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Avoiding ugly headlines

Compliance in esports

August 2019

If you think compliance is expensive, try non-compliance
Former US Deputy Attorney General Paul McNulty

Compliance is a key requirement for the next stage in the rapid global development of esports. Ignoring the need for an effective compliance, ethics and governance system would be an expensive and painful mistake.

Learning from others' mistakes

The esports industry is in the lucky position of being able to learn from others, in particular from the scandals, mistakes and omissions made by high profile traditional sports associations. FIFA, UEFA and other international soccer associations, the International Olympic Committee and the International Association of Athletics Federations were all hit by scandals in recent years, and are still in the process of purging their organisations. The door is open for the young esports industry to take the right lessons and build organisations with effective compliance, ethics and governance rules. Implementing an efficient compliance system – ideally one that is accepted by all the main stakeholders in esports – will help to avoid ugly headlines and, worse, public prosecutions and sentencings. It may even help to limit fines and sanctions when an event of non-compliance occurs.

Main challenges

Like traditional sports, esports is exposed to severe challenges to its integrity. The main issues are doping, financial fair play, transparency of team ownerships, exclusion of conflicts of interest, and combating bribery and corruption. The more money is on the table, the bigger the temptation to manipulate matches, or engage in bet rigging and money-laundering. Doping by players is not just an issue for players of traditional sports, but for esports players as well. 

These challenges are an even bigger test for esports than for traditional sports. While traditional sports have had decades to grow step by step, in parallel to the development of ethical and compliance standards, esports has undergone rapid and global growth in a very short timeframe and now has to meet the current high standards. The pressure has grown in recent years as the sports and media industries have been plagued by further disturbing revelations of illegal and criminal practices – including the abuse of minors and discrimination by race, gender or sexual orientation.

The credibility and positive development of esports depends on establishing a transparent and convincing, state-of-the-art compliance, ethics and governance system equipped to “prevent, detect and respond”. This type of system aims to prevent non-compliance through a robust code of conduct, relevant technical regulations and effective training programmes. But it also needs to effectively detect and respond to improper or illegal actions. Establishing competent and independent internal bodies with ample powers for effective investigation, adequate sanctions and penalties is key. Independent and highly respected experts should be retained to strengthen the independence and credibility of these internal judicial bodies.

A system for all stakeholders

Esports teams already have governance and compliance frameworks available to them, including the ESIC governance code. To be truly effective, the compliance rules should be accepted not just by the players, but should extend to all stakeholders – including team owners and, most importantly, the publishers whose games make esports possible. WESA, the World Esports Association, aims to establish a framework of compliance rules and transparency requirements, including investigation rights of competent internal bodies and an internal independent jurisdiction covering all stakeholders. This goal may be just a vision today, but reaching it would benefit every stakeholder and esports league, as any instance of non-compliance hits the reputation of esports as a whole.  

Sponsors, marketing and media partners

Sponsors, marketing and media partners know the value of a convincing compliance, ethics and governance system. They are not willing to accept a compliance level which is below their own ethics and compliance standards. The public has not forgotten the reaction of FIFA’s major sponsors to the bribery and corruption allegations brought against the association by US prosecutors over the selection of hosts for the World Cups 2018 and 2022. Several sponsors did not renew their sponsoring contracts, and leading companies challenged FIFA to introduce effective and sustainable cultural change, or face the loss of future support.

Taking compliance to the next level

Non-compliance is not a viable option for esports. And if esports is smart, it can use compliance as a springboard to the next level of its development, enjoying increased recognition and even greater support. Esports needs to rise to the challenge and deliver on the vision of a standard ethical, compliance and governance system across the various forms of esports, integrating and uniting all the major stakeholders behind the same standards and principles. There are already promising efforts in progress, and there’s no need to ‘reinvent the wheel’. Learning from the mistakes of others and adapting state-of-the-art approaches to transparency and compliance could be a game-changing move for esports.


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Authors

Thomas Sonnenberg
Dr. Thomas Sonnenberg
Partner
Cologne