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Online Gaming And Gambling Laws In India

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At present gambling in India is regulated amongst others, by the Public Gambling Act (“Gambling Act“) constituted in the year 1867, which extends to the United Provinces, East Punjab, Delhi and the Central Provinces and specifically prohibits public gambling and running or being in charge of a common gaming house.

In addition to the aforesaid, the state legislators are, vide Entry No. 34 of List II (State List) of the Seventh Schedule of the Constitution of India, 1950 (“Constitution“), given exclusive power to make laws relating to betting and gambling. The applicability of the Gambling Act, for the purpose of any particular state stands repealed by virtue of the specific state enactment so promulgated in respect of the subject matter of betting and gambling, by virtue of the aforementioned provisions of the Constitution.

As a consequence of the aforementioned state legislations, any individual/entity intending to engage in any gaming activities, with or without stakes would have to comply with the provisions of the enactment/ legislation in force across India in various states.

At present the state legislature of Delhi has enacted the Delhi Public Gambling Act, 1955 (“Delhi Gambling Act“) which prohibits gaming in the union territory of Delhi, but excludes from its purview the “games of mere skill” wherever played1. By virtue of the provisions of the Delhi Gambling Act, the applicability of the Gambling Act to the union territory of Delhi stands repealed2.

GAME OF SKILL V. GAME OF CHANCE

Similarly, as in the State of Delhi, the State of Goa has made special enactments for the purpose of allowing gambling. The only State to allow on-line Gaming is the State of Sikkim. However, there are certain restrictions. In India, the enactments essentially allow such Games to be played on line, which are games of skill.

Various courts in India have examined the difference between the game of skill and game of chance and in order to determine what constitutes gaming as defined in various state enactments (i.e. gambling); it is imperative to understand the difference between a “game of skill” and a “game of chance“. For this purpose, it will be interesting to examine the following Indian judicial pronouncements:

In State of Bombay v. R. M. D. Chamarbaugwalal3, the Supreme Court of India (“Apex Court“) held that competitions (games) where success depends on a substantial degree of skill will not fall into category of ‘gambling’ (i.e. gaming as defined under state enactments); and despite there being an element of chance, if a game is predominantly a game of skill, it would nevertheless be a game of “mere skill”.

In State of Andhra Pradesh v. K. Satyanarayana & Ors4, the Apex Court while holding that the card game – “Rummy” is not a gambling activity stated that “Rummy requires certain amount of skill because the fall of the cards has to be memorised and the building up of Rummy requires considerable skill in holding and discarding cards. We cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill.”

In M.J. Sivani & Ors. v. State of Karnataka5, the Apex Court observed, “Even a skilled player in a game of mere skill may be lucky or unlucky, so that even in a game of mere skill chance must play its part. But it is not necessary to decide in terms of mathematical precision the relative proportion of chance or skill when deciding whether a game is a game of mere skill. When in a game the element of chance strongly preponderates, it cannot be game of mere skill. Therefore, it is not practicable to decide whether particular video game is a game of skill or of mixed skill and chance. It depends upon the facts, in each case.”

The Apex Court again delved into the aspect pertaining to what constitutes a game of skill in Dr. K.R. Lakshmanan v. State of Tamil Nadu6, where it stated “Games may be of chance, or of skill or of skill and chance combined. A game of chance is determined entirely or in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling of the cards, are all modes of chance. In these games the result is wholly uncertain and doubtful. No human mind knows or can know what it will be until the dice is thrown, the wheel stops its revolution or the dealer has dealt with the cards. A game of skill, on the other hand – although the element of chance necessarily cannot be entirely eliminated – is one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player. Golf, chess and even Rummy are considered to be games of skill. The courts have reasoned that there are few games, if any, which consist purely of chance or skill, and as such a game of chance is one in which the element of chance predominates over the element of skill, and a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element – “skill” or “chance” – which determines the character of the game.”

