The Competition Commission of India (CCI) in 2021 initiated suo moto proceedings and ordered its investigative arm – Office of the Director General (DG) – to investigate into the updated 'Terms of Service and Privacy Policy' introduced by WhatsApp Inc. (WhatsApp) in 2021 (2021 Privacy Policy) (CCI Order).1
The 2021 Privacy Policy which allowed sharing of user data across Facebook Inc. (Facebook) (now Meta Platforms Inc. (Meta)) companies was prima facie seen to be a case of abuse of dominance under the Competition Act, 2002 (Act) in the garb of a policy update.
Since the passing of the CCI Order, WhatsApp and its parent company, Meta, pursued an arsenal of legal remedies available before Indian courts praying to halt the DG's investigation. However, the Supreme Court of India put a final stop to these applications by choosing not to interfere into the CCI's proceedings against WhatsApp and Meta, initiated under its statutory jurisdiction vested by the Act.2
CCI Order: 'take-it-or-leave-it' indicated a prima facie case
In early January 2021, WhatsApp started intimating users about updates in its terms of service and privacy policies, i.e., the 2021 Privacy Policy. In this notification to users, WhatsApp required users to mandatorily agree to the 2021 Privacy Policy in its entirety to be able to resume using WhatsApp's services from 8 February 2021.
WhatsApp also mandated users to agree to sharing of their account data across all information categories with all Facebook and/or Meta companies, unlike the previous updates which granted users the option to choose whether their data would be shared with Facebook and/or Meta.
The CCI launched suo moto proceedings into the 2021 Privacy Policy based on media and market reports. The CCI found the mandatory data sharing provisions of the 2021 Privacy Policy to be prima facie exploitative with possible exclusionary effects that can potentially undercut the competitive process and result in creation of further entry barriers into the market.
In view of this, the CCI prima facie opined that the 'take-it-or-leave-it' nature of the 2021 Privacy Policy especially in relation to the information sharing clauses merited a detailed investigation, given the dominant market position and market power enjoyed by WhatsApp and Meta in the relevant market for 'Over-The-Top messaging apps through smartphones in India'.
Therefore, the CCI held that WhatsApp's 2021 Privacy Policy, prima facie contravened the provisions of the abuse of dominance provisions of the Act.
The CCI Order of 2021 followed closely on the heels of the previous competition law case against WhatsApp in 2017, in relation to its then privacy policy of 2016. In Vinod Kumar Gupta v WhatsApp Inc.3, the CCI contrastingly did not find any prima facie contravention of the Act by WhatsApp and/or Meta (then Facebook), given the 'opt-out' option offered under the privacy policy of 2016. This allowed 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.
Delhi High Court allowed DG's probe
The CCI Order was first challenged by WhatsApp and Meta before the Delhi High Court on the grounds that, in spite of the pending constitutional challenge to the 2021 Privacy Policy before the Supreme Court, the CCI went on to direct an investigation into the 2021 Privacy Policy.
These constitutional proceedings included the question of whether WhatsApp was under a legal obligation to provide an 'opt-out' facility to users – an issue pending adjudication by a Constitution Bench of the apex court.
Firstly, a single judge bench of the Delhi High Court dismissed the applications and held that the CCI would not be stripped of its statutory jurisdiction under the Act solely because an issue surrounding the underlying arrangement was pending before the Supreme Court or a High Court. Upon appeal, a two-judge quorum of the Delhi High Court re-affirmed the single judge's order.4
Supreme Court's final decision of non-intervention
WhatsApp and Meta then challenged the Delhi High Court Order before the Supreme Court, contending again that there was a jurisdictional bar on the CCI as the Supreme Court was reviewing the validity of the 2021 Privacy Policy.
The Supreme Court however stood by the market regulator and resolutely ruled that there was no need for interference into the matter. It noted that, once the CCI has formed a prima facie opinion that there is a case of violation of the provisions of the Act and has initiated its proceedings thereunder, such proceedings cannot be said to lack jurisdiction.
The bench remarked that the CCI should not be delayed any further from proceeding with its inquiry. Additionally, all contentions available to Meta and/or WhatsApp would be open for consideration by the CCI on their own merits, and all observations made by the Delhi High Court would be deemed strictly prima facie or tentative.
Takeaways
The judgment of the Supreme Court re-validates the competition regulator's independent statutory jurisdiction to inquire into and adjudicate upon possible contraventions of the provisions of the Act. It also demonstrates that constitutional courts are now less willing to interfere with CCI's probe orders unless prima facie flaw can be illustrated. Further, considering that probe orders are merely a departmental inquiry or a preparatory step which do not determine the rights and liabilities of the parties, it appears that the common thrust of such non-intervention orders is to prevent stifling of CCI's investigation powers.
Another facet which is worth noting is that while the Supreme Court affirmed the right of the CCI and the DG to investigate, it simultaneously clarified that the Delhi High Court's observations are at best tentative. Arguably, this remark protects the Meta's ability to possibly agitate the same issues in the future. That said, for now, the Supreme Court's message is simple – cooperate with the CCI's investigation in all earnest.
Footnotes
1. In Re: Updated Terms of Service and Privacy Policy for WhatsApp Users, Suo Moto Case No. 01 of 2021.
2. Meta Platforms Inc. v Competition Commission of India & Anr., Special Leave to Appeal (C) No. 17121/2022
3. Shri Vinod Kumar Gupta v WhatsApp Inc., Case No. 99 of 2016.
4. WhatsApp LLC & Anr. v Competition Commission of India, LPA 163/2021 & CM APPLs. 15908/2021, 16893/2021, 18800/2021, 18910/2021, 46058/2021, 46059/2021, 46655/2021.
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