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This is an overview of the notice from the Competition Commission of India, written by Niharika Goel, law student of VIPS, Guru Gobind Singh Indraprastha University. This article analyses the conclusions of the Competition Commission, and how it guards the privacy of citizens of India against the monopolistic manoeuvre of Whatsapp, in the absence of stringent data protection legislation in India. 

Introduction 

Hi, I am a law-abiding Indian citizen signing into Whatsapp, the leading platform to find and communicate with my friends at.

Did I just tell my friend I wished to purchase a 55-inch television for my living room, and an advertisement on television deals at minimum prices started popping up on my screen? – yes, I signed up on Whatsapp as there was no better substitute to the app in sight, and no, I did not sign up to share my end-to-end encrypted data to help other people run and expand their business through display advertising. 

Indian citizens constitute the largest number of active users of Whatsapp in South-East Asia, counting over 200 million active users currently. In the era of convenience and comfort, blurring the gap between social networking and traditional messaging services may seem to provide a technology boom at the surface, but it may just be the tip of the iceberg. Today, growing at the pace of one million gains of daily active users, swiftly releasing updates like video calls, status stories, Whatsapp has dominated the market. And of late, riding on the success of its parent company’s in-house messaging app, Messenger, Whatsapp is taking messaging to a whole new level. Such a dominant position has led to WhatsApp’s monopolistic manoeuvre, and the users are left concerned.

Whatsapp privacy policy: an overview 

In order to deepen its integration with parent company Facebook, WhatsApp announced an update to its privacy policy in January 2021, particularly in the realm of business messaging features. The update also provided certain apprehension on the kinds of data that are collected by Whatsapp. The users reported that the new policy, prima facie, made it mandatory for the users to accept the terms and conditions in order to retain their WhatsApp account information. Such a mandate to accept the terms of the dominantly leading messaging app appears to be an evident breach of power. As per previous privacy policy(ies) dated 25.08.2016 and 19.12.2019, existing users had a fundamental option to choose whether they wanted to share their Whatsapp data with Facebook, which is a wise norm to adhere with. However, with the latest update, every Whatsapp user had to mandatorily agree to such data sharing with Facebook, in order to retain their account. This seems to be a huge hindrance to the right to privacy of the citizens.

In India, the right to privacy forms the basic structure of the Constitution of India reserving a position under the fundamental right to life, as constituted under the infamous K.S. Puttaswamy judgement. Any breach or mere apprehension of breach of privacy constitutes a major concern and requires grave diligence as the matter may lead to anti-national repercussions.

Allegedly, since January 2016 Whatsapp has waived off its subscription fee of US$0.99 per annum and is providing the service for free. The subscription fee being the only source of revenue considering Whatsapp follows no-ads product strategy, it was alleged that Whatsapp is sourcing funds from its parent company Facebook and hence is indulging in the practice of predatory pricing. In this manner, this company is trying to provide services that are below the cost and can reduce or eliminate the competition. The sole contention raised against privacy policy was that it has contravened Section 4 of the Competition Commission Act, 2002 by mandating the users to agree with its privacy policy and hence enforcing them to share their account details with “Facebook”. However, under the defence of such allegations, in Case No. 99 of 2016 titled Vinod Kumar Gupta and WhatsApp Inc. (‘Vinod Gupta Case’), it was noted that Whatsapp had provided an option to its users to ‘opt out’ of sharing user account information with ‘Facebook’ within 30 days of agreeing to the updated terms of service and privacy policy.

Legal provisions allegedly breached

Right to privacy

Right to privacy and the Right to information are two branches of the same tree, the fundamental rights. The right to information is recognized as a fundamental right under Article 19(1)(a) of the Indian Constitution. The issue of whether the right to privacy is a fundamental right has been subjected to constant debates for a long time. However, this was put to an end in 2017 after the nine-judge bench in Justice K.S Puttaswamy v Union of India, declared that the right to privacy is a fundamental right guaranteed under Article 21 of the Indian Constitution. Besides the UDHR and ICCPR, the UN Convention on Protection of the Child and the Convention for the Protection of Human Rights and Fundamental Freedoms also contain provisions for the protection of privacy rights.

