Surrogate Advertising in Gaming Industry is Alarming
THERE is a rise in surrogate advertisement in the gaming industry. The recent Asia Cup international men’s cricket tournament is a testament to this phenomenon, in which betting or gambling services were promoted in the guise of sport news. This is a concerning issue as this circumvents the will of the law, and promotes an addictive activity among the citizens.
What are surrogate advertisements?
Advertisements act as important means of influencing consumer choices, and is part of commercial speech. Justice H.A. Blackmun of the Supreme Court of the United States, while upholding the constitutional protection accorded to commercial speech in the landmark judgment of Virginia State Board of Pharmacy versus Virginia Citizens Consumer Council, Inc. (1976), observed that “the particular consumer’s interest in the free flow of commercial information … may be as keen, if not keener by far, than his interest in the day’s most urgent political debate” and that “the free flow of commercial information is indispensable.”
Advertisements can create a need and desire to procure a product or service, which was originally not there. But there are products like alcohol or tobacco, or services like betting, which are harmful for the health or finances of people. The advertisements related to these products or services may influence people to consume these products more and get addicted to them. Hence, the State has legitimate interest to prohibit advertisements related to such goods or services, the consumption of which is considered to be immoral.
But it is in the interest of businesses to take their products or services to consumers. To circumvent the prohibition, they advertise legitimate goods and services with the same brand name and logo that is related to the prohibited product. In this way, they can market their brand without violating the prohibition imposed by the law. This is surrogate advertising.
The case of TV Today Network Ltd. versus Union of India (2021) decided by the Delhi High Court is a good example of surrogate advertising. Advertisements of alcohol products are prohibited under various laws like the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 and the Cable Television Networks (Regulation) Act, 1995.
In this case, the manufacturers of ‘All Seasons Whisky’ advertised ‘All Seasons club soda’, where the bottle of club soda is of the same design and make as a bottle of whisky. As such, there is no prohibition on advertising club soda. But to circumvent the prohibition on advertising alcohol products, the manufactures used the club soda as a shadow product. The court held this advertisement to be a surrogate advertisement, and ordered the channel to render an apology.
The State has legitimate interest to prohibit advertisements related to such goods or services, the consumption of which is considered to be immoral. To circumvent the prohibition, businesses advertise legitimate goods and services with the same brand name and logo that is related to the prohibited product. In this way, they can market their brand without violating the prohibition imposed by the law.
Also read: Will the new guidelines issued by the Union Government help to curb misleading advertisements?
Are there exceptions to surrogate advertisements?
But there can be instances where the shadow products used in this type of advertisements could be legitimate, and commercially important and viable businesses, which deserve to be marketed. If we take the example of the previous case, what if the club soda individually is an important product of the manufacturer, rather than a mere shadow product? The State cannot deny advertisement to such products.
Hence, the challenge lies in determining whether something is a mere copy or shadow product used in order to circumvent the prohibition on advertising, or whether it is a legitimate and commercially viable business in itself, which deserves to be marketed.
To tackle the above challenge, Rule 7(2)(viii) of the Programme and Advertising Codes prescribed under the Cable Television Network Rules, 1994, provides certain guidelines. It allows for the use of the brand name and logo of a prohibited product as long as the storyboard or visuals of the advertisement is completely different from prohibited product; when reference is not made to the prohibited products; when the layouts, colours, presentations or phrases used are not related to the prohibited product; and when the advertisements do not use situations which are typically used for promotion of the prohibited products (like a club or bar setting for alcohol advertisements).
Moreover, whenever the manufacturers use the logo and brand name of prohibited products in advertising the other products, they should obtain a certificate from a Chartered Accountant that “the products are distributed in reasonable quantity and is available in a substantial number of outlets where other products of the same category are available and the proposed expenditure on such advertising thereon shall not be disproportionate to the actual sales turnover of the product.” It is also subjected to scrutiny by the Union Ministry of Information and Broadcasting, and the manufacturer has to obtain certification from Central Board of Film Certification before telecasting.
If these criteria are satisfied, the advertised products can be considered as brand extensions of the prohibited products.