From the aforesaid, judgments, it can be concluded, that what is allowed in India is only a game of skill and for a game to be considered as a game of skill, the mechanics (nature of the game, mode of playing, rules etc.) of the game should clearly reflect that the requirement of skill preponderates the element of chance and wherein success depends principally upon superior knowledge, training, attention, experience and adroitness of the player. In addition to which, it can be concluded that “games of skill” do not come within the purview of a majority of state gambling enactments, thereby meaning, that playing games of skill for stakes in the physical form, would not be treated as an act of gaming (as defined in such enactments).

ONLINE GAMING

Sikkim is so far the only state in India which has enacted a statute pertaining to online gaming i.e. Sikkim Online Gaming (Regulation) Act, 2008 (“Sikkim Gaming Act“). In terms of the Sikkim Gaming Act, an interested person can obtain a “license” for the purpose of conducting online games such as Roulette, Black-jack, Pontoon, Puntobanco, Bingo, Casino Brag, Poker, Poker dice, Baccarat, Chemin-de-for, Backgammon, Keno and Super Pan 9.

  • As concluded above, games of skill played for stakes in the physical form, do not come within the ambit of gaming (as defined in various state enactments); however to ascertain whether the same status is accorded to games of skill played online, it has to be seen whether there is a distinction between a game of skill and a game of chance. The expression ‘skill’ has been defined by the Courts as an exercise upon known rules and fixed probabilities of sagacity, which involves five parameters:
    • learned or a developed ability,
    • strategy,
    • physical co-ordination,
    • technical expertise, and
    • knowledge.

Games like Rummy, Chess, Bridge, Billiards and Golf have been recognised by the courts in India as games of skill.

  • The courts have held that Poker cannot be accepted as a game of skill; however it was stated that it would be legal to play poker within the states which do not hold it as illegal.
  • The Courts have also opined that that the degree of skill required in games played in a physical form cannot be equated with those played online, as the degree of chance increases in case of online games and the degree of skill used in playing these games online is questionable. Hence, online games, even those requiring a high degree of skill, conducted by gaming sites offering prize money and partaking a slice of the winning hand are illegal in states which prohibit gambling.
  • Courts in India have also stated that such online gaming portals are essentially a substitute for traditional casinos since websites operate as common gaming houses7 where members interact and place bets. Thus the company and its directors, agents, players are liable to penal consequences.
  • It has been also held that conducting online games for profit cannot be included in the scope of trade, business or commerce as envisaged under Article 19 (1) (g)8 of the Constitution. Further, sports’ betting is an offence in India and individuals earning money from bets laid on games of skill do not have the constitutional protection of Article 19(1) (g).

In view of the aforesaid, it is clear that only Games of skill and that too played in physical form have been held by the courts to be valid and falling within the ambit of various enactments, dealing with Gaming, in India. However, as far as, on-line Gaming is concerned, the courts are of the view that on-line Gaming could not be compared to real game being played and would, therefore, not be allowed until ‘skill’ test is passed by it.

Footnotes

1 Section 13 of the Delhi Public Gambling Act, 1955

2 Section 18 of the Delhi Public Gambling Act, 1955

3 AIR 1957 SC 699

4 AIR 1968 SC 825

5 1995 6 SCC 289

6 AIR 1996 SC 1153

7 The court placed reliance on the definition of “gaming house” in the Bombay Gambling Act as “any house, room or place whatsoever, in which any instrument of gaming is kept or used for profit or gain of the person owning, occupying using such house, room or place by way of charge for the use of such house, room or place or otherwise howsoever.”

8 Article 19(1)(g) of the Constitution provides to every Indian citizen the right of freedom to carry on any occupation, trade or business, subject to reasonable restrictions.

© 2014, Vaish Associates, Advocates,
All rights reserved with Vaish Associates, Advocates, 10, Hailey Road, Flat No. 5-7, New Delhi-110001, India.

English Court Requires ISPs To Block Websites Selling Counterfeit Goods

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In a landmark judgment, the English High Court has ordered the UK’s main internet service providers (ISPs) to block access to websites selling counterfeit goods.

In recent years, the English courts (and indeed the Irish courts) have granted a series of orders requiring ISPs to block access to filesharing websites, such as The Pirate Bay, which infringed copyright. However, this is the first time in which a court in an EU member state has made a blocking order in an effort to combat trade mark infringement.

