddy’s unfriendly business practices are echoed by long social media threads that consist of users expressing frustration at the company and requesting that it allow use of Entri’s one-click domain setup. Users have recommended that small business owners not use GoDaddy, due to the limitations it imposes on users.

GoDaddy declined to speak to InvestorPlace about the lawsuit or Entri’s allegations, stating the company does not comment on pending investigations. 

What Comes Next

As of now, it is unclear how Entri’s lawsuit against GoDaddy will play out and if it will swing the same way as the Google antitrust ruling. InvestorPlace contributor Muslim Farooque sees Google’s legal setbacks as a valuable opportunity to acquire shares on a dip. However, despite being a leader in its specific market niche, GoDaddy doesn’t have Google’s power. If a judge rules in favor of Entri’s case, it may cause a setback for GDDY stock that the company finds more difficult to weather. And Storey is optimistic about his company’s chances in court. 

“They’re counting on that complexity to allow them to continue to do this,” he says, referring to GoDaddy’s terms and conditions. “I’d like to think small businesses and the average consumer are smarter than that; that they know when something’s not right and unfair. [I hope] the court also knows that and will make a decision based on that.”

This may seem like a David versus Goliath story: a single small company taking on a much larger one. But Storey has made it clear this type of legal action is about more than just Entri; it’s necessary for the entire industry.

Regardless of how the lawsuit progresses, it is clear the tech sector is moving towards a more regulated future, or at least one with fewer monopolies. Companies like Google will find ways to maintain their dominance, but a smaller one like GoDaddy might have a more difficult time in an economy with stricter rules. 

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.