The US government has moved to halt what it claims is an internet domain name scam that has duped as many as 27,000 small businesses in the US.

The Federal Trade Commission (FTC) has asked a US district court to shut down the websites of three businesses, which it says have scared consumers into needlessly registering variations of their existing domain names.

According to the FTC, the businesses - National Domain Name Registry, Electronic Domain Name Monitoring and Corporate Domain Monitoring - have falsely told domain name holders that a third party had applied for an identical domain name but that for a $70 fee, the applications would be blocked.

The claims, which were faxed to the victims, also said that the unidentified domain name applicants were acting in "bad faith" and were attempting to confuse the marketplace by registering for similar domains but with different suffixes.

The FTC said that the scheme is "nonsensical" because according to the Internet Corporation for Assigned Names and Numbers (Icann), the industry's official naming body, the purchase of domain names is practically instantaneous, which means that there is no time for applications to be challenged.

Stephen Cohen, an FTC attorney, urged small businesses to be wary, as there are other firms operating similar services. "If companies get any unsolicited faxes or calls just throw them in the trash or ignore them," he told vnunet.com.

According to the FTC, the act of domain name registration has attracted other questionable businesses. Last year, Icann warned users about companies offering to put them first in the queue for the forthcoming seven new top-level domains. According to officials it is unwise to pre-register for suffixes that are not yet available.