BACKGROUND

The Richemont Group, which owns several of the world’s leading luxury brands, including Cartier, Mont Blanc and IWC, applied to the English High Court for orders requiring the UK’s main ISPs to block access to six websites (referred to as “the Target Websites“) which advertised and sold counterfeit Cartier, Mont Blanc or IWC goods.

THRESHOLD CONDITIONS

Arnold J noted that despite the absence of an express power to grant injunctions under the UK Trade Marks Act (in contrast with UK copyright legislation), the courts have a general power to grant injunctions where the circumstances of a case so require. This power is not restricted to granting an injunction against the person actually infringing the right in question.

Arnold J stated that, as with copyright infringement cases, certain ‘threshold conditions’ must be met before a website blocking order can be granted in a trade mark infringement case:

  • the ISPs must be intermediaries within the meaning of the EU Directive on the enforcement of intellectual property rights (“the Enforcement Directive“);
  • either the users and/or the operators of the websites in question must be infringing the claimant’s trade marks;
  • they must be using the services of the ISPs to do this; and
  • the ISPs must have actual knowledge of this.

Each of the above conditions was satisfied in this case.

PRINCIPLES TO BE APPLIED

The EU Enforcement Directive requires that measures adopted by member states to enforce intellectual property rights be proportionate. In finding that the blocking orders sought would be proportionate in the circumstances of the case, Arnold J had regard to the following:

  • Justification for interfering with the rights engaged: Arnold J weighed up the competing rights of the parties involved as follows: (i) Richemont had a legitimate interest in restricting the Target Websites from infringing its trade marks; (ii) the ISPs’ freedom to carry on business would not be interfered with and nor would they be required to acquire new technology as they already have the requisite technology in place; (iii) the operators of the Target Websites had no rights which required protection as they appeared to be exclusively engaged in infringing commercial activity; and (iv) the users of the ISPs’ services would not be adversely affected if the orders were properly targeted and had sufficient safeguards built into them (see below).
  • Availability of alternative measures: Arnold J was not satisfied that the alternative measures open to Richemont (e.g. domain name seizure, customs seizure and de-indexing from Google searches) would be as effective as blocking orders.
  • Efficacy: Arnold J referred to evidence which showed that the blocking of websites in copyright infringement cases had proved reasonably effective in reducing the use of those websites in the UK. He stated that there was no reason to believe that blocking would be materially less effective in reducing UK traffic to the Target Websites. In fact, it could possibly be more effective as the evidence suggested that consumers have little “brand loyalty” to the Target Websites, whereas websites like The Pirate Bay had quite a loyal user base.
  • Dissuasiveness: Arnold J was satisfied that the orders sought would have some dissuasive value since users would not only be blocked from accessing the Target Websites, but would also be informed of the reason for this. »» Cost: Arnold J noted that each of the ISPs had already invested in blocking technology in order to comply with blocking orders in copyright infringement and other cases. Further, the ISPs would not necessarily have to bear the costs of implementing the orders, but could pass them on to consumers in the form of higher subscription charges.
  • Impact on lawful users: Arnold J was satisfied that it would be possible to target the blocking in such a way so as not to adversely affect those who use the ISPs’ services lawfully. SAFEGUARDS AGAINST ABUSE Mindful of the requirement in the EU Enforcement Directive that remedies in intellectual property infringement cases include safeguards to protect against abuse, Arnold J indicated that he would include provision for the following in his final orders: »» permission for (i) the ISPs, (ii) the Target Websites (who were not involved in the application), and (iii) subscribers to the ISPs’ services to apply to court to discharge or vary the orders;
  • a statement to be included on the page displayed to users who attempt to access the blocked websites explaining that access to the website has been blocked by court order, identifying the party who obtained the order, and advising that affected users have the right to apply to court to vary or discharge the order; and
  • a ‘sunset clause’ to provide that the orders will cease to have effect at the end of a certain period unless (i) the ISPs consent to the orders being continued; or (ii) the Court orders that they should be continued.

