The Competition Commission of India (hereinafter, “CCI”) through its order dated March 24, 2021 (hereinafter, “Order”) passed under section 26(1) of the Competition Act, 2002 (hereinafter, “Act”), formed a prima facie opinion of the violation of Section 4 of the Act and directed an investigation into the 2021 Update. Following this, on April 6, 2021, WhatsApp LLC, and Facebook Inc. (hereinafter, “Petitioners”) filed separate writ petitions before the Delhi High Court (hereinafter, “Delhi HC”) impugning the said Order. This article will dissect and analyse the Delhi HC’s judgment regarding the aforesaid.
The CCI took suo moto cognizance of the 2021 Update and came to the prima facie conclusion that the ‘take it or leave it’ nature of the 2021 Update was problematic. This is because WhatsApp has acquired the position of a dominant messaging platform due to the enhanced network effects (when the value/utility of a service is enhanced by the number of users subscribing to it) enjoyed by it. The issue was that the network effects being enjoyed by WhatsApp and the restricted inter-operability between other platforms would mean that the users may face difficulty in switching to substitute platforms such as Signal, Telegram, etc. Further, the disclosures about the information categories within the 2021 Update were opaque, vague and open-ended; the concentration of data in WhatsApp and Facebook may be a competition concern; and the data-sharing would amount to degradation of non-price parameters of competition (distinguishable features such as design, utility, etc.).
The Petitioners contented that since the 2021 Update was already being considered before the Supreme Court and the Delhi HC, the CCI could not have taken suo moto cognizance of the matter. In response, CCI claimed that since they were examining the possible anti-competitive implications of excessive data collection and its use by WhatsApp, their intervention was necessary. The CCI further contended that the concentration of data itself may raise competition concerns. The Petitioners had therefore approached the Delhi HC.
Proceedings before the Delhi HC
The learned Single Judge of the Delhi HC in its judgement dated April 22, 2021 observed that although it was not pleaded by the Petitioners, the issues raised in the impugned Order were not beyond the jurisdiction of the CCI. The Petitioners’ main contention that the subject matter was already under consideration before the Supreme Court was rejected, given that pending proceedings before the Supreme Court and the High Court cannot restrict the CCI’s operation and exercise of its jurisdiction under the Act.
WhatsApp argued that the 2021 Update was aimed at informing its users about the business services that would be provided in the future. It explained the ‘Commercial Messaging’ feature and how it would allow users and third-party businesses to communicate via WhatsApp for commercial purposes. The feature would also include marketing messages that would be received by the users for offers that might interest them.
The aforesaid contention warrants consideration because it enhances the business services on the OTT messaging platform, especially when more businesses are increasingly using the application for commercial and logistical purposes. This argument may or may not be a relevant contention during the investigation being carried out by CCI, but it is relevant to the issue at hand. If the said argument is to be accepted as what the 2021 Update seeks to do, then it should not be considered a violation of Section 4 of the Act (abuse of dominant position in the industry). This is because it is merely an additional service being provided by WhatsApp to its business users. However, considering that WhatsApp is under scrutiny, especially as it is owned by Facebook, it might not be afforded the benefit of the doubt in the present case. If the update is genuinely for business purposes, then it would not be anti-competitive as the network effects are merely being used to enhance the business model and provide an additional utility within the messaging platform.
Conclusion of the CCI
The conclusion reached at by the CCI was only prima facie. The key word in the apprehension noted by the CCI was ‘may’ and it was in no way an Order of final adjudication. Moreover, the conclusion was regarding the competition and anti-trust law concern. While this may be interloping with issues such as the right to privacy, i.e., the data sharing with Facebook, the order passed by the CCI was referencing the competitive concerns and hence, warrants further investigation. Further, as stated above, the issue of violation of the right to privacy by the 2021 Update is already under challenge before the Supreme Court and the Delhi HC.
Facebook’s Feeble Defense
Facebook contended that they should not be involved in the investigation ordered by the CCI since Facebook was merely the parent company of WhatsApp and the 2021 Update is offered by WhatsApp alone, and hence, not applicable to Facebook users. The Delhi HC rejected this defense based on the Order and the fact that the allegations were in relation to data sharing by WhatsApp with Facebook, which would require Facebook’s participation in the investigation. It is also worth mentioning that the 2021 Update shows that Facebook would be an integral part of the update, thereby making Facebook’s contention that the update would have no implication on Facebook users baseless and contrary to what is stated in the content of the 2021 Update.
WhatsApp and Facebook have preferred an appeal against the said judgement before a Division Bench, so the matter is currently sub judice. However, based on the material brought before the Single Judge and the fact that the Order is only a prima facie conclusion, there doesn’t seem to be much merit in the appeal.
In conclusion, the CCI had taken suo moto cognizance of the 2021 Update and ordered an investigation into the same due to their concerns about anti-competitive implications of excessive data gathering and exploitative use due to the dominant position of WhatsApp as an OTT messaging platform. Further, WhatsApp and its parent company Facebook had petitioned the Delhi HC challenging the order directing this investigation into the 2021 Update contending that the same is already under challenge before the Delhi HC and the Supreme Court. However, this contention was rejected as the Single Judge held that just because a matter is pending before a larger bench would not restrict the lower courts from adjudicating the matter and performing their duty.
Lastly, it is noteworthy that since OTT messaging apps have become a major part of our daily lives, it is only natural that these platforms would be used by businesses and workplaces for logistical and promotional purposes. However, considering the dominant position of certain apps such as WhatsApp, the same ought to be regulated by the CCI to ensure that the dominant positions are not abused, and the privacy of users is not invaded under the garb of ‘policy updates’.