CCI Initiates an Investigation against Whatsapp LLC and Facebook Inc.

On March 24, 2021, CCI initiated a suo-moto investigation against Whatsapp LLC (‘Whatsapp’) and Facebook Inc. (‘Facebook’) concerning abuse of dominance. [1]

Based on a review of media reports, CCI observed that Whatsapp updated its privacy policy and terms of service for its users making it mandatory for the users to accept the terms and conditions to retain their WhatsApp account information. The new policy provides the manner in which Whatsapp will share personalised user information with Facebook and its subsidiaries. CCI noted that the Whatsapp notification in relation to its updated privacy policy indicated that unlike Whatsapp’s prior privacy policy where users had an option to choose whether they wanted to share their WhatsApp data with Facebook, under the new privacy policy every user has to mandatorily agree to such data sharing with Facebook.

On Whatsapp’s preliminary objection against CCI’s jurisdiction to take cognizance of the case since the same issues are sub-judice before other courts, CCI observed that such policy updates have to be examined from a competition lens. Further, in digital markets, unreasonable data collection and sharing may grant competitive advantage to the dominant players and may result in exploitative as well as exclusionary effects.

In its assessment of the relevant market and Whatsapp’s dominance, CCI relied on its prior decision i.e., Harshita Chawla v. WhatsApp Inc.[2], to conclude that WhatsApp is dominant in the relevant market for ‘OTT messaging apps through smartphones in India’.

On abuse, CCI noted that the new policy does not provide Whatsapp’s existing users an option to choose not to have their WhatsApp account information shared with Facebook, implying that consent to sharing and integration of user data with other Facebook companies has been made a precondition for availing WhatsApp service. CCI further noted that the new policy facilitates data collection which is expansive and disproportionate since it seeks to capture, amongst others, transactions and payments data; data related to battery level, signal strength, app version, mobile operator, ISP, language and time zone, device operation information, service related information and identifiers etc. Further, given that Whatsapp and Facebook are the two largest players in terms of market share in the relevant market of instant messaging, their conduct required scrutiny. Lastly, CCI noted that the wordings of the new policy were opaque, vague, open-ended and lacked complete disclosures, thereby hiding the actual data cost that a user incurs for availing WhatsApp services.

Based on the above, CCI formed a prima facie view that the conduct of Whatsapp and Facebook is unfair to users. Accordingly, CCI directed the Director General (‘DG’) to initiate an investigation against Whatsapp and Facebook.

Subsequently, writ petitions were filed by Whatsapp and Facebook before the Delhi High Court (‘DHC’) challenging the CCI order on grounds of lack of jurisdiction since a judicial challenge against the updated privacy policy and terms of service is pending adjudication before the Supreme Court of India (‘SC’) and DHC.

DHC dismissed the writ petitions concluding that pendency of the issues before the SC and before itself would not bar the CCI from exercising its jurisdiction. However, DHC clarified that any finding made by the CCI during its investigation would be subject to, and bound by, the findings of the SC and those of its own. DHC further noted that the scope of CCI’s investigation is broader than the issues pending adjudication before the SC and itself.

 

[1] Suo Moto Case No. 01 of 2021, Order dated March 24, 2021

[2] Case No. 15 of 2020

Published In:Inter Alia Special Edition - Competition Law - May 2021 [ English
Date: May 31, 2021