COMMENTARY

The judgment of Arnold J will provide some comfort to brand owners who are seeking to protect their brand, reputation and the exclusivity of their goods. The case brought by Richemont was a test case and applications by other brand owners, both in the UK and across the EU, are likely to follow. Indeed, Richemont envisages further actions and has identified 239,000 potentially infringing websites, 46,000 of which have been confirmed as infringing.

An Irish court would be likely to consider the decision in Richemont as persuasive authority in terms of the protection of intellectual property. The decision mirrors a line of Irish High Court jurisprudence in cases such as EMI v UPC & Ors and EMI & Ors v UPC & Ors, where the Court displayed a willingness to protect intellectual property rights and grant orders requiring ISPs to block websites infringing copyright. It is likely that a similar rationale would apply in the case of online counterfeit cases based on trade mark infringement.

A recent report published by the EU Commission noted that in 2013 EU customs authorities seized a total of 35.9 million counterfeit articles, representing a market value of €768 million.

It is also worth noting that the recent adoption of EU Council Regulation No 608 of 2013, which allows for the destruction and detention of counterfeit goods by customs, means the remedies available to address online counterfeiting of goods have never been stronger.

FTC And Florida Attorney General Settlement Cripples Medical Alert Device Company

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On November 13, 2014, the United States District Court for the Middle District of Florida approved and entered a permanent injunction and settlement between the Federal Trade Commission (“FTC”) and the Florida Attorney General (the “AG”), on the one hand, and Woldwide Info Services, Inc. (“Worldwide”), on the other.  The settlement effectively ends the medical alert device business of Worldwide and its principals.  The settlement is the result of a lawsuit filed by the FTC and the AG in January alleging that Worldwide and its principals fraudulently marketed their devices to seniors in the State of Florida.  The settlement imposes sweeping restrictions on Worldwide and its principals, forbidding them from, among other things, making any robocalls or performing any telemarketing campaigns in the future.

FTC Allegations

According to the complaint, Worldwide and its related entities used pre-recorded messages to robocall senior citizens.  The calls informed consumers that medical alert devices had been purchased for consumers by friends or relatives, and that the shipping costs were prepaid.  The callers were asked to press a number on their telephones to speak with a live agent to schedule delivery.  Thereafter, consumers would be directed to a live operator who, toward the end of the call, would inform consumers that the medical alert service came with a monthly monitoring fee.  To cover the fee, consumers were asked to provide a credit card or bank account information.  Although assured that their accounts would not be charged until the device was received, for many consumers Worldwide would process the monitoring fee on the same day of the call.  The FTC alleged that Worldwide’s business practices violated the FTC Act, the Telemarketing Sales Rule and the Florida Deceptive and Unfair Trade Practices Act, as well as other common law rules.

The FTC Settlement

Pursuant to the terms of the settlement, Worldwide, its related entities, and its principals, are all banned from placing any robocalls or participating in any telemarketing campaign in the future.  Additionally, Worldwide, its related entities and its principals are banned from ever selling, advertising, marketing or promoting medical alert products or services.  A judgment has been entered against the settling defendants for $22,989,609.00, however all but $24,000 of the judgment has been suspended.  The principals have also agreed to sell personal property, such as cars and a boat, with the proceeds to be paid to the FTC.

Protect Yourself

As we have previously noted, the FTC has been increasingly vigilant in pursuing marketers that use deceptive advertising and robocalling in connection with their respective businesses.  The settlement reached with Worldwide demonstrates that business owners risk not only money damages, but also the loss of personal property and possibly the very existence of the business if they run afoul of telemarketing and deceptive advertising laws.

If you are interested in learning more about this topic, or if you have been served with legal process relating to your marketing practices, please e-mail us at [email protected] or call us at (212) 246-0900.

Your Websites Terms Of Service Are Unenforceable

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The Law on Electronic Commerce (“the Law“) which has been pending for approval by the Turkish Parliament for the past 3 years has finally been passed on October 23, 2014. However, the Law will enter into force as of May 1, 2015.

