CCI’S take on updated privacy policy by behemoth Whatsapp: Abuse of its dominant position?

Harsh Patidar & Srijita Goswami[i]

On 24 March 2021, a three-judge bench of the Competition Commission of India in its order passed against WhatsApp LLC and Facebook, Inc., directed the Director General to conduct an investigation under Section 26(1) of the Competition Commission Act, 2002 (hereinafter to be referred as “CCI Act” ). The investigation was in relation to the newly updated privacy policy of WhatsApp in January, 2021 and the terms of service for its users. The Commission passed an order stating that there was excessive data collection being effectuated by the new policy of WhatsApp, and it needed to be examined whether excessive data collection would have anti-competitive effect violating Section 4 of the Act.


This disquisition highlights facts of the matter, issues raised by the party, and the decision given by the Commission. In peroration, this article coruscates the order passed by the Commission.


Factual Background

In the present matter, WhatsApp and Facebook were ‘Opposite Parties’. The users of WhatsApp started receiving notification from WhatsApp since January 2021. The notification suggested that in order to be able to use the services of WhatsApp, users would have to compulsorily accept the new terms and policy including the terms with respect to sharing of their data with Facebook and other subsidiaries. This new policy of WhatsApp was completely different from the previous policies of WhatsApp as the previous policies provided the users with an option to choose whether they wanted to share their WhatsApp data with Facebook. This matter got widely reported by media. In the backdrop of this reporting by media, the Commission took suo motu cognisance of the matter from the perspective of competition angle in order to determine as to whether such unreasonable data collection and sharing grants any competitive advantage to the dominant players and whether such competitive advantage results in exclusionary effects in the form of the display advertising market which has the potential to undermine the competitive process which may create barriers to market entry besides leveraging in violation of the provisions of Section 4. Further, the Commission strictly observed that WhatsApp is dominant in the relevant market for OTT messaging apps through smartphones in India.


Issues Raised

The issues which came before the Commission for its perusal and thoughtful consideration were Firstly, whether the updated privacy policy of WhatsApp results in abuse of its dominant position under Section 4. Secondly, whether the Commission possesses the power to interfere in the matter where the policy of WhatsApp amounting to abuse of its dominant position had not been implemented. Thirdly, whether the Commission can take cognisance of the matter which is sub-judice before any court. Fourthly, whether the legal practitioners are authorized to appear, and to sign the pleadings on behalf of the opposite parties under Section 35 of the Act. Lastly, whether the matters pertaining to data localization and sharing of data with any subsidiary, can be dealt under the purview of Competition law in India.


Observation of the Bench

The three-judge bench ruled that WhatsApp has prima facie violated the provisions of Section 4 of the Act through its exploitative conduct which can be ascribed to its updated privacy policy.


To the second issue, the bench ruled that the Commission has the power to interfere in the matter where the act of abuse of dominant position had not been committed. To buttress this ruling, the Commission strongly observed and submitted that “Section 33 of the Act, which empowers the Commission to intervene even in respect of acts which are in contravention of the provisions of Sections 3/4/6 of the Act if such acts are about to be committed.” Therefore, the analysis of the act of abuse of dominant position can be done before it is about to be committed by any enterprise.


To the third issue, the bench held that the Commission can take cognisance of the matter which is sub-judice before any court. Further, to the fourth issue, the Commission held that among the procedural complexities, WhatsApp’s misplaced reference toSection 35 of the Act as it is evident from a bare reading of the provision. Section 35 lays down the provisions for the appearance of a person or enterprise either in-person or through authorized person or persons that qualify under said provision. Therefore, WhatsApp’s reliance on it for justifying procedural overlaps in signing of pleadings is rendered irrelevant. Thus, the bench held that the legal practitioners are authorized to appear. They are not authorized to sign the pleadings on behalf of the opposite parties under Section 35. To the last issue, the bench ruled that the Commission has no jurisdiction to deal with the matters related to data localization and data sharing and shall restrict itself to Competition law matters. Despite the fact that the matters related to data localization and data sharing fall outside the purview of Competition law in India, the Commission held that it can interfere with the policy of WhatsApp as the policy updates are in breach of Section 4 of the Act.


