Case Title: WhatsApp LLC v. Competition Commission of India & Anr
According to the Delhi High Court, WhatsApp's 2021 privacy policy forces users to accept it or reject it by giving them the illusion of a choice before sharing their sensitive information with Facebook.
The appeals brought by WhatsApp and its parent company Meta (formerly Facebook) against a single bench decision declining to interfere with CCI's investigation into the 2021 privacy policy were dismissed by a division bench made up of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad.
Noting that WhatsApp holds a dominant position in the relevant product market, the Court noted that there is a significant "lock-in effect" that prevents users from switching to another platform "despite dissatisfaction with the product," as demonstrated by the fact that WhatsApp's user base remained constant when the 2021 Policy was announced despite an increase in the downloads of rival applications like Telegram and Signal.
“By and large, to ensure retention of its user base and to prevent any other disruptive technology from entering the market, data is utilised by tech companies to customise and personalise their platforms so that its user base remains hooked. When data concentration is seen through this prism, it does give meaning to the new adage that "data is the new oil", and, as noted in the CCI Order dated 24.03.2021, it raises competition concerns because it prima facie amounts to imposition of unfair terms and conditions upon its users, thereby violating Section 4(2)(a)(i) of the Act,” the Court observed.
The Court rejected the reliance put out by WhatsApp and Facebook on the CCI's Order in the Vinod Kumar Gupta case, which affirmed the 2016 Policy and found that Whatsapp had not abused its dominant position.
The 2016 Policy gave its customers the opportunity to "opt-out" of sharing user account information with Facebook within 30 days of consenting to the amended Terms of Service and Privacy Policy, according to the Court, which stated that the reliance was misplaced.
"The 2021 Policy, however, places its users in a "take-it-or-leave-it" situation, virtually forcing its users into an agreement by providing a mirage of choice, and then sharing their sensitive data with Facebook Companies envisaged in the policy. Therefore, it cannot be said that the CCI is bound by its findings in Vinod Kumar Gupta (supra) when the issue at hand, as well as the circumstances, are different," the Court said.
The Court also decided whether the CCI should refrain from exercising its jurisdiction to preserve the comity of judgments made by other bodies on the same subjects and the question of whether the CCI's authority overlaps with that of the Constitutional Courts.
Whatsapp and Facebook maintained that since the fundamental issues before the Apex Court and High Court, as well as the inquiry that was intended to be carried out by the CCI, were similar, this may result in divergent views.
They argued that the CCI's investigation into the 2021 Policy was limited to whether it furthered WhatsApp's dominant position and established anti-competitive practices, whereas the Apex Court was looking into the issue of privacy violation qua 2021 Policy under Article 21 of the Indian Constitution.
Whatsapp's argument was thus rejected by the Court, which stated:
"The sphere of operation of both are vastly different. Neither this Court nor the Supreme Court is analysing the 2021 Policy through the prism of competition law."
The Court held that there was no unbreakable rule that the CCI would have no jurisdiction in the present case even if the grounds were the same and the authorities' approaches were very different.
"It is the "opt-out" option that primarily led to CCI rendering its conclusion that the 2016 Policy did not violate the Competition Act, 2002. However, in the face of changed circumstances, considering the dominant position occupied by WhatsApp, the investigation proposed to be conducted by CCI does not warrant interference, and res judicata would, thus, not be applicable in the instant case," the Court held.
Insofar as the 2016 Policy featured an "opt-out" option, which was missing from the 2021 Policy, putting its users in a "take-it-or-leave-it" scenario, the Court observed that the 2021 Policy was a significantly changed version of the 2016 Policy.
"Solely for the reason that the policies itself do not emanate out of Facebook Inc., the Appellant cannot hide behind the fact that it is the direct and immediate beneficiary of the data sharing mechanism envisaged by the policies," the Court said.
The Court also agreed with the CCI's argument that the 2021 Policy's inclination to share user data with Facebook Inc., WhatsApp's parent firm, was one of its major flaws.
Following a prima facie finding that WhatsApp's new privacy policy violated the Competition Act of 2002, the Competition Commission of India requested an investigation.
In April of last year, a single-judge panel of Justice Navin Chawla rejected the Whatsapp and Meta petitions, finding no value in them, and declined to stop the CCI investigation.
Observing that the privacy policy provisions on sharing customised data with Facebook firms were "neither completely clear nor based on explicit, voluntary agreement of users," CCI had written notifications to both WhatsApp and its parent corporation.
The CCI had asserted prima facie that the policy violated Section 4 of the Competition Act by abusing its dominant position.
The anti-trust regulator described the privacy policy terms as "take-it-or-leave-it" conditions established by a dominating messaging platform, without giving the users much information, and noted that the policy prima facie appeared to be "unfair and unreasonable".
Sangeeta Verma, a member of the CCI bench, Bhagwant Singh Bishnoi, a member, and Ashok Kumar Gupta, the chairperson, stated that "a complete and extensive inquiry is necessary to identify the actual degree, breadth, and effect of data sharing through involuntary permission of users."
As a result, the Commission gave the Director General (the "DG") the order to cause an inquiry into the situation under Section 26(1) of the Act. The Commission further instructed the DG to wrap up the inquiry and submit the inquiry report within 60 days of receiving this directive.