The legal and regulatory tide seems to be blowing against WhatsApp and Facebook in India.
The main ground of challenge of the CCI's impugned order dated 24 March 21 directing investigation into the 2021 policy of WhatsApp ("impugned order"/"prime facie order") was that that despite the judicial challenge to the 2021 Update pending before the Supreme Court 1 and before the Delhi High Court 2, the CCI wrongly took suo moto action and passed the Impugned Order.
Mr. Harish Salve, the learned senior counsel for WhatsApp LLC., and Mr. Rohatgi, learned senior counsel appearing for Facebook Inc., argued that the issue as to whether the sharing of the information available with WhatsApp with Facebook violates the right of privacy of the users protected under Article 21 of the Constitution of India, and as to whether the petitioner(s) are under any legal obligation to provide an 'opt-out' facility to the users of WhatsApp, are issues that are pending adjudication before the Constitutional Court, and especially the Constitutional Bench of the Supreme Court, and , therefore, it was not open for CCI to consider the same issues in exercise of its suo moto powers under the Competition Act, 2002 ( the Act) . They submitted that judicial discipline would demand that CCI ought to have refrained from adjudicating on the said issues till the same are pronounced upon by the Supreme Court and this Court in the above-referred proceedings. They also placed reliance on the judgment of the Supreme Court in Competition Commission of India vs. Bharti Airtel Limited & Ors., (2019) 2 SCC 521 in support of their submission that CCI should have restrained from proceeding with the investigation until the issues pending adjudication before the Supreme Court and this Court are first decided by the said Courts.
Similarly, WhatsApp also referred before the High Court (and also before the Commission earlier ) another order of the Commission dated 18 August 2020 in the Harshita Chawla Case . In this case, the allegations of possible abuse of dominance were levelled against both Facebook and WhatsApp in the market for digital payments through WhatsApp Pay, where despite finding that WhatsApp was dominant in the related market for instant messaging applications through Smartphones , dismissed allegations of abuse of dominant position , since WhatsApp Pay, had received regulatory approvals to act as a payment app in India in February 2020 in beta version, and only recently, it seemed to have complied with the data localisation norms stipulated by NPCI to operate fully and therefore, its actual conduct was yet to manifest in the market and therefore the complaint against its leveraging its market position in the instant messaging market to dominate the market for digital payment was premature.
On the other hand, Mr Aman Lekhi, the learned Additional Solicitor General appearing for the respondent no.1, placing reliance on the Supreme Courts celebrated judgement in the SAIL Case 3, submitted that the impugned order was merely an administrative order which could not have been challenged in terms of the SAIL judgment. He also differentiated between the constitutional issued pending adjudication before the Supreme Court and the High Court in the above referred cases and submitted that CCI is examining the 2021 Update in relation to any violation of the provisions of Section 4 of the Act and whether the excessive data collection by WhatsApp and the use of the same has any anti-competitive implications. He submits that the concentration of data in the hands of WhatsApp may itself raise competition concerns, thereby resulting in violation of the provisions of Section 4 of the Act.
High Court's decision
The High Court after hearing the rival contentions as above has decided as under –
- Accepted the contention of Ld. ASG (for CCI) that based upon the SAIL judgment, the impugned order was only an administrative order which does not entail any consequence on the civil rights of the petitioner(s). In fact, the Impugned Order could have been passed without notice or granting an opportunity of hearing to the petitioner(s). Though the CCI is to give reasons in the Impugned Order, it is not to give any conclusive findings but is to form only a prima facie opinion to order an investigation, it need not deal with all the submissions of the petitioner(s) in detail.
- Appreciated the CCI's prima facie view that WhatsApp is dominant in the relevant market for Over-the-Top (OTT) messaging apps through smartphones in India; due to lack of/restricted interoperability between platforms, the users may find it difficult to switchover to other applications except at a significant loss; there is opacity, vagueness, open-endedness and incomplete disclosures in the 2021 Update on vital information categories; concentration of data in WhatsApp and Facebook itself may raise competition concerns; data-sharing amounts to degradation of non-price parameters of competition.Therefore, it cannot be said that the issues raised by the CCI are beyond its jurisdiction under the Act or that there is a total lack of jurisdiction in the CCI.