Competition Commission Act

Any agreement entered into by an enterprise which concludes entrance into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India shall be considered a contravention of Section 3 of the Competition Commission Act, 2002.

Section 4 of the Act further prohibits abuse of its dominant position by an enterprise. The dominant position entails a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to operate independently of competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its favour. Regulation 35 of the Competition Commission of India (General) Regulations, 2009 (the ‘General Regulations’) states that a party seeking confidentiality has to make an application setting out cogent reasons for seeking such treatment along with confidential and non-confidential versions of the information provided and document(s) sought to be filed. Third-party sources explain that it is a seller who publishes the said product in the marketplace or without this market to auto physically carry on those products. when an order is placed the third-party seller has the item and fulfills its requirement.

Competition Commission:  an armour

Having considered the potential impact of the Policy and Terms for Whatsapp users in the market, the commission decided to take suo moto cognizance of the matter. A data-driven ecosystem mandates the need for examination of excessive data collection and the extent to which such collected data was subsequently put to use, may hinder antitrust scrutiny. Under the Whatsapp 2021 update, the apprehension of unreasonable data collection and sharing grants a competitive advantage to the dominant players. This may result in exploitative tactics falling under the subject matter of examination by competition law.

Defence raised by Whatsapp

Whatsapp posited that the prior 2016 update allowed users to opt-out of sharing their information with Facebook companies for advertising and product experiences, and the same has been honoured by Whatsapp throughout. According to the company, Whatsapp has maintained the privacy of personal messaging which is an integral part of its vision and growth, and personal conversations are protected by end-to-end encryption. 2021 update does not hinder the aforesaid norms, and merely provides specifics of Whatsapp working with businesses that use Facebook or third parties to manage their communications on WhatsApp.

Whatsapp has also made a preliminary objection and submitted that its current Terms of Service and Privacy Policy, as well as the proposed update in the same (the, ‘2021 Update’), fall within the purview of the information technology law framework and these issues are currently sub judice before various courts and other fora in India. It has also been averred that the examination of the 2021 Update by courts and the Government of India is not merely limited to data protection/ privacy laws but extends to assessing more broadly whether the 2021 Update is in conformity with principles of fairness, public policy, and national security considerations. Furthermore, Whatsapp has averred that the questions set out in the Commission’s order are sub judice and therefore, the Commission should not look into the same set of issues. Whatsapp has relied on the decision of the Hon’ble Supreme Court in Competition Commission of India v. Bharti Airtel Limited and others, (2019) 2 SCC 521, and stated that the said decision emphasized the need to maintain comity between decisions of different authorities on the same issues and held that the Commission should only exercise jurisdiction after the proceedings before the sectoral regulator had concluded and attained finality. Whatsapp has also relied on the decision of Hon’ble High Court of Bombay in Star India Private Limited v. Competition Commission of India, 2019 SCC OnLine Bom 3038 and decision of the Commission in Jitesh Maheshwari v. National Stock Exchange of India Limited, Case No. 47 of 2018.

Counter argument by the Competition Commission

Scrutinizing the contentions by Whatsapp, the commission put forth certain conclusions. The notice stated that Whatsapp tried to brush off the charges using the Bharti Airtel Case to claim bar on Commission’s jurisdiction into the matter, where the judgement had held that competition commission could hold scrutiny only after the proceedings before the sectoral regulator had attained finality. The commission, in contrast, concluded that the judgement of the said case was being irresponsibly manipulated, since the facts had an entirely different connotation, and the thrust of the decision was to maintain community between sectoral regulators. Abuse of dominance may be subject to post facto analysis, the commission’s view, however, states that the prompt to accept the privacy guidelines has already been proceeded with. The time has started running for users to comply therewith, thus falling under the scrutiny of Sections 3, Section 4, and Section 6 of the Act.

