The Information Technology Amendment Rules, 2023

June 27, 2023 — Leave a comment

IT AMENDMENT RULES 2023: An Overview

The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023

INTRODUCTION 

The aim of this primer is to provide an overview of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023 (“the Amendment”), which amend the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“2021 Rules”). 

The Ministry of Electronics and Information Technology (“Meity”) amended the 2021 Rules, with the aim  to inter alia regulate the online gaming in India, along with ensuring safety to its users, broadly by governing-

  1. Online games
  2. Online real money game
  3. Permissible online game
  4. Permissible online real money game
  5. Online gaming intermediary
  6. Online gaming self-regulatory body and
  7. Restricting the spread of fake & misinformation. 

THE BASICS

The Amendment defines an ‘online game’ as a game that is offered via the internet, wherein the same can be accessed by any user through a computer resource or upon the access of an intermediary.

STAKEHOLDER ANALYSIS

  1. Online Game

The Amendment classifies online games into three subcategories. They are-

i) Online real money game- The Amendment defines ‘online real money game’ as an online game, wherein the user deposits in the form of cash/kind with an expectation and intention of earning winnings in the form of cash/kind on such deposits made. The Amendment further explains the term ‘winnings’ as any prize in cash/kind distributed to the user of the online game based on their performance in accordance with the rules of the game.

ii) Permissible online game- The Amendment defines ‘permissible online game’ as a permissible online real money game, and also includes: online game(s) which is not considered as online real money game (reference to Rule 4C of the Amendment). With this definition, the ambit of the 2021 Rules gets widened as the Central Government will have the power to extend and direct the applicability of the said rules to even those online games that do not require a user to make a deposit. Hence, even covering casual games under the 2021 Rules.

iii) Permissible online real money game- The Amendment defines ‘permissible online real money game’ as an online real money game that has been verified by an online gaming self-regulatory body under Rule 4A of the Amendment.

  1. Online Gaming Intermediary (“OGI”)

i) With the release of the Amendment, it seeks to classify a new category of intermediary i.e., OGI. The Amendment defines an ‘OGI’ as any intermediary that seeks to give access to one or more online games to users on its platform.

ii) Moreover, what is essential to note from the Amendment is that an OGI is required to comply with not just the due diligence obligations mentioned under Rule 3, but also with the additional due diligence requirements under Rule 4, on similar lines, like that of a significant social media intermediary may be required to do under the 2021 Rules.

  1. Online Gaming Self-Regulatory Body (“SRB”)

The Amendment welcomes another soon-to-be established entity(ies) within the purview of the said rules and allows such entity(ies) to self-regulate the online gaming industry in India, in accordance with the 2021 Rules. This self-regulatory body(ies) is to be called as an ‘online gaming self-regulatory body.’ They are defined as an entity designated by Meity under Rule 4A of the Amendment. The primary responsibility of the SRB is to verify ‘online real money game’ as ‘permissible online real money game.’

  1. Fact Check unit of the Govt.
  • A significant change brought in by the Amendment, (apart from regulating online games and platforms), pertains to curtaining fake and misleading information in relation to any business of the Central Government, which has been hosted, published, and transmitted on the intermediary’s platform. 
  • Further, the Amendment directs Meity to appoint a fact-checking unit of the central government, to identify and restrict the flow of fake and misleading information that pertains to the business affairs of the central government. 

DUE DILIGENCE- OGI

The Amendment aims to bring online gaming intermediaries to the same table along with the social and significant social media intermediaries. Earlier, the due diligence obligations mandated under Rule 3 of the 2021 Rules, only applied to social media intermediary(ies) and significant social media intermediary(ies). However, with the present Amendment, now even an OGI will be required to comply with Rule 3 of the 2021 Rules, including some new requirements/obligations brought in by the Amendment-

  1. An OGI shall not offer its users an online game that results in ‘user harm.’ The term ‘user harm’ has been explained in the Amendment as any effect that is considered detrimental to a user and/or child;
  2. An OGI shall not offer any online game unless it is verified as a permissible online game;
  3. Intermediaries shall not indulge in advertising/surrogate advertising or promoting a non-verified online game, and/or an OGI promoting such a game;
  4. An OGI that offers ‘permissible online real money game(s)’ is required to inform its users about the change in its rules and regulations, privacy policy, or user agreement within a time frame of 24 hours and not later than that;
  5. An OGI that offers ‘permissible online real money game’ shall on receipt of an order, provide all and/or any information under its possession to the government agency for the purpose of investigation, detection, prevention, prosecution of offenses, etc, within a time frame of 24 hours and not later than that;
  6. An OGI is required to prominently publish on its website and mobile app, the name and contact details of the grievance officer, along with the complaint mechanism for the user/victim to follow for addressing their complaints and grievances;
  7. Any person being aggrieved by the decision of the grievance officer of the OGI may prefer an appeal within 30 days from the receipt of such decision to the Grievance Appellate Committee;
  8. The OGI and the SRB are required to comply with the orders passed by the Grievance Appellate Committee and further are required to publish a compliance report on their respective website(s).

