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Whether integrating WhatsApp Pay within WhatsApp is anti-competitive

June 08, 2021
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WhatsApp Pay

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This article is written by Apurv Umredkar, pursuing a Certificate Course in Competition Law, Practice And Enforcement from LawSikho.

Introduction 

The key players of the technology sector have lately been on the forefront of Antitrust lawsuits across the globe owing to their powerful position and dominant control in the market. The audacity of their power and effect can be comprehended by the fact that these companies constitute among some of the biggest private corporations in the world. Over the years their scale of operations have increased exponentially along with the number of dominant players in the market.  As these entities grew stronger in their respective market places, so did their power hungry attitude to conquer and remain on the top. This global rise of entities called for stricter regulations and regimes with an aim to act as a defense mechanism in providing a fair, equitable and competitive market for both the consumers as well as the smaller enterprises or competitors. Due to their nature and sheer size these big enterprises are also informally called as gatekeepers or market disruptors. They hold the capability of manipulating the market for their own unfair benefits and preventing smaller entities from entering into this market thereby causing barriers to entry to them.

With the staggering figures of market capitalization upto USD 15.64 trillion, these companies place themselves in a position of special responsibility towards consumers, other small competitors and the overall market as well. The time period between 2010-2020 saw a plethora of rising competition lawsuits against these big tech corporations. [For a detailed analysis of antitrust issues pertaining to technology companies, click here.] And as we approach 2021, one can easily anticipate by the ongoing trend that this decade is going to be far worse for big dominant enterprises as Antitrust Investigations are on the rise. The fresh probe ordered by CCI in a suo moto capacity against WhatsApp for privacy policy issues is a prime example of this. The Competition Authorities are more vigilant than ever and are tightening their grip on such conglomerates so that consumers and competitors are not duped by big companies. Most prominently the US and EU Antitrust regulators on the controversies in regard to their strict compliance mechanism and zero tolerance policy towards the Antitrust rule breakers as is evident from the recent proposal of Major Antitrust Bill passed by US Senator Amy Klobuchar.

Currently there are 4 entities having a global presence – Google, Amazon, Facebook and Apple (popularly known together as GAFA) which are dealing with complex antitrust cases filed against them in many jurisdictions including India, Spain, France, Britain, Italy, Germany, Australia, Canada and China among others.  These lawsuits are filed either by small competitors/individual informants or as class action lawsuits specifically in the US. Apropos the Indian perspective, the author has by way of this manuscript critically analyzed the recent WhatsApp Antitrust Case held by Competition Commission of India in 2020. This case raised very significant questions over the various competition regulations and possibilities of some blatant misconceptions put forward by CCI pertaining to this case. So let’s get to the facts of the case. 

Case

Brief Overview 

The recent WhatsApp case brought with it a slew of questions pertaining to the provisions under Competition Act, 2002 (the Act). The case is one of a kind. It is considered to be a remarkable one since it adduces the approach and methodology taken by Indian Competition Regulatory Authority – CCI, in the already going the worldwide trend of suing big corporations in antitrust intricacies. The way this case was presented, CCI duly noted and gave its opinion of astuteness and crispness of details present in the notice. It also mentioned it as attractive. 

The case pertains to an information filed by a practicing advocate under Section 19(1)(a) of the Act alleging WhatsApp and Facebook of various misconducts using anti-competitive agreements and contravention of Section 4 of the act along with other competition issues. A plethora of allegations was filed by the informant which were backed up with precedents, similar cases against similar parties in foreign jurisdictions & misconducts under the Competition Act 2002. From the bare perusal of the case, it is easily recognizable that counsels of both the informant and opposite parties strived hard to prove their standing. The informant provided various details related to the matter to convince CCI about the anti-competitive conducts allegedly done by WhatsApp and Facebook. 

Submissions by Informant 

The informant in the complaint mentioned a detailed analysis of Facebook regarding its functioning, working pattern and overall strategy. It was observed that Facebook is amongst the most visited websites with over 2.3 billion monthly users & works on an attention based advertising business model which targets the right audience with the right product at the right time also known as (targeted advertising). The staggering amount of personal data is customized to user situations and attracts attention.  This targeted advertisement is stated to be the source of much of the company’s earnings. The informant also averred the business strategy and tactics adopted by Facebook as can be seen from the recent transactions. Facebook’s strategy has always been to outpower its competitors by buying out market competition. It monetizes data, generates revenue and eliminates competition. 