- Noted the submission of the Ld ASG that the scope of inquiry before the CCIis not confined only to the issues raised before the Supreme Court or before this Court, but is much vaster in nature.
- Held that the issue as to whether the 2016 Update/2021 Update announced by WhatsApp in any manner infringes upon the Right of Privacy of the users guaranteed under Article 21 of the Constitution of India is pending adjudication before the Supreme Court and this Court. The question regarding the 2016 Update/2021 Update not giving an option to opt-out is also an issue before the Supreme Court and this Court. However, the same cannot necessarily mean that during the pendency of those petitions, the respondent no.1 is completely denuded of the jurisdiction vested in it under the Competition Act, 2002 or that it must necessarily await the outcome of such proceedings. Therefore, it is not a question of lack of jurisdiction of the respondent no. 1, but rather one of prudence and discretion.
- Referring to the earlier decisions of the Supreme Court and Delhi Court 4which did not hold adjudication on merits on the moot issue by even smaller Benches of the High Court/Supreme Court when the same issue was pending decision before the larger Bench of the same court, held that as mere pendency of a reference before the larger bench does not denude the other courts of their jurisdiction to decide on the lis before them. Similarly, merely because of the pendency of the above proceedings before the Supreme Court and before this Court, the respondent no. 1/CCI cannot be said to be bound to necessarily hold its hands and not exercise the jurisdiction otherwise vested in it under the statute. Maybe, it would have been prudent for the respondent no.1 to have awaited the outcome of the above-referred petitions before the Supreme Court and before this Court, however, merely for its decision not to wait, the Impugned Order cannot be said to be without jurisdiction or so perverse so as to warrant to be quashed by this Court in exercise of its extra-ordinary jurisdiction.
- Rejected the contention of Facebook that its impleadment in the investigation was unwarranted. A reading of the Impugned Order passed by the respondent no.1 itself shows that Facebook shall be an integral part of such investigation and the allegations in relation to sharing of data by WhatsApp with Facebook would necessarily require the presence of Facebook in such an investigation.
So what brought this change in the Regulator's thinking on data privacy that it decided to initiate a suo motu inquiry?? This is not normal in India and there must be some background to this development. And did this inquiry really come as surprise to WhatsApp? Let me trace the background for the benefit of my readers.
It is not that the Commission was completely oblivious about the possibility of invoking provision relating to abuse of dominant position against WhatsApp in case it found any "unfair condition" such as restricting the choice of the "locked in" user by its data policies. This is manifested in the Vinod Kumar Gupta case as explained above (ibid). CCI did not find the 2016 policy abusive of dominance since it gave a 30 days' time to users to "opt out" of its consent given at the time of joining. Nevertheless, it is true that till at least 2018, CCI was avoiding intervening directly in social media platform's conducts on specific issue of big data.
But the origin of the "shift' in Commission's view can be traced to the release of a Market Study on Telecom Sector on 22 January 2021, in which, CCI for the first time acknowledged the role of big data as a factor to assess "non-price competition" in the online medium . Para 70 & 71 of the Study are worth reproducing:
- Data Privacy and Competition: Another aspect of data in the context of competition in digital communications market is the conflict between allowing access and protecting consumer privacy. Privacy can take the form of non-price competition. In the era of data aggregation, competition analysis must also focus on the extent to which a consumer can 'freely consent' to action by a dominant player. Abuse of dominance can take the form of lowering the privacy protection and therefore fall within the ambit of antitrust as low privacy standard implies lack of consumer welfare.Privacy degradation can lead to an objective detriment to consumers. Lower data protection can also lead to the standard legal category of exclusionary behaviour which undermines the competitive process. Tying with other digital products will further strengthen the data advantage enjoyed by the dominant incumbent by cross-linking the data collected across services, creating a vicious circle. Thus, anti-trust law framework is broad enough to address the exploitative and exclusionary behaviour arising out of privacy standards, of entities commanding market power. No doubt, there is a school of thought, which construes privacy as fundamentally a consumer protection issue.
