The problem with cheating is not just "it's not fair". In fact, it takes a whole lot of cheating before that becomes a problem (through diploma inflation). The problem with cheating is that students aren't learning. This sets them up for failure on further classes that build on the current one.
They have a point though. If exam is testing for things that can be looked up easily, what's the point? Test for understanding and make tests individual enough to make mass cheating not feasible.
> Agreeing to follow specific rules and then silently not following them is lying. Do you consider that to be okay too?
Students are hardly in a position where they can express their views freely. Do you consider laying out rules and punishing anyone who voices objections okay too?
You're at 'cheating = bad', which is the level of a 5 year old naive little boy.
Try upgrading that system instead of pointing fingers. You only have one life to live and all that.