As regards the UPI, the informant stated that it is an instant real-time payment delivery system designed by National Payments Corporation of India launched in 2016. The main purpose behind this was to make India a cashless society. Its interoperability and ‘peer to peer’ connection makes it very popular among digital payment service users. It operates via virtual payment address, account number, IFSC code and 1-click 2 factor authentication. In terms of value UPI facilitated transactions worth INR 18.36 Trillion in the year 2019. The informant further explained about the third party operators in the UPI ecosystem (like Paytm, Phonepe, BHIM) which provide the digital payment services to its consumers and emphasized upon the fact that the service providers in the UPI ecosystem compete with in a very cut throat manner. Any private application provider who wishes to enter into this ecosystem must comply with all the procedural requirements, stipulated guidelines, RBI protocols and prove the safety and security of transactional data.

Post successful registration, the players have to invest heavily in market research, business strategies, creating and increasing customer base. They do so by providing cashbacks, coupons, vouchers and other gift hampers to attract consumers. Hence to keep pace with the market trend they continuously have to upgrade themselves in every possible manner and efficiently utilize money, mind and manpower to produce optimum output. The reason for providing such detailed information points towards the fact that if WhatsApp is allowed to bundle its messaging application with payment application, then it will successfully escape from all the intricacies, obligations and practical problems dealt with by OTA providers over the years. All these intricacies were not being dealt with by the WhatsApp Payment platform thereby giving an unfair advantage over other applications. Hence without incurring any costs or required labour, it will be able to enjoy the fruits of the UPI ecosystem just because it has a nexus with the largest user base of other relevant markets. 

Relevant Markets 

Thus conferring on the above based information, the informant delineated two different types of market – (a) Market for internet based messaging application through smartphones. (b) Market for UPI enabled digital payments applications. Concerning the geographical limitation, the informant has mentioned that the functioning and usage of these messaging apps is the same across the world, but since the antitrust regulations differ from region to region, and the same will be homogenous across India, the relevant geographic market in this case will be India. 

Proof of Abuse of Dominance by WhatsApp (as submitted by the informant) 

Apart from this, the informant has also submitted as to on what basis it considers WhatsApp dominant. Here the informant has taken the factors mentioned under Section 19(4) of the act to justify her claims. The following are reasons noted by informant – 

Allegations made by the informant 

The following allegation were made by informant on WhatsApp  – 

(a) That WhatsApp is bundling or tying its two separate products – messaging app with its payment service platform (WhatsApp pay) by using its dominance in the internet based instant messaging app to penetrate into the market of digital payments app which is illegal under Section 4(2)(e) and 4(2)(d) of the act. The large user base of the messaging platform is thereby giving undue advantage by synchronizing both platforms and coercing existing users to use its payment platform for digital purchases

(b) That this automatic installation of payment app via downloading messaging app amounts to pre-installation forced upon a user which leads to contravention of Section 4(2)(a)(i) of the act by imposition of unfair conditions. 

(c) That applications in the UPI payment market carry huge amounts of sensitive & personal data records and considering its volume raises the risk of national security and data privacy breach. 

(d) The acquisition of Whatsapp and Instagram by Facebook raises the risk of adverse effects on competition (supporting it with the ongoing federal lawsuit against it in US and data access case in EU). 

(e) That WhatsApp is involved in serious non-compliance of critical and mandatory procedural norms pertaining to data localization and storage. 

Prayers made by informant 

At last the informant has prayed for the following matters under this case – 

Submission made by Facebook 

Submission made by WhatsApp 

Observations of the CCI

“Details of litigation or dispute pending between the informant and parties before any court, tribunal, statutory authority or arbitrator in respect of the subject matter of information.”

Conclusion

To conclude, it is imperative to note that this case quickly became the talk of the town since the intensity and graveness of the complexities involved in this case raised other queries and doubts. Dealing with antitrust issues doesn’t only involve the legal aspect, but it is much more than that. It involves an in-depth understanding of the market, thorough research in law and economics, etc. The CCI gave a somewhat translucent idea of what should be the approach in these types of cases which involve an unharmed informant. Apart from this various new things and intricacies one gets to know when reading about antitrust cases in different jurisdictions. The commencement of this decade was quite stirring as new competition lawsuits are piling up in front of Antitrust regulators. One should adopt a wait and watch attitude until unless the concrete guidelines are issued by CCI in any particular case.


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