What these people do might not be technically illegal, but it’s certainly not ethical either. Say you buy a domain name for your business. Some time later you get a very official looking letter in the mail asking you to renew your domain name with DROA because it’s about to expire. They are counting on you not remembering what company you originally bought the domain from because it most likely wasn’t with DROA. Now say you renew with them. What you actually do is transfer your domain to their service, where you’ll now pay more for less features and bad customer service.
A true life example: had a client who had been taken by these guys. She forgot to renew her domain but after expiration she went ahead and renewed and they allowed it. The Whois information showed she still owned the domain, in her own name, for another two years. I told her to transfer the domain to a more ethical service. DROA would not allow it, saying the domain was locked and ownership had actually moved to another person when the domain expired. She was crushed. I reminded her that she had paid DROA for the renewal and the domain was under her name, address and email. She called DROA and they said they’d “put in a request” but it might take weeks to take care of, and she still might not get the domain she still owned back, despite the fact that she still owned it. I told her to inform them that she would sue and magically the transfer immediately went through. Crazy how that works, isn’t it?