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 – 

• Market Share – The informant presented various newspaper reports that prove that WhatsApp is dominant in its relevant market since it is the most downloaded application by users. According to statista, the number of daily WhatsApp users crossed the 500 million mark in India. 
• Size and resources of enterprise – Since WhatsApp is backed by Facebook, it is quite possible that the latter’s power and dominance is used in growing the user base for the former. Facebook is alleged to have eliminated fair competition and market conditions. Its dominant position is the major driving force behind its success. Coming under the top 5 global technology conglomerates, there isn’t even the need to assess further regarding its power and reach. Even if measured independently, WhatsApp is sufficient enough to create and manage its own base. 
• Size of customers – As per the study report provided by the informant WhatsApp and Facebook hold first and second rank respectively in the most actively used mobile applications across the globe. This clearly indicates that it contains the largest consumer bases ever in the history of social media. 
• Countervailing buying power – Due to the largest customer base available, consumers of WhatsApp have certainly no buying power. Although there isn’t any restriction on users for switching to another platform, the users find it difficult to substitute any other app with WhatsApp since such users may find it difficult to find the majority of their contacts in any other application. Therefore willingly or unwillingly, users cannot opt out of WhatsApp. And even if they do, they incur a heavy communication loss. 
• Presence of any Vertical link  – In this point the informant has referred to various acquisitions made by Facebook since its inception. Informant has provided that each of the acquisitions done by Facebook involves an element of rooting out competition and establishing a monopoly in the social media market. 
• Barriers to entry – It is obvious that Facebook and WhatsApp are very much powerful. And with this power, they multiply their dominance and profit across the globe. Any new entrant or player is either purchased by Facebook or is denied various facilities and options of the market. This leads to the automatic exclusion of any player who is a competitor of Facebook. The capitalization of huge amounts of data available in the hands of these companies creates even more opportunities for them to abuse such power and dominance. 

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 – 

• Conduct a thorough investigation against WhatsApp. 
• Order or direct WhatsApp to immediately cease and desist its anti-competitive operations of bundling the internet based instant messaging application and UPI enabled digital payments application. 
• An interim relief requesting the commission to restrain abuse of dominance by WhatsApp. 

Submission made by Facebook 

• Regarding the maintainability of suit against Facebook – Facebook in its reply has stated that Facebook and WhatsApp are two different entities. Therefore in this case, dragging Facebook unnecessarily does not carry any significance or importance relevant to the case. As a result, Facebook should be deleted from the memorandum of parties. Also since both are separate entities, the stronghold of Facebook cannot be attributed to WhatsApp. 
• Apropos the locus of the informant – As far as the locus of the informant is concerned, Facebook has alleged that the informant doesn’t have any locus standi to approach the CCI because neither she has claimed any injury nor has suffered violation of her legal rights as a customer. Facebook relied upon the case of Samir Agarwal vs. Competition Commission of India for proving this point.  
• Forum Shopping – Facebook has alleged that the informant is involved in forum shopping. This contention was explained by Facebook as the informant in this case is closely linked with the petitioner who approached the Supreme Court raising the same intricacies as those in this information. This willingly non-disclosure of pending litigation is concrete proof of malafide intention of the informant. 
• Regarding previous acquisitions – Facebook has also objected to the allegations on it by informants pertaining to the acquisitions. It has contended that the legitimate acquisitions cannot be equated with abuse of dominance since all the acquisitions are made after gaining the required approval and prerequisites. Further it was stated such mergers are significant for growth of the overall industry. 
• Foreign Jurisdiction cases – As regards the foreign cases pending against Facebook, it has clearly stipulated that CCI has already held in previous cases that mere pending cases or investigation in other jurisdictions does not automatically bring the opposite party under the ambit of competition regimes. 

Submission made by WhatsApp 

• Regarding informant’s locus – WhatsApp has also contended about the locus standi of the informant as already stated by Facebook in its reply. Both Facebook and WhatsApp have made similar contentions on this matter. 
• Absence of evidence – WhatsApp in its reply to the notice has stated that the informant doesn’t provide any conclusive proof regarding the maintainability of the allegations. And therefore has requested that matter must be closed on this ground alone. The reliance has been placed on the 2015 case of BCCI vs CCI. WhatsApp has also contended that the allegations are based on unverified newspaper reports which have no evidentiary value in the court of law.  
• Prematurity of information – WhatsApp has averred that the information filed is premature in nature as WhatsApp pay has not been released on a full fledged basis. It is in the beta testing mode with the total number of users allowed is less than 1% of total Indian WhatsApp users. And filing a complaint prior to even the commencement of the conduct is not permissible. 
• Apropos the incorrect interpretation of relevant market – WhatsApp has stated that informants have wrongly interpreted the relevant market while making complaints. Instead of the relevant market being the market for internet based instant messaging apps in India, WhatsApp has defined the market as a market for user attention. WhatsApp has emphasized on the fact that it competes broadly with all digital commodities and services that have the primary aim to capture user attention. This is usually done through social networking, messaging, gaming, content viewing and sharing, photo and video sharing, or music, amongst many others. Hence the relevant market could not be specified to mode instant messaging only. 
• Dominant Position – As far as the dominant position is concerned, WhatsApp clearly stated that it does not hold a dominant position in any of the markets defined above. It further challenged the evidence provided by informants stating it as baseless and claiming that it does not provide any comparative synopsis to prominently show that WhatsApp acts independently of market forces and competitive constraints. It mentioned its competitors – viber, hike, telegram, iMessage. 
• On the matter of the dominant position of WhatsApp as per market shares, it averred that market shares are not the correct measure to identify an enterprise’s true position. Since the figures are static and fixed at a point of time. Therefore the correct assessment could not be based upon the market shares. The ground realities should be taken while assessing any company in any industry. Further the presence of various new entrants from India as well as beyond was taken as a factor in determining market share. 
• Denial of Allegation of Abuse – WhatsApp has clearly denied the allegations that it has abuse. It has contended that to constitute an abuse, it must be proved that WhatsApp coerces users to use WhatsApp pay feature. Further it was emphasized that for using WhatsApp pay, users have to separately agree to the terms and conditions therein. Without voluntarily entering into WhatsApp pay it is not possible to use it. It remains inactive until the user specifically activates it. Also the option of adding other UPI applications for payment in the WhatsApp pay app itself proves that it is not abusing its dominant position. 
• Denied the allegations of contravention of Section 4(2)(e) – WhatsApp denied the allegations regarding leveraging its dominant position in one market to enter into another. It averred that users retain full discretion and choice as to use WhatsApp pay or not. There is no restriction or abusive conduct or any “use” of an alleged dominant position as required under Section 4(2)(e) of the Act. 
• Regarding Bundling or Tying – As far as the bundling charges are concerned, WhatsApp has stated that the payment application feature is only in a testing mode and not fully launched in the app stores. As a matter of fact, WhatsApp pay doesn’t even exist for putting it under the ambit of bundling. Also it has been specifically stated that WhatsApp pay is simply a feature introduced in the WhatsApp messaging app like any other feature introduced in it – video calling, image/document sharing, etc. It will become part of the messaging platform when fully released. Hence the case of bundling doesn’t arise. 