While Facebook is available on smartphones as well as PCs, and Whatsapp essentially is a smartphone app owing to its diverse functionality, it becomes all the more challenging to compartmentalize them into watertight categories.  It is primarily an over-the-top messaging app linked to a smartphone device using the internet to send and receive text, images, audio-video, location content shared personally or to a particular public through status updates. Facebook is a social networking app that connects various users through text, photos, multimedia, etc. visible to all, shared for friends through different privacy settings. The services provided by its service providers may not be substitutable. Another aspect to identify substitutability is through SSN IP (small but significant non-transitory increasing price) which is difficult to contextualize through OTP communication apps as they do not levy monetary charges. The Commission concluded that the relevant product market in which WhatsApp operates is the market for over the topic messaging apps through smartphones. 

To rely upon the conclusion of the Harshitha Chawla case, the most widely used apps are Whatsapp followed by Facebook being way ahead of other messaging apps, which adds on their combined strength as a group. Given its popularity, wide uses as well as distinct features, Whatsapp seems to hold a dominant position.

Dwelling into the 2016 and 2021 updates, it appears to the commission that consent to sharing and integration of user data with Facebook companies has been made a precondition to avail of Whatsapp services. So as to compare the facts with the Vinod Gupta case, mandating users to agree with this terms of service and privacy policy, which was disguised for being used for business expansion, contravenes the provision of Section 4 of the Act. Considering that the option to opt-out of the terms was subsequently abolished adds up to the severity of the situation since it dishonours the users’ consent of the 2016 update as well. The veracity of the entire claim of Whatsapp to protect itself from the scrutiny of the Competition Commission will be, thus, examined by the DG. 

The information provided to the users under the entitlement seems to be vague and unintelligible to the Competition Commission and does not appear to provide the real deal. The sovereign right and control over the decisions relating to sharing personal disaster have been infringed by Whatsapp without a justifiable reason. The take it or leave it terms by a dominant messaging platform does not constitute consent or significant voluntary agreement, when customers are not even provided with appropriate granular choice neither upfront nor in the fine prints.

The conductive Whatsapp is neither fully transparent nor can be said to be raised on voluntary and specific user consent, which is prima facie unfair. The impugned conduct of data sharing by Whatsapp with Facebook apparently amounts to the degradation of non-price parameters of competition in violation of Section 4 (2)(a)(i) of the Act. Moreover, the users who wish to opt-out of Whatsapp may have to lose their historical data. Otherwise, the process not only becomes cumbersome and time-consuming, making it almost impossible for the users to shift to other alternatives.

Indian consumer data protection and loss of control over personalised data can be regarded as a reduction in quality under antitrust law. Impugned sharing of data from Whatsapp to Facebook for the purpose of advertising also affects display advertising, bringing the potential to create further barriers to market entry, thus violating Section 4(2)(c) and (e) of the Act. In view of the foregoing, the commissioner concludes that Whatsapp has prima facie contravened the provisions of Section 4 of the act through exploitative conduct in the garb of the policy update.

Under the faucet, the commission directed the Director General to cause an investigation to be made into the matter under the provisions of Section 26 of the Act, to be filed and submitted within 60 days. 

Overview of the CCI’s notice 

Fairtrade regulator, Competition Commission of India directed its investigation to proceed with scrutiny of Whatsapp’s 2021 update, disguising dative and exclusionary dominant tactics. The report in its entirety concludes the dominant position of Whatsapp in the market, and abuse of such position thereof, as apprehended by the competition commission. The commission is of the view that Whatsapp is disguising its entry barrier tactics into fair business outgrowth policy, which is unfair considering the unavailability of alternatives to users. 