The aim of the Law is to harmonize the Turkish e-commerce legislation with the Directive 2000/31/EC of the European Parliament and of the Council on Certain Legal Aspects of Information Society Services, in Particular Electronic Commerce, in the Internal Market (“Directive on Electronic Commerce“).

The Law regulates the procedures and principles on e-commerce. It aims to create a more secure, transparent and accessible e-commerce environment to extend the use of e-commerce in Turkey. The implementation of the Law will be provided by secondary legislations prepared by the Ministry of Customs and Trade.

The Law provides that prior to executing an electronic agreement, the service provider must provide the buyer with detailed information regarding the terms of the electronic agreement, including but not limited to; easy access to up-to-date introductory information, technical steps necessary for formation of an electronic agreement, and information on whether the agreement will be stored by the service provider after the formation of the electronic agreement and whether the buyer will have access to the agreement and for how long such access shall last.

Pursuant to Article 4 of the Law, before the buyer’s payment details are submitted, service providers shall have to ensure that the buyer sees all of the terms of the agreement clearly, including but not limited to the total purchase price with respect to orders placed via electronic media.

The service provider shall also immediately confirm through electronic communication devices that the buyer’s order has been received.

Another obligation of service providers under the Law is that before the order is placed, the service provider shall provide the buyer with appropriate, efficient and accessible technical tools so that the buyer can detect and correct any data which has been entered incorrectly.

In case parties to an e-commerce agreement are not consumers by virtue of Turkish law, they can determine to act contrary to the abovementioned obligations.

However, agreements made through e-mail or similar personal communication devices are exempted from these principles on orders placed through electronic communication devices.

In case of commercial communications, the Law provides that adequate information which clearly procures the commercial communication and the identity of the real person or legal entity that the commercial communication was made on behalf of shall be provided. Moreover, any trade communications promoting discounts, gifts or promotional competitions or games must clearly express its purpose, and any information regarding the participation to such games or competitions must be comprehensive and easy to access.

According to the Law, sending commercial electronic messages is subject to the approval of the receiver. On the other hand, it is worth noting that commercial electronic messages can be sent to merchants and tradesmen without their prior approval.

Service providers and intermediary service providers are liable for the protection and security of personal information acquired within the scope of the Law. Additionally, service providers and intermediary service providers cannot use the aforementioned personal information for any other purpose and cannot disclose such information to third parties.

The Law provides specific punitive measures for wrongful acts against the provisions of the Law. However, the Law fails to provide any measures for any failure of protection of personal information. Although implementation of the Law will be provided by secondary legislations, failure to address such a vital issue is a setback of the Law.

Football League Championship Clubs Tweak Their Financial Regulations

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Introduction

Yesterday, representatives at an EGM of the Football League’s 24 Championship clubs voted in favour of a new set of new financial regulations which will, in two seasons, replace their previous financial fair play regulations (FFPRs). They have however taken the lead from the Premier League in renaming their new regulations that will be implemented from the 2016/17 season, the ‘Profitability and Sustainability” Regulations’ (PSRs). There are a number of interesting implications and consequences that are set out below based on the Football League’s recent press release.

The Football League’s Press Release and Some Initial Comment

1. ‘At an EGM at Derby County, Championship clubs have agreed a new set of “Profitability and Sustainability” Regulations that will bring the division’s approach to Financial Fair Play into line with that used by the Premier League.”

Three quarters of all Championship clubs were required to vote in favour of the rule changes for any agreement to be reached. From a consensus building perspective, the Football League administration has done well to persuade at least 18 clubs to vote in favour of the new PSRs. This is because the current Football League FFPRs rules benefited a number of compliant Championship clubs that would have the competitive advantage of signing players at a time when other Championship clubs in breach (because of losses over the acceptable permitted amounts) would have been sanctioned with a transfer embargo from January.

2. ‘From the beginning of the 2016/17 season, Championship clubs will have their financial performance continuously monitored over a three season timeframe and will be permitted to lose up to £15 million during that period without having to be prescriptive over how that loss will be funded.”