The challenge lies in determining whether something is a mere coy or shadow product used in order to circumvent the prohibition on advertising, or whether it is a legitimate and commercially viable business in itself, which deserves to be marketed.
All these measures are taken to ensure that the product advertised is not a mere shadow product used to circumvent the prohibition on advertising.
Also read: Concerns over regulatory vacuum in relation to surrogate advertising
How is surrogate advertisement being done in the gaming industry?
With the advent of technology, the online gaming industry is flourishing. Some online gaming companies are sponsors of major sporting events. These online games allow people to play games for money, and there is an element of risk.
These games could be broadly categorized into games of skill and chance. Games of skill are those games where there is some display of skill, talent, knowledge, memory and so on. On the other hand, games of chance or luck can be equated with wagering or betting, as they stake money on the happening or not happening of an event which is unpredictable.
Games of skill, though played for money with an element of risk, are legal and are protected under the freedom of business under the Constitution. For example, many courts in India had declared that the game of rummy is a game of skill and cannot be considered as gambling. Whereas games of chance, including betting or gambling, are illegal and cannot have protection of law.
The thumb rule of advertising is that the law does not allow promotion of illegal activities. The advertising code states that “no advertisement shall be permitted which tends to incite people to commit crime, cause disorder or violence, or breach of law or glorifies violence or obscenity in any way.” Naturally, no gaming concern can advertise their betting or gambling business as it violates Indian law. But to circumvent this regulation, many companies are promoting their betting business in the shadow of sport news websites or blogs. This was most recently seen during the Asia Cup tournament, with two betting companies – 1XBet and Fairplay Club -advertising rampantly through their shadow services of the 1XBET sportsblog and Fairplay News respectively. In fact, Fairplay News has become the official sponsor of the Sri Lankan cricket team.
Also read: Are Betting Games Based on Cricket and Fantasy League Games Nothing but a Source of Revenues for the Central Government?
Are the news websites or blogs brand extensions?
Though the news websites and blogs are available online, the real purpose behind the advertisements is to attract the people towards their betting websites. An initial search online about these companies takes web users to the betting websites, rather than to the blog or news websites. It is also financially imprudent to carry out expensive advertisements during highly watched sports events to sell free services such as sports news.
Games of skill are those games where there is some display of skill, talent, knowledge, memory and so on. On the other hand, games of chance or luck can be equated with wagering or betting, as they stake money on the happening or not happening of an event which is unpredictable.
It should be noted that the logo and designs are the same in both betting and news websites. What is conspicuously absent in those advertisements is marketing of the news websites. Except for the logo, which indicates that it is news or blog, there is no promotion of news or the blog (such as directives to go and check sports updates). The FairPlay advertisement goes a step ahead and declares that “there is no entry fee to play the sport”. Is that really referring to sports news?
This indicates that the news is a mere shadow product to circumvent the prohibition. Also, these advertisements do not satisfy the brand extension criteria like market presence, visual effects, story line and so on mentioned in advertising code, discussed earlier.
These types of advertisements are also in conflict with Rule 8 of the Central Consumer Protection Authority (Prevention of Misleading Advertisements and Necessary Due Diligence for Endorsement of Advertisements) Guidelines, 2020. As the Cable Television Networks (Regulation) Act and the advertising code are not applicable to over-the-top platforms like Hotstar and SonyLiv, this law can be invoked for remedy.
The Advertising Standards Council of India (‘ASCI’), which is recognised under the Cable Television Network Rules, comes down heavily on surrogate advertisements. ASCI’s self-regulatory code provides even harsher requirements to qualify as brand extension: the advertised product should be registered with an appropriate government authority. If it is brand in existence for more than two years, it should have a sales turnover of five crore rupees nationwide and on crore rupees state-wide. If it did not complete two years, it should have a minimum revenue of twenty lakh rupees per month and an investment over ten crore rupees. It is highly questionable if these news websites qualify the above criteria.
These surrogate advertisements are potentially dangerous, as they can highly influence technologically savvy youth. Technology innovations like online platforms and UPI payments make it easy to indulge in betting. The State and society should be concerned about these developments and ban these advertisements before it gets too late.
Sri Harsha Kandukuri is an Assistant Professor of Law at CMR University, Bengaluru.
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