FAQ published by Whatsapp as well as terms of services are considered to be too broad, vague, and unintelligible disguising the actual data cost that a user incurs for availing Whatsapp services. Whatsapp infringes the right to consent of users with no justifiable reason. Considering violation of Section 4 of the Act in its entirety, the Director General is ordered to conduct a detailed investigation into the matter.

Therefore, the impugned data-sharing provision may have exclusionary effects also in the display advertising market which has the potential to undermine the competitive process and creates further barriers to market entry besides leveraging, in violation of the provisions of Section 4(2)(c) and (e) of the Act. 

As per the 2021 update to the privacy policy, a business may give third-party service providers such as Facebook access to its communications to send, store, read, manage, or otherwise process them for the business. It may be possible that Facebook will condition the provision of such services to businesses with a requirement for using the data collected by them. The DG may also investigate these aspects during its investigation.

Investigation directed 

Accordingly, the Commission directs the Director General (‘DG’) to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act. The Commission also directs the DG to complete the investigation and submit the investigation report within a period of 60 days from the receipt of this order. Both the Opposite Parties have also sought an opportunity to make oral submissions on their response in a hearing before the Commission.

In this regard, it is sufficient to note that a three judges Bench of the Hon’ble Supreme Court through its judgment in Competition Commission of India v. Steel Authority of India Ltd., Civil Appeal No. 7779 of 2010 decided on September 09, 2010 has already settled the issue by holding that “…Neither any statutory duty is cast on the Commission to issue a notice or grant S. M. Case No. 01 of 2021 21 hearing, nor can any party claim, as a matter of right, notice and/or hearing at the stage of formation of opinion by the Commission, in terms of Section 26(1) of the Act that a prima facie case exists for issuance of a direction to the Director General to cause an investigation to be made into the matter.” 

Lastly, it is noted that Whatsapp has filed its submissions dated 03.02.2021 in two versions viz. confidential as well as non-confidential (filed on 25.02.2021). The confidential versions were kept separately during the pendency of the proceedings. The DG, however, shall be at liberty to examine the confidentiality claims as per law. Further, it is made clear that no confidentiality claim shall be available in so far as the information/ data that might have been used/referred to in this order for the purposes of the Act in terms of the provisions contained in Section 57 thereof. It is also made clear that nothing stated in this order shall tantamount to a final expression of opinion on the merits of the case and the DG shall conduct the investigation without being swayed in any manner whatsoever by the observations made herein.

The Secretary is directed to send a copy of this order along with the material available on record to the DG forthwith and also to take steps in terms of the direction contained in para 10 of this order for ensuring strict compliance with the General Regulations and to issue a suitable public notice in this regard for future guidance.

The need to bring up law in this scenario fulfilled by CCI

India does not hold any special legislation for privacy and data protection as of yet which may seem a setback in the era of data usage and diversity. Currently, information technology in combination with other legislation is used for targeting the issue of the right to data privacy. However, India still awaits the Indian personal data protection bill that is still under the scrutiny of several amendments since 2008. The severe breach of data privacy and right to consent by a dominant app, with the least substitutability in the hands of users, seeks an immediate reform in the Indian legislation. 

What is being missed amid the clamour is that if India already had a data protection law in place, even the most dominant app would not have the loopholes to go ahead with the update in the first place. Whatsapp is legally bound to not share data with Facebook in the European region, as it contravenes the provisions of the General Data Protection Regulation. Section 5 of The Personal Data Protection Bill which was introduced by the parliament in 2008 and is still under the scrutiny of amendments, provides that one can only use the information for purposes that are a reasonable link to the purpose for which the information was given. Had the said law been in place, Whatsapp privacy policy would have been held prima facie illegal. 