Observations of the CCI

• The CCI observes that the objections raised to the allegations by the informant are two-pronged. First one is that the informant is not the aggrieved party and therefore she doesn’t have a locus standi to file the current information. Secondly, the informant was involved in forum shopping since the close ties between her and the petitioner who approached the Supreme Court. This non-disclosure of the fact prominently displays the mala-fide intention of the informant.  
• Of the above mentioned two objections, CCI denied the acceptability of the first one. The CCI emphasized on the fact that it is established to prevent practices leading to AAEC (Appreciable Adverse Effect on Competition), promote market competition, protect consumer’s interest, and ensure freedom of trade. Describing the inquisitorial nature of CCI, it reiterated the fact that “The proceedings before the Commission are inquisitorial in nature and as such, the locus of the Informant is not as relevant in deciding whether the case filed before the Commission should be entertained or not. As long as the matter reported to the Commission involves anti-competitive issues falling within the ambit of the Act, the Commission is mandated to proceed with the matter”  as was held in Reliance Agency And Chemists and Druggists Association of Baroda & Others. Towards that end, the Commission is more concerned with the fair functioning of the market and the motives with which the informant has come to the Commission is subservient to that objective.  
• Coming to the second argument, CCI held that the informant did come with unclean hands to CCI and was involved in forum shopping. Citing the links between the informant and petitioner in, Good Governance Chambers vs. National Payments Corporation of India and others, W.P. (C) No. 427 of 2020, the WhatsApp averred that the willful suppression of facts & withholding the relevant information from CCI, informant does come to CCI with malafide intention. 
• Regarding the non-disclosure part, CCI laid emphasis on Competition Commission of India (General) Amendment Regulations, 2019 dated 20.11.2019, Regulation 10 of the Competition Commission of India (General) Regulations, 2009, which states that – 

“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.”

• The CCI rejected the preliminary objection of Whatsapp as regards the locus of the Informant.
• CCI also rejected the claim of WhatsApp that the relevant market should be marketed for user attention. It observed that the relevant product market in which WhatsApp operates is the ‘market for Over-The-Top (OTT) messaging apps through smartphones’. The Commission observes that though in terms of nomenclature this relevant product market appears different from the one proposed by the informant, it widely covers the same set of players and competition dynamics. 
• Apropos the geographic market, the CCI agreed with the informant that the functionality of OTT messaging apps through smartphones does not differ depending upon the region, either in terms of price, functionality or operating system. However, the competitive conditions & regulatory architecture. Since conditions for competition are homogenous in India, the geographic area of India has been taken as the relevant geographic market for the purposes of assessment. 
• The Commission also agreed with the Informant that the second relevant market for assessing the allegations of the Informant would be ‘market for UPI enabled Digital Payments Apps in India’. 
• The CCI concludes that Facebook and WhatsApp are group entities and though they may operate in different relevant markets, their strongholds can be attributed to each-others’ positioning in the respective markets in which they operate. Therefore, as per Section4 of the Act, WhatsApp’s market position should be assessed keeping in consideration its nexus with Facebook and several other group entities (e.g.Instagram, Oculus) which are part of the same group. 
• The CCI has used the data given by informants as a proxy due to the absence of verified and trustworthy sources from which the information was accessed. 
• CCI prima facie found WhatsApp to be dominant in the relevant market for ‘market for OTT messaging apps through smartphones in India.’
• Regarding the pre-installation of payment app with messenger app, the CCI held this misconduct violative of (a) Section 4(2)(a)(i) (such pre-installation amounts to imposition of unfair condition on the user by a dominant entity.) (b) Section 4(2)(d), (the conduct of WhatsApp amounts to bundling of its messaging services with the UPI enabled Digital Payments Apps.) (c) Section 4(2)(e), (such pre-installation also amounts to leveraging of dominance by WhatsApp in first relevant market to favour and protect another relevant market.) 
• The Commission observed that Facebook and WhatsApp prominently deal with users’ sensitive data which is amenable to misuse and may raise potential antitrust concerns among other data protection issues. Nevertheless, the Informant has only alleged that WhatsApp/Facebook have access to data which they are using for doing targeted advertising. There is neither any concrete allegation, nor any specific information to support the competition concern of the Informant. In the absence thereof, there is nothing on record which the CCI can examine.

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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