Interestingly, the Football League PSRs framework will be similar in substance to the Premier League PSRs (click here for explanation on the Premier League regulations). It would appear beneficial to have two regulatory systems that align especially because of the fluid nature of relegation and promotion between the two leagues. As is explained below, the Football League PSRs now provide practical compliance guidance for clubs that ‘yo-yo’ between the leagues to ensure they know what losses will be permitted. This was not previously set out in such a joined-up manner. Similarly, whereas before the Championship FFPRs were only based on one years’ set of accounts (see here for the detail), from the 2016/17 season, both Premier League and Football League PSRs will align to cover a three year rolling accounting period.

The example provided for in the Football League press release explains that “A club that moves between the Premier League and Championship will be assessed in accordance with the average allowance that is permitted in the relevant division (for example, a club that had played two seasons in the Championship and one in the Premier League would have a maximum permitted loss of £61 million – consisting of one season at £35 million and two at £13 million)”.

As such, both sets of PSRs work regardless of whether a club is in the Premier League or the Football League for the relevant calculation season. This joined up approach from a regulatory compliance perspective will be of value to clubs and, to some degree, shows both the Premier League and the Football League working together to make the PSR process more manageable and straightforward.

3. “In addition, they will be permitted to lose more than £15 million, but not more than an aggregate of £39 million (compared to an equivalent figure of £105 million in the Premier League) but will be subject to additional regulation when doing so. This will include providing evidence of Secure Owner Funding and Future Financial Information for the two seasons ahead. The maximum deviation under the regulations will remain at £6 million for 2014/15 and will increase to £13 million in 2015/16, in line with the maximum loss (£39 million over three seasons) permitted under the new rules.”

From the 2016/17 season (i.e. the previous Football League FFPRs continue in force for the current two seasons), Championship clubs will be permitted to lose £13m per year (up to a total of £39m over three years if they remain in the Championship) so long as club owners provide, a guarantee for the overspend. Based on the fact that the acceptable FFPR loss that a club could make in their 13/14 accounts was £8m and next year will be £6m, there will be a large increase in the acceptable loss amounts permitted so long as an owner is willing to guarantee such spending. This will give clubs from the 2016/17 season, more leeway than under the current FFPRs.

4. ‘Clubs also agreed transitional arrangements for the period leading up the introduction of the new regulations in 2016. These can be summarised as follows:

  • The existing Championship FFP framework will remain in place for the 2014/15 and 2015/16 seasons.
  • Any sanctions for accounts relating to the 2013/14 season will continue to take effect as intended (and in accordance with the amounts specified at the time).

As explained above, the clubs that were in line to comply with the current Football League FFPRs would have needed incentivising to accept and vote in favour of the new Football League PSRs. It appears that the method for coaxing some clubs to sign up to the new regulatory framework was to ensure that the existing FFPRs will still bite for this and next season. As such, Championship clubs that are in breach of the £8m figure for the 13/14 accounting period season, during this current season, will to be sanctioned with a transfer embargo in January 2015. Similarly, clubs who were promoted to the Premier League and are in breach of the £8m acceptable deviation amount for the 13/14 season when they were in the Championship will be fined. This suggests that, if reports are to be believed, the Football League will still impose a hefty fine on QPR for their Football League FFPR breach regardless of these recent changes.

Some may argue that clubs like QPR that were promoted to the Premier League, that are no longer in the Championship and that are inherently affected by this vote have unreasonably had no say in shaping the amended regulations. Others may disagree and say they are no longer in the Football League Championship and as they are not a member they do not get a say. Similarly, it appears that no substantive changes have been made to the current sanctioning punishments so that any Championship club in breach of the £8m threshold will incur a transfer embargo (with some leeway in specific circumstances) regardless of whether they are £10,000 or £10m over the acceptable loss amount.

Conclusion

The next steps for the Football League are likely to involve issuing sanctioning decisions for those clubs in breach of the current FFPRs, imposing fines on clubs promoted to the Premier League (i.e. QPR) and transfer embargos on current Championship clubs. The rules have changed but the current FFPRs still remain in force for this and next season. In short, expect clubs to be embargoed and fined come January 2015.

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