the IETF is the main body i am aware of, that dictates the standards for the internet (protocols, rules for data transfer etc.)
http://www.ietf.org
but the internet itself is self-regulatory hence all the problems with pornography and other possible areas which cause legal wrangles between nations, as the internet does not have national boundaries.
In answer to your question, they are not selling you a domain name (because as you correctly say it was never theirs to sell in the first place) - as J2B says domain names are maintained and recorded by ICANN who receive requests to register a unique name with a person/persons. Obviously the maintenance of tracking all domain names (and making sure 2 people don't have the same domain name) costs money so a charge is made for this. The domain name sellers you describe, are selling a "service for registering a domain name against yourself", rather than selling the name itself.