it would be a bad thing in my opinion. when i had my ps3 there was a lot of games (mortal kombat stands out) that were delayed on the europe store due to the germans being against it, so sony had to fight to get it released. i fear similar issues would arrise with a watchdog, everything would have to go through soo many processes before it could get released, and if something did crop up, customers would suffer whilst it was being investigated.
the t&c's are there for a reason, break them and you cant really complain. i know its frustrating, and maybe bits are on the boarderline of being illegal, but im sure their lawyers have made sure if it went to court they would win.