CCI Dismisses Allegations of Abuse of Dominance against WhatsApp Inc.

On August 18, 2020, CCI passed an order dismissing the information filed by Harshita Chawla against WhatsApp and its holding company, Facebook Inc. (‘Facebook’) alleging a contravention of Section 4 of the Act.[1]

The informant alleged that WhatsApp has a dominant position in the market of internet based messaging application and was abusing its dominance by bundling its messaging application with the payment option i.e. WhatsApp Pay (‘WA Pay’) thereby using such dominance to penetrate the United Payment Interface (UPI) enabled Digital Payments Application Market.

The informant submitted that WhatsApp is dominant in the following relevant product markets: (a) market for internet-based messaging applications through smartphones in India (‘Internet Messaging’); and (b) market for UPI enabled digital payment applications in India (‘UPI Enabled Digital Payments’). The informant submitted that the UPI Enabled Digital Payment applications were a distinct market segment as these are not substitutable with other modes of payment such as debit cards, credit cards, mobile wallets, net banking, and other forms of electronic payment facilities.

The informant relied on WhatsApp’s high market share, economies of scale enjoyed by it, and the absence of significant competitors to establish WhatsApp’s dominance in the market of Internet Messaging market. The informant alleged that WhatsApp used this dominant position to: (a) mandate pre-installation of WA Pay into its messaging application which amounts to the imposition of an unfair condition; (b) bundle digital payment services with its instant messaging services, each being different services with separate consumer demand. The informant further alleged that such mandatory pre-installation of WA Pay indicated that WhatsApp was leveraging its dominant position in the Internet Messaging market to enter/protect its market position in the UPI Enabled Digital Payments market in violation of Section 4(2)(e) of the Act.

WhatsApp and Facebook contested the informant’s locus for filing the information based the National Competition Appellate Law Tribunal’s decision in Samir Agarwal v. Competition Commission of India,[2](‘Samir Agarwal’). WhatsApp submitted that the informant had not suffered any legal injury as a result of the alleged anti-competitive conduct and thus had no locus to file the information. CCI rejected this contention stating that under the scheme of the Act the informant need not necessarily be an aggrieved party to file a case before CCI.

Regarding the allegation of installing WA Pay with the messaging service, WhatsApp submitted that to activate WA Pay, users are required to sign up for various terms and conditions including the mandatory linking of the user’s bank account to enable payments. Accordingly, there was no abuse in the market of UPI Enabled Digital Payments since the users have complete freedom in deciding to use WA Pay.

CCI observed that while many digital applications offer a host of services, it is important to identify the primary or most dominant features of such apps to delineate the relevant market and assess the substitutability of such features. In this context, CCI noted that WhatsApp primarily offered instant messaging services to its users which are distinct and not substitutable by the services offered by other digital applications. Accordingly, CCI defined the Relevant Market as ‘Market for Over-The-Top messaging apps through smartphones in India’ (‘OTT Messaging’). Regarding digital payments, CCI agreed with the informant and defined the relevant market as the ‘Market for UPI enabled Digital Payment Apps in India’.

CCI relied on WhatsApp’s popularity, its wide usage, its relative strength vis-à-vis its competitors, and the network effects enjoyed by it to hold it a dominant player in the market of OTT Messaging. CCI noted that the existence of an app or a pre-installed feature does not necessarily translate into actual usage. CCI acknowledged WhatsApp’s submission that to enable WA Pay, users were required to follow certain registration steps and provide certain additional information. As such, no transaction can be completed without the user taking these necessary voluntary steps. CCI also noted that incorporating a payment feature does not influence consumer choice, as there is a strong likelihood of a status quo bias that operates in favour of the existing competitors in the UPI Enabled Digital Payments market. Accordingly, CCI held that the integration of WA Pay into WhatsApp’s application did not amount to the imposition of an anti-competitive unfair condition.

CCI also dismissed allegations of anti-competitive bundling, since there was no compulsion on users to use WA Pay for making instant interbank transfers. Moreover, the presence of various established players such as Google Pay, PayTM, Phone Pe, Amazon Pay, etc., in the UPI Enabled Digital Payments market indicated a competitive market. CCI observed that it would be incorrect to assume that WA Pay will automatically gain a considerable market share, merely based on its pre-installation. CCI also dismissed the allegation of leveraging because of the vigorous competition in the UPI Enabled Digital Payments market. Further, CCI observed that since WhatsApp’s ecosystem does not involve paid services for normal users, the consumer traffic would not automatically be diverted to WA Pay. Accordingly, CCI dismissed all the allegations and passed a closure order under Section 26(2) of the Act.

 

[1] Case No. 15 of 2020, Order dated August 18, 2020.

[2] Competition Appeal No. 11 of 2019, Judgement dated May 29, 2020.

Published In:Inter Alia Special Edititon - Competition Law - October 2020 [ English
Date: October 19, 2020