Having said that, the Competition Commission’s approach in holding scrutiny in the entire matter, and handling it with grave anti-national apprehension is laudable. The Commission’s stringent approach of dismissing Whatsapp’s plea, and digging into the depths to unveil the disguise has been valorous. The order to investigate and conclude the matter within sixty days further puts forth the urgency of the Commission to protect the privacy of the citizens. Needless to say, the Competition Commission holds an armour to Indian citizens against Whatsapp’s disguise of prejudiced manoeuvre.

Whatsapp boons: the tip of the iceberg

A company that holds an immense dominant position, with no substitutability in its entirety, must not act in prejudice, harming privacy, anyhow. Such a dominant position puts forth certain duties and responsibilities, including a well-drafted policy to say the least. The entire hassle would not have taken place in the first place, had the FAQ, policies and terms of Whatsapp and its update been clear and unambiguous. The aforesaid ambiguity creates suspicion of the manoeuvre disguising gambit.

Not only does the entire prejudice create suspicion, but the judgement that held definite infringement on the privacy under European Region also affirms it thereof.  In the era of convenience and comfort, blurring the gap between social networking and traditional messaging services may seem to provide a technology boon at the surface, but the boon may just be the tip of the iceberg. Today, growing at the pace of one million gains of daily active users, swiftly releasing updates like video calls, status stories, Whatsapp has dominated the market. And of late, riding on the success of its parent company’s in-house messaging app, Messenger, Whatsapp is taking messaging to a whole new level. Such a dominant position has led to Whatsapp’s monopolistic tactic, and the users are left concerned.

Whatsapp’s dominant position

Given the pronounced network effects it enjoys, and the absence of any credible competitor in the instant messaging market in India, Whatsapp appears to be in a position to compromise quality in terms of protection of individualised data and can deem it unnecessary to even retain the user-friendly alternatives such as ‘opt-out’ choices, without the fear of erosion of its user base. Moreover, the users who do not wish to continue with Whatsapp may have to lose their historical data as porting such data from Whatsapp to other competing apps is not only a cumbersome and time-consuming process but, as already explained, network effects make it difficult for the users to switch apps. This would enhance and accentuate switching costs for the users who may want to shift to alternatives due to the policy changes.

Today’s consumers value non-price parameters of services viz. quality, customer service, innovation, etc. as equally if not more important as the price. The competitors in the market also compete on the basis of such non-price parameters. Reduction in consumer data protection and loss of control over their personalised data by the users can be taken as the reduction in quality under the antitrust law. Lower data protection by a dominant firm can lead to not only exploitation of consumers but can also have exclusionary effects as Whatsapp/Facebook would be able to further entrench/reinforce their position and leverage themselves in neighbouring or even in unrelated markets such as display advertising market, resulting in insurmountable entry barriers for new entrants.

Conclusion

Data and data analytics have immense relevance for the competitive performance of digital enterprises. Cross-linking and integration of user data can further strengthen data advantage besides safeguarding and reinforcing the market power of dominant firms. For Facebook, the processing of data collected from Whatsapp can be a means to supplement the consumer profiling that it does through direct data collection on its platform, by allowing it to track users and their communication behaviour across a vast number of locations and devices outside the Facebook platform.

Whatsapp appears to be in a position to compromise quality in terms of protection of individualised data and can deem it unnecessary to even retain the user-friendly alternatives such as ‘opt-out’ choices, without the fear of erosion of its user base. Moreover, the users who do not wish to continue with Whatsapp may have to lose their historical data as porting such data from Whatsapp to other competing apps is not only a cumbersome and time-consuming process but, as already explained, network effects make it difficult for the users to switch apps. This would enhance and accentuate switching costs for the users who may want to shift to alternatives due to the policy changes.

In the entire hassle, the Competition Commission’s approach in holding scrutiny in the entire matter, and handling it with grave anti-national apprehension is laudable. Dismissing Whatsapp’s plea, and digging into the depths to unveil the disguise has been valorous. The order to investigate and conclude the matter within sixty days further puts forth the urgency of the commission to protect the privacy of the citizens.

References 


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