Authors' Analysis

In WhatsApp’s contention challenging CCI’s jurisdiction, it relied upon the fact that the matter of the new updated Privacy Policy is sub-judice before other courts. The Commission emphasised on its duty to intervene in disputes having “anti-competitive implications” in order to carry out “anti-trust scrutiny” when such a step is invited by any action. Such a stance is consistent with the objective of the Commission that has been expressed in its Preamble that enshrines it with the duty to prevent anti-trust practices and thereby “promote and sustain competition”. Further clarification was offered by highlighting that the inquiry into the update was being carried out through a “competition lens” and hence could not be discounted on account of having technology law implications. The use of the means of data collection and its subsequent sharing that eventually induces anti-competitive consequences enabling potentially exploitative actions invariably brings said action under the purview of antitrust scrutiny. The harbouring of large amounts of data is perceived as a huge competitive advantage that may create entry level barriers to potential competitors. When such databases of accumulated information are shared with companies belonging to the same group, the probability of dominating the relevant market becomes a reality. More importantly, when a clause mandates such data sharing without providing consumers the option of opting out, it may be perceived as exploiting the Company’s essentially monopolistic position in the relevant market. To this effect, Section 62 of the Act has been highlighted which expressly mentions that the Act is to be implemented “in addition to” other laws in force.


It is essential to note that a challenge similar to WhatsApp’s is an ordinary practice owing to the debate around the extent of CCI’s jurisdiction in matters containing sectoral overlaps. With the presence of sector-specific regulations that delve into matters covered under the Commission’s authority, such overlaps are not infrequent. Upon close scrutiny of the Act, applying the rule harmonious construction in the interpretation of Section 60 with Section 62 provides coherence in the issue. The mandate in Section 60 gives predominance to the provisions embodied in the Act. Section 62 provides for the implementation of the Act in addition to other laws in force at the time without subjecting such laws to any derogation. While the former provision provides for the non-obstante supremacy of the Act, the latter ensures that said supremacy is consistent with the provisions of other laws. While at a first glance these provisions may seem contradictory in nature, when interpreted harmoniously, it becomes apparent that the supremacy that has been mandated in restricted to the subject matter of the Act itself, that is, competition law. Therefore, it may be derived that when concerning matters in the competition law domain, the Act shall have the effect of prevailing over other laws. While similar provisions may have been included in other statutes, they should be viewed complementary to the provisions of the Act, and not be given primacy. Any interpretation to the contrary could potentially render the authority of CCI and the governing Act ineffective.


Conclusion

Data privacy and accumulation have become raging subjects of dispute across the world, putting such decisions under global scrutiny. Through the course of the order, upon close scrutiny, certain inconsistencies in the Act become apparent. This order of the CCI can fundamentally change the landscape for social media and communication applications by upholding user consent and control over data. Simultaneously, it establishes the importance of upholding and promoting competition in markets dominated by solitary players. Further, it is the need of the hour to preserve the sanctity of the Commission and ensure the un-curtailed discharge of its objective, it is of grave importance to ensure that the question of its jurisdiction with regard to matters involving other sector regulators be clarified. Concretizing CCI’s predominance in the domain of competition law over other sector regulators would essentially eliminate threats undermining its authority, thereby enable it to preserve and promote competition.


[i]Srijita Goswami is a 4th Year B.A.LL.B (Hons.) student at Symbiosis Law School, Hyderabad. Harsh Patidar is a 3rd Year B.A.LL.B (Hons.) student at National Law Institute University, Bhopal. For any discussion related to the article, they can be contacted via mail- harshptdr09@gmail.com or srijitagosw@gmail.com

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