Analysis of the amendment introduced by MeitY for regulation of online gaming (Part 3)

In our previous posts, thus far, we’ve scrutinized the statutory definitions (pertaining to ‘online games’ and ‘online gaming intermediaries’) which have been incorporated in the Amendment Rules [under rules 2(qa) to (qf)] as well as the additional provisions incorporated therein [under rule 3] in respect of the due diligence required to be observed by intermediaries (including an ‘online gaming intermediary’).

We now move on to the changes prescribed in the Amendment Rules concerning the functioning of the Grievance Appellate Committee (established pursuant to rule 3A of the IT Rules) as well as the additional due diligence stipulated to be observed [under rule 4] thereunder (for certain categories of intermediaries). Our analysis of these changes is provided below.

Grievance Appellate Committee

As part of the compliances prescribed under the IT Rules, intermediaries are obligated to maintain a grievance redressal mechanism and appoint a Grievance Officer to deal with grievances (i.e., complaints in relation to the categories of prohibited content enumerated thereunder and/or any defaults under the provisions thereof) within the time period prescribed therein.

The IT Rules provide any ‘person’ (including a user) who is aggrieved by a decision of the Grievance Officer (as may be appointed by an intermediary) the option of preferring an appeal against such decision before a (three-member) Grievance Appellate Committee (established pursuant to rule 3A of the IT Rules). The IT Rules further provide that the relevant appeal must be made within thirty days of the receipt of communication of decision from the Grievance Officer and the order passed by the Grievance Appellate Committee in this regard must be complied with by the concerned intermediary. In furtherance, the concerned intermediary is also required to upload a written report (affirming its compliance with the order issued) on its website.

Under the Amendment Rules, however, any person may now prefer an appeal to the Grievance Appellate Committee (within the prescribed thirty-day timeline) in case he/she is aggrieved by the decision of the Grievance Officer as well as in case such person’s ‘… grievance is not resolved within the period specified…’ under the IT Rules. The Amendment Rules further mention that the orders of the Grievance Appellate Committee will be binding upon the ‘online gaming self-regulatory body’ proposed to be set up [under rule 4A] thereunder.

Additional Due Diligence

Under the IT Rules, additional due diligence requirements [mentioned in rule 4] were required to be observed only by an intermediary qualifying as a ‘significant social media intermediary’ (having more than 50 lakh registered users in India).

Under the Amendment Rules, however, certain additional due diligence requirements are also required to be observed by any online gaming intermediary that ‘…enables the users to access any permissible online real money game…’ (hereinafter referred to as ‘eligible online gaming intermediaries’) These have been enumerated for reference hereinbelow:

The Amendment Rules require eligible online gaming intermediaries (as well as significant social media intermediaries) to appoint a ‘Chief Compliance Officer’ (responsible for ensuring compliance with the IT Act and rules thereunder, including the Amendment Rules), a ‘Nodal Contact Person’ (for 24x7 coordination with law enforcement agencies) and a ‘Resident Grievance Officer’ [for the purpose enumerated under rule 3, as mentioned hereinabove]. While the IT Rules required only the Chief Compliance Officer and the Resident Grievance Officer (as may be appointed by the concerned intermediary) to be resident in India, the Amendment Rules stipulate that all three post-holders should be resident in India.

Further, eligible online gaming intermediaries (as well as significant social media intermediaries) are now required to provide for the following

• To implement an appropriate mechanism for the receipt of complaints and grievances (in relation to the categories of prohibited content enumerated thereunder and/or any defaults under the provisions thereof). For reference, as part of such a mechanism, a unique ticket number facility must be allotted to every complaint or grievance received by the concerned intermediary so as to allow for a complainant to track the status of such complaint or grievance.
• Further, to the extent reasonably possible, the concerned intermediary must provide reasons to the complainant for taking an action (or not taking an action) pursuant to a complaint or grievance.
• To publish periodic compliance report(s) on a monthly basis mentioning the details of complaints received and action taken thereon.
• To publish on the concerned intermediary’s website and/or mobile-based application a physical contact address (at which communication may be addressed to the concerned intermediary).
• To enable registered users (either from India or using the concerned intermediary’s services in India) to voluntarily verify their accounts by using any ‘appropriate mechanism’ (as a result of which the user is provided with a demonstrable and visible mark of verification, which shall be visible to all users of the service).

Further, the following specific additional due diligence requirements for eligible online gaming intermediaries have also been incorporated in the Amendment Rules:

• To display a ‘demonstrable and visible’ mark of verification (as may be granted by the online gaming self-regulatory body proposed to be set up under the Amendment Rules) in respect of any ‘permissible online real money game’ which the concerned intermediary enables its users to access;
• To ensure to include all prescribed information [under rule 4 of the Amendment Rules] while informing users regarding the concerned intermediary’s ‘…rules and regulations, privacy policy, terms of service and user agreements…’ in the manner required [under rule 3 of] the Amendment Rules.
  For reference, such prescribed information includes a policy related to ‘…withdrawal or refund of the deposit made with the expectation of earning winnings, the manner of determination and distribution of such winnings, and fees and other charges payable by the user…’, the KYC procedure followed by the concerned intermediary for verifying the identity of the users of such online game as well as ‘…measures taken for protection of deposit made by a user for such online games…’.

The Amendment Rules further restrain eligible online gaming intermediaries from financing their services ‘…by way of credit…’ or otherwise enabling ‘…financing to be offered by a third party for the purpose of playing such online game…’.

Interestingly, the Amendment Rules also restrain any ‘online gaming intermediary’ (and not just an eligible online gaming intermediary) from accepting any ‘…deposit in cash or kind from any user for a permissible online real money game…’ if the online gaming intermediary has not identified such user and verified the user’s identity. In this regard, the Amendment Rules provide that the KYC procedure required to be followed by an entity regulated by the Reserve Bank of India (for customer identification and verification) will also be required to be followed (with whatever changes may be necessary) for identification and verification of the users of such online gaming intermediary.

It is pertinent to note that all the above additional due diligence requirements are required to be observed in addition to the standard due diligence requirements prescribed [under rule 3 of the Amendment Rules] for intermediaries (including online gaming intermediaries).

In our succeeding and final post in this series (which we’ll release shortly), we’ll cover the prescribed procedures for verification of online real money game, the online gaming self-regulatory body proposed to be set up in this regard as well as the additional requirements (in relation to online games and online real money games) set out in the Amendment Rules.