Surrogate advertising in the gaming industry is alarming

OVER THERE is an increase in surrogate advertising in the game industry. The recent Asian Cup international cricket tournament is a testament to this phenomenon, promoting betting or gambling services under the guise of sports news. This is a matter of concern as it circumvents the will of the law and promotes addictive activity among citizens.

What are Surrogate Ads?

Advertisements are an important means of influencing consumer choices and are part of commercial communications. United States Supreme Court Justice HA Blackmun, while upholding the constitutional protections afforded to commercial expressions in the landmark judgment of Virginia State Board of Pharmacy vs. Virginia Citizens Consumer Council, Inc. (1976), noted that “The interest of the particular consumer in the free flow of commercial information … may be as great, if not sharper, than his interest in the most urgent political debate of the day” and that “the free flow of commercial information is indispensable .”

Ads can create a need and desire to purchase a product or service that wasn’t there originally. But there are products such as alcohol or tobacco, or services such as betting, which are harmful to people’s health or finances. The advertisements related to these products or services may lead people to consume these products more and become addicted to them. Therefore, the state has a legitimate interest in banning advertisements related to such goods or services, the use of which is considered immoral.

But it is in the interest of companies to bring their products or services to consumers. To get around the ban, they advertise legitimate goods and services with the same brand name and logo related to the banned product. This way they can market their brand without breaking the prohibition of the law. This is surrogate advertising.

The case of TV Today Network Ltd. vs Union of India (2021) decided by the Delhi High Court is a prime example of surrogate advertising. Advertising of alcohol products is prohibited under various laws, such as the Prohibition of Advertising and Regulation of Trade and Commerce, Manufacturing, Supply and Distribution Act, 2003 and the Cable Television Networks Act (Ordinance) 1995.

In this case, the “All Seasons Whiskey” manufacturers advertised “All Seasons club soda,” where the soda water bottle has the same design as a whiskey bottle. As such, there is no ban on advertising club soft drinks. But to get around the ban on advertising alcohol products, the manufacturers used the soda water as a shade product. The court considered this ad a surrogate ad and ordered the broadcaster to apologize.

The state has a legitimate interest in prohibiting advertising related to such goods or services, the use of which is considered immoral. To circumvent the ban, companies advertise legitimate goods and services with the same brand name and logo as the banned product. This way they can market their brand without breaking the prohibition of the law.

Also read: Will the new Union government guidelines help curb misleading advertising?

Are there any exceptions to surrogate ads?

But there may be instances where the shadow products used in this type of advertising are legitimate and commercially important and viable companies, which deserve to be marketed. Taking the example of the previous case, what if the club soda is a major product of the manufacturer individually, rather than just a shadow product? The State cannot refuse advertising for such products.

So the challenge is to determine whether something is just a copy or a shadow product used to circumvent the advertising ban, or whether it is a legitimate and commercially viable business in its own right that deserves to be marketed.

To address the above challenge, Rule 7(2)(viii) of the program and advertising codes prescribed under the Cable Television Network Rules, 1994, provides certain guidelines. It allows the use of the brand name and logo of a banned product, as long as the storyboard or visuals of the ad are completely different from the banned product; when no reference is made to the prohibited products; when the layouts, colors, presentations or expressions used are unrelated to the prohibited product; and when the ads do not use situations typically used to promote the prohibited products (such as a club or bar environment for alcohol ads).

In addition, when using the logo and brand name of prohibited products in advertising the other products, manufacturers must obtain a certificate from a chartered accountant who “the products are distributed in a reasonable quantity and are available in a significant number of retail outlets where other products of the same category are available and the proposed expenditure on such advertising thereon must not be disproportionate to the actual sales revenue of the product.” It is also overseen by the Union Ministry of Information and Broadcasting, and the manufacturer must obtain certification from the Central Board of Film Certification before broadcasting.

If these criteria are met, the advertised products can be considered as brand extensions of the banned products.

The challenge is to determine whether something is just a restrained product or a shadow product used to circumvent the advertising ban, or whether it is in itself a legitimate and commercially viable business that deserves to be marketed.

All these measures are taken to ensure that the advertised product is not merely a shadow product used to circumvent the advertising ban.

Also read: Regulatory vacuum concerns regarding surrogate advertising

How is surrogate advertising done in the game industry?

With the advent of technology, the online gaming industry is booming. 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 can be roughly divided into games of skill and games of chance. Skill games are those games that show skill, talent, knowledge, memory and so on. On the other hand, games of chance or luck can be equated with betting or betting because they bet money on whether or not an unpredictable event will occur.

Games of skill, although played for money with an element of risk, are legal and protected by the freedom of doing 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 gambling. While games of chance, including betting or gambling, are illegal and have no legal protection.

The rule of thumb of advertising is that the law does not allow the promotion of illegal activities. The ad code states that: “No advertising is allowed that incites people to commit crime, cause disorder or violence, or violate the law, or that glorify violence or obscenity in any way.” Of course, no gambling company is allowed to advertise their gambling or gambling business as it violates Indian law. But to get around these regulations, many companies promote their gambling activities in the shadow of sports news websites or blogs. This was most recently seen during the Asia Cup tournament, with two betting companies – 1XBet and Fairplay Club – advertising rampant through their shadow services of the 1XBET sports blog and Fairplay News respectively. Fairplay News has even become the official sponsor of the Sri Lankan cricket team.

Also read: Are slot games based on Cricket and Fantasy League games nothing but a source of revenue for the central government?

Are the news websites or blogs brand extensions?

Although the news websites and blogs are available online, the real purpose behind the advertisements is to lure the people to their gambling websites. An initial online search about these companies takes Internet users to the gambling websites rather than the blog or news websites. It is also financially unwise to place expensive advertisements during popular sporting events to sell free services such as sports news.

Skill games are those games that show skill, talent, knowledge, memory and so on. On the other hand, games of chance or luck can be equated with betting or betting because they bet money on whether or not an unpredictable event will occur.

It should be noted that the logo and designs are the same on both gambling and news websites. What is conspicuously lacking in those advertisements is the marketing of the news websites. Other than the logo, which indicates that it is news or blog, there is no advertising for news or the blog (such as guidelines for watching sports updates). The FairPlay ad goes a step further and states that: “There is no entry fee to play the sport”. Is that really a reference to sports news?

This indicates that the news is just a shadow product to get around the ban. Also, these ads do not meet the brand extension criteria such as market presence, visual effects, storyline, and so on mentioned in the ad code discussed earlier.

Also, these types of advertisements are in violation of Rule 8 of the Central Consumer Protection Authority (Prevention of Misleading Advertisements and Necessary Due Diligence in Notification of Advertisements), 2020. Since the Cable Television Networks Act and the advertising code do not apply to over-the-top platforms such as Hotstar and SonyLiv, this law can be invoked for recovery.

The Advertising Standards Council of India (“ASCI”), which is recognized under the Cable Television Network Rules, relies heavily on surrogate advertising. ASCI’s self-regulatory code sets even stricter requirements to qualify as a brand extension: the advertised product must be registered with an appropriate government agency. If it’s a brand that’s been around for more than two years, it should have sales of five rupees nationwide and rupees statewide. If not completed for two years, it should have a minimum turnover of twenty lakh rupees per month and an investment of more than ten rupees crore. It is highly questionable whether these news websites meet the above criteria.

These surrogate ads are potentially dangerous because they can greatly influence technologically savvy young people. Technological innovations such as online platforms and UPI payments make it easy to gamble. The State and society should be concerned about these developments and ban these advertisements before it is too late.

Sri Harsha Kandukuri is an assistant professor of law at CMR University, Bengaluru.

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