“Are you asking if the funds for these [private] self-regulatory bodies should come from the consolidated fund of India?” drily asked Koan Advisory’s Vivan Sharan at MediaNama’s event on India’s proposed online gaming rules last week.
Sharan was responding to gaming and technology lawyer Jay Sayta’s concerns over the independence of proposed self-regulators mentioned in the rules. Sayta remained unconvinced about whether self-regulatory bodies funded by a handful of wealthy gaming companies could be expected to regulate the industry fairly. “When a body is a caged parrot, how does it expect to hold its masters accountable? How do we solve this inherent contradiction between funding and the structure of the body [which the rules haven’t solved for]?”
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What’s this model again?: The government seems to have palmed off most of its regulatory duties to the private sector in the rules through self-regulatory bodies. These bodies will have to be set up with the IT Ministry’s approval—after that, they have the all-important task of ensuring that only legal games that sufficiently protect consumers from harm hit the Indian market. While this “light-touch” model might reduce the load on the government (and minimise its interference with the sector to an extent), one question still remains: can we trust a handful of powerful bodies to regulate a competitive, growing sector fairly?
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What incentives do self-regulators have to be biased?: A member of the audience was confused by the negative outlook towards the self-regulatory model.
“This is an industry that went to the government and asked for this regulatory system. Broadly speaking, they like the legitimacy it provides. There is an incentive to regulate properly because the option of de-recognition also exists. There are a lot of positive incentives with the current framework. why are we looking at these bodies as if they’ll have all these negative consequences?”
NKR Law Offices’ Aditya Kumar remained clear that self-regulators may determine thresholds for consumer harm that protect their own interests, running contrary to the intent of the rules. Remember: they come in the aftermath of multiple gaming-related consumer harms cropping up across the country, including addiction, financial losses, and in some cases, death by suicide.
“The risk is too large only because of the nature of the product you’re dealing with,” Kumar argued. “I don’t want to establish a false equivalence, but there are other industries whose business is also [dependent on] addiction which are heavily regulated. When you understand and agree that your business is addiction, you have to be open to the fact that you have checks in place.” States may also have more inputs as the rules evolve because they have an interest in preventing consumer harm too, he added.
Let 1,000 flowers bloom: As we’ve previously reported, the annual membership fees for some self-regulatory bodies can be as high as Rs. 50 lakh. If those rates stay high, then it may be difficult for smaller gaming companies to sign up for these organisations as they’re mandated to. The proposed rules remain silent on these fees—and other potential market barriers raised by self-regulators, as an audience member observed.
“I agree, the market entry barrier for any such organisation should be very, very low,” noted Koan’s Sharan. “If you have only one or two of these bodies it’s problematic. Let 1,000 flowers bloom, but let that not create a window for forum shopping [by companies hopping from one self-regulatory body to another]. That’s the balance the rules have to try to achieve.”
One way of getting around this potential for bias: specific bodies could possibly certify self-regulatory bodies as kosher, in that they truly operate at an “arm’s distance” from their members. “I don’t know of bodies in India capable of doing this, so offshoring [this task] is a distinct possibility,” added Sharan. “But we would then also lose a chance to document a very rich body of data emerging from the entry and exit of players from self-regulatory bodies.” That data can be crucial to understand how self-regulatory bodies and the larger online gaming regime function.
Does a self-regulatory body’s stamp of approval really mean anything?: Some of these questions of bias—as well as unintended regulatory mishaps—may find themselves answered in court.
For example, self-regulatory bodies are supposed to check that games are games of skill (which are legal) and not gambling games (which are generally banned by states). They then give them a stamp of approval. But, India hasn’t actually figured out concrete legal definitions for games of skill or gambling games. Cases on the matter are pending at the Supreme Court, while states adopt different definitions based on their own prerogatives. What’s more, roughly only three games have been concretely called games of skill (and legal) by courts—fantasy sports, rummy, and poker. The legal status of hundreds of other games remains unclear. So, would a court recognise a self-regulator’s sign-off as legitimate? Would what the self-regulator says about a game be the final word?
“I think a court would place some value on this badge,” said Kumar. “But, that doesn’t mean courts won’t examine the game further. The self-regulatory body could be wrong [in its evaluation of a game]. It could also not be updated on the legal standards, and adopt older standards [to classify games as legal]. It’s quite possible they may be wrong, so courts will look into that.”
CUTS’ Neelanjana Sharma added that even if courts contest this verified badge, it can impact consumers positively. “There are quite a lot of fly-by-night operators and games that the government doesn’t want consumers to play. So a visible certification, or whitelist of gaming platforms, ends up leading to less harm for consumers [because they know which games have been verified and which haven’t].” Sharma added that adding sunset clauses to the proposed rules to review self-regulatory frameworks periodically and ensure good practices are in place, could be a step forward.
What do the rules tell us about India’s regulatory vision?: “The current regulatory thinking is that you basically leave regulation at the base level to the company and self-regulatory organisations,” said MediaNama’s Editor Nikhil Pahwa. “If there’s a problem, it gets bumped up to a government committee [the Grievance Appellate Committee] to adjudicate on. We’re seeing this with streaming services and news regulators. There is no ‘regulator’ being conceptualised at all. In fact, this framework is perhaps the means to avoiding having a regulator.”
Koan Advisory’s Vivan Sharan agreed, adding that the self-regulatory structure requires much more institutional strengthening. “In a sense, this is the outsourcing of public regulatory functions,” noted Sharan. “It’s [also] a pandora’s box. The Grievance Appellate Committee [the government body hearing appeals to self-regulatory decisions] will have three people weighing in on procedure. They will not be able to weigh in on substance. So, there is a regulatory oversight gap. If you have a weakness in the regulatory structure that you have created, whether self-regulatory, quasi-regulatory or otherwise, then you are reliant on the appellate structure. [But in this case] The appellate structure is so weak that there is no way you can rely on it. Therefore in the Digital India Act at some point, you’re going to have to solve this infirmity.”
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