- Japan has finalised guidelines, which state that any use of personal information, including users' purchase history and location, without their consent would constitute an "abuse of a superior bargaining position," a violation specified under Japan's Anti-Monopoly Act. India is still to legislate on a domestic Data Protection Law. However, as pointed out, the existing antitrust tools can address the competition issues arising out of privacy standards. India is at a critical stage in its digital evolution, and for India to realise its stated digital ambitions, it is vital to lay the foundations for a strong and competitive telecommunications sector. (Emphasis supplied).
Subsequently , a Public Interest Litigation (PIL) was filed by an engineer and start-up founder Karmanya Singh Sareen before the Supreme Court of India (SC) who sought its intervention to restrain WhatsApp from enforcing its 2021 policy. Sareen had also challenged WhatsApp's earlier policy in 2016 and the petition is still pending in SC before a Constitution bench. The PIL was heard by the Supreme Court and the observation of the Apex Court that "we will protect privacy of the people: SC to WhatsApp" formed the news headlines on 16 February , 21. And then came the CCI detailed order dated 24 March 2021, directing investigation against WhatsApp and Facebook !
So much for the background. But this CCI order could not have come as a surprise to WhatsApp and Facebook since even in the 2017 order in the Vinod Kumar Gupta case, CCI had observed that as the 2016 policy gave an option to the users to opt out of the consent given within 30 days, WhatsApp even if found to be dominant, could not then have been accused of abuse of dominance on this account. This option of the user is now sought to be withdrawn completely in the 2021 policy, which, WhatsApp should have anticipated, was likely to be challenged by anyone before CCI.
Be it as may, the question which now emerges for consideration is how WhatsApp will justify the new data policy before the Director General during the impending investigation in the light of the admitted fact that it has been already held as dominant. The only plausible defence could be that (a) There is no evidence of harm to consumer welfare and (b) Unlike the GDPR in EU, there is no data protection law in India yet to regulate WhatsApp in giving a free service in exchange of personal data after obtaining a voluntary consent for its sharing with Facebook except the IT Act, 2000 , which is outside CCI's purview to adjudicate upon and finally (c) the matter is sub judice before the SC in the PIL on the similar issues .
1. The 2016 Update was challenged in Public Interest Litigation, being W.P.(C) 7663/2016 titled Karmanya Singh Sareen & Anr. vs. Union of India & Ors. Filed inDelhi High Court disposed vide order dated 23.9.2016 with certain directions to WhatsApp, which were challenged by WhatsApp by a before the Supreme Court in SLP(C) No.804/2017, however, no interim order has been passed therein and the petition remains pending for adjudication.
2. The 2021 Update was also challenged in several judicial fora, including Delhi High Court and the Supreme Court, that is, W.P.(C) No.677/2021 titled Chaitanya Rohilla vs. Union of India & Ors., and W.P.(C) No.1355/2021 titled Dr.Seema Singh & Anr. vs. Union of India & Anr seeking to restrain WhatsApp from implementing the 2021 Update. The said applications are also pending before the Supreme Court.
3. Competition Commission of India vs. Steel Authority of India Ltd. & WP(C) Nos.4378/2021 & 4407/2021 Page 8 Anr., (2010) 10 SCC 744
4. State of Maharashtra and Anr. vs. Sarva Shramik Sangh, Sangli and Ors.; (2013) 16 SCC 16; P. Sudhakar Rao & Ors. vs. U. Govinda Rao & Ors., (2013) 8 SCC 693; Union of India & Anr. vs. V.K. Vashisht; (judgment dated 19.12.2012 in WP (C) No. 5036/2012); Ashok Sadarangani and Anr. vs. Union of India and Ors., AIR 2012 SC 1563.
Note: This article is based on my two articles on the same topic published on the Antitrust and Competition Law Blog on 23 April 2021 and 02 May, 2021.
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