The National Company Law Appellate Tribunal, New Delhi ("NCLAT") vide its order dated January 23, 2025, disposed of the application for stay filed by WhatsApp LLC ("WhatsApp") in WhatsApp LLC v. Competition Commission of India, (I.A No. 280 of 2025 in Competition App. (AT) No. 1 of 2025). WhatsApp had filed an appeal against the order dated November 18, 2024 ("CCI Order") passed by the Competition Commission of India ("CCI") along-with an application for stay challenging the findings of unfair trade practices by the CCI with regards to the 2021 Terms of Service and Privacy Policy ("2021 Policy").
By way of its order, the NCLAT has stayed CCI's findings in respect of the 5 (five) year ban imposed on WhatsApp for sharing user data with Meta Companies/ Meta Company Products for advertising purposes. However, it refused to stay the directions concerning data sharing for purposes other than advertising purposes. With regard to the penalty, the NCLAT granted stay on the CCI's direction to the extent of the penalty subject to a deposit of 50% (fifty per cent) of the total penalty by WhatsApp.
1. BRIEF FACTS:
WhatsApp LLC, a part of Meta Platforms Inc., updated its privacy policy and terms of service in 2021 in respect of sharing data collected from users across all information categories with other Meta Companies. The 2021 Policy of WhatsApp required users to accept new terms within a limited window period, failing which, the Policy stated, the users could continue using the services provided they consent to the 2021 Policy. This was a mandatory condition for continued access to the messaging application. However, on May 7, 2021, WhatsApp announced that no user would have their account deleted or lose functionality due to non-acceptance of the 2021 Policy. Further, WhatsApp, vide its letter dated May 22, 2021 to the Ministry of Electronics and Information Technology, stated that it will not limit the functionality of how the messaging application works in the subsequent weeks.
Taking suo motu cognizance of certain media reports on the conduct of WhatsApp and recognizing the 2021 Policy as inherently coercive in nature, the CCI registered a case against WhatsApp. In its determination, CCI observed that cloaked in the name of its policy update, WhatsApp had indulged in exclusionary and exploitative conduct thereby violating the provisions of Section 4 of the Competition Act, 2002 ("Act"). The CCI held that enjoying its position of dominance in the OTT messaging applications, Meta through WhatsApp sought to protect its position in the market for online display advertising by sharing user data between Meta companies for advertising purposes. The CCI further observed that data sharing by WhatsApp for advertising and purposes other than providing WhatsApp services resulted in the creation of barriers thereby leading to the denial of market access for competitors of Meta.
Thus, the CCI found WhatsApp liable for abuse of dominance and directed WhatsApp to cease and desist from indulging in anti-competitive practices. The CCI imposed a 5 (five) year ban on the Appellant from sharing user data collected on its platform with other Meta Companies and also, levied a penalty of Rs. 213.14 Crores ( Rupees Two Hundred Thirteen Crore and Fourteen lakhs) on Meta.
Aggrieved by the decision of CCI, WhatsApp approached the NCLAT under appeal.
2. CONTENTIONS RAISED BY THE PARTIES:
WhatsApp, contended that, instead of establishing the actual anti-competitive effects to substantiate a violation of Section 4 of the Act, the CCI relied merely on the potential and probable consequences of WhatsApp's actions. WhatsApp further argued that the CCI lacked the jurisdiction to deal with the matter as the same pertaining to data protection and privacy. The enforcement of the Digital Personal Data Protection Act, 2023 ("Data Protection Act") being underway, WhatsApp contended that CCI was not the appropriate authority to deal with data protection and privacy-related issues. It was further submitted that WhatsApp did not limit the functionality of the application to the users due to their non-acceptance of the 2021 Policy. Additionally, WhatsApp also pointed out that the CCI's order, if not stayed, could affect WhatsApp's business model, potentially forcing them out of the market.
On the other hand, CCI contended that, the issues relating to violations of the Act's provisions clearly fell within the scope of CCI's jurisdiction. While rebutting the arguments put forth by WhatsApp, CCI further submitted that the evidence presented solidified the abuse of dominance by WhatsApp. In this regard, the CCI Order records that the high percentage of users accepting the policy reflected the level of coercion by WhatsApp, as users were left with no practical alternative but to agree with the 2021 Policy. The acceptance rate during this period indicated the extent to which users felt compelled to accept terms against their will, highlighting the 'imposed' nature of the policy. The CCI Order further recorded that till the time WhatsApp made announcement on May 7, 2021, anti-competitive harm had already been caused to WhatsApp users by way of exploitative conduct on the part of WhatsApp.
3. DECISION OF THE NCLAT:
Taking into account that WhatsApp provided services to its users free of cost and that the complete embargo imposed by the CCI may potentially lead to the 'collapse of business model' and further noticing the Supreme Court's refusal to grant stay on the 2021 Policy in an appeal filed by Karmanya Singh Sareen, the NCLAT partially allowed the prayers made by WhatsApp. The NCLAT granted stay on the CCI order in respect ban of five (5) years imposed on sharing user data with Meta Companies for advertising purposes. Additionally, it stayed the penalty imposed by the CCI, subject to a deposit of 50% (fifty per cent) of the penalty of Rs. 213.14 Crores ( Rupees Two Hundred Thirteen Crore and Fourteen lakhs). NCLAT, however, refused to stay the directions contained in respect of sharing user data for purposes other than advertising purposes.
With regards to the allegations of the jurisdiction of the CCI and introduction of the Data Protection Act, the NCLAT did not delve into the complete analysis of the issue as it was only expressing a prima facie view on the application for stay. It observed that should the Data Protection Act or any provisions pertaining to the regulation of data sharing/ protection as and when enforced, the parties could seek modification of the present order.
Please find attached a copy of the order.
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