ADDITIONAL DUE DILIGENCE- OGI

It is essential to note here that following the 2021 Rules, the additional due diligence requirements under Rule 4, were only supposed to be a compliance obligation for the significant social media intermediary. However, with the present Amendment, even an OGI offering permissible online real money game, irrespective of its user base will be required to comply with Rule 4, including-

  1. Appointing a Chief Compliance Officer;
  2. Appointing a Nodal contact person, who shall be a resident in India;
  3. Appointing a resident Grievance officer, who shall be a resident in India;
  4. Publishing periodic reports monthly in relation to the complaints received, and the course of measure(s) duly taken;
  5. Maintaining a physical address in India, and publishing its details on the website and mobile application;
  6. Implementing a complaint and grievance mechanism for the users’ to file, track and check the status of their complaints;
  7. Verifying the users’ accounts, and marking such users with a visible mark;
  8. Displaying the verified mark obtained after due verification done from the concerned SRB;
  9. Informing the users’ about withdrawal/refund policy, manner of determining and distribution of winnings, fees and charges payable by the users, KYC procedure, measures undertaken for protecting the users’ deposits, and the procedure followed for verification of online real money game;
  10. Mandatory KYC before accepting deposits from the users;
  11. Prohibiting and banning OGI from offering its users’ credit facilities and/or enabling third-parties to finance for the purpose of playing such online game.

ELIGIBILITY CRITERIA FOR SRB

  • Verification of online real money game shall only be done by designated SRB(s). An entity may apply to Meity for being designated as an SRB, provided they fulfil the following-
  1. Entity registered under section 8 of the Companies Act, 2013;
  2. Membership is representative of the online gaming industry;
  3. The number of board of directors shall be 8. They shall have no conflict of interest, and possess skills, experience, and knowledge as mentioned under the said rules, for performing their roles & duties as a self-regulating body;
  4. Must have sufficient funds for performing their duties as a self-regulatory body;
  5. The MoA & AoA of the entity shall be compliant with the 2021 Rules and the Amendment.

VERIFICATION OF ONLINE REAL MONEY GAME

  • Upon receiving an application from an online real money game, the SRB shall verify and declare them as permissible online real money game, provided the following is satisfied-
  1. Such an online real money game shall not contain wagering on any outcome; and
  2. The OGI and such online real money game shall be compliant with Rule 3 and 4, law relating  to the age and competency to contract, along with the SRB’s framework.
  • The rule further clarifies the time-frame given to the SRB shall be three (3) months, in which they have to declare the applicant (online real money game) as permissible online real money. It is further stated that initially the SRB shall only rely upon the information provided to them by the applicant. However, the SRB shall complete the due inquiry with the said time-frame to declare them as compliant and permissible or reject their application in writing.
  • SRB must publish on their website and/or website, a list of all the permissible online real money game, their verification expiry date, suspended and revoked online real money game.
  • SRB must maintain and publish their members’ list on their website and/or mobile application.
  • SRB shall have the powers to suspend and revoke the verification of any online real money game, if they are satisfied that the said online real money game is not in compliance with the 2021 Rules and the Amendment.
  • The online real money game and the OGI must display the verified mark granted by the SRB on their platforms.
  • Every SRB is required to publish on their website and/or mobile application their framework of verifying online real money game, which shall also include-
  1. Measures taken to ensure that an online real money game is not against the interests of sovereignty, integrity and security of the nation;
  2. Measures to ensure that an online real money game does not cause user harm as described under the Amendment;
  3. Measures taken to ensure protection to minors;
  4. Measures undertaken to ensure protection against gaming addiction, fraud, financial loss, etc.
  • The Central government before issuing directions for blocking under section 69A of the IT Act, 2000, against a permissible online real money game, may consider the details published by the SRB.
  • SRBs’ must publish a framework of grievance redressal along with the contact details of their Grievance Officer. The complaints must be acknowledged within 24 hours by the Grievance officer, and resolution must be done within 15 days from the date of the complaint.
  • Meity may suspend and/or revoke the designation of the SRB, if it is satisfied and found necessary. However, the SRB shall be given an opportunity to be heard.

APPLICABILITY & COMPLIANCE OF CERTAIN OBLIGATIONS

The Amendment further states that the compliance obligations upon the OGI shall come into force only after the expiry of three (3) months from the date on which at least three (3) SRBs would have been designated and established in accordance with Rule 4A of the Amendment.

‘ONLINE GAME’ OTHER THAN ONLINE REAL MONEY GAME

The said rules may apply to only those online games, that come under the ambit of online real money game and permissible online real money game. However, if the Central government finds it necessary in the interest and security of the State, public order, and preventing user harm, etc, in those circumstances, even those online game other than online real money game will be required to comply with the following obligations-

  • the obligations under sub-clauses (ix) and (x) of clause (b) of sub-rule (1) of rule 3; sub-rules (1), (5), (6), (7), (10), and clause (d) of sub-rule (11) of rule 4; along with rule 4A.

CONCLUSION

With the significant rise in the development of online games around the globe, the massive user and fan base, along with the amount of money involved were essential to be considered, before regulating this space. However, letting this space go unregulated would be detrimental to the country’s economy and its national security. The notified Amendment aims to promote online gaming by making the industry more accountable and transparent to its users. 

However, there are still some questions unanswered, such as why Meity took this approach to bring online games and the platforms as ‘intermediaries’ and not as ‘publishers’ under the 2021 Rules. Moreover, there are still vagueness and clarifications required in relation to terms such as ‘online real money game’ and ‘user harm’, as the ambit of both these terms is too wide, and might result in overregulation and hamper the growth of the industry as a whole.

Interestingly, the Amendment has been challenged recently in the Bombay High Court, within a week of its notification. The writ petition primarily questions the power of Meity under Rule 3(1) (b) (v), which seeks to appoint a fact-checking unit of the central governing for curbing fake and misleading information relating to the central government’s business affairs.

Lastly, the true impact of this Amendment could only be judged after the provisions come into force, and how the industry reacts toward it.

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