Breaking: CCI calls for DG investigation into WhatsApp Privacy Policy

The Competition Commission of India (CCI) has called for an investigation into allegations of abuse of dominance levelled against WhatsApp in relation to its privacy policy..The order passed by the CCI today states,"Having considered the overarching terms and conditions of the new policy, the Commission is of prima facie opinion that the ‘take-it-or-leave-it’ nature of privacy policy and terms of service of WhatsApp and the information sharing stipulations mentioned therein, merit a detailed investigation in view of the market position and market power enjoyed by WhatsApp.".The Commission had taken up the matter suo motu in January this year, after considering media reports highlighting the impact of the WhatsApp privacy policy on users..Pursuant to this, WhatsApp and its parent company Facebook were asked to file responses to the allegations. While WhatsApp filed a response that was not in line with Regulation 35 of the Competition Commission of India (General) Regulations, 2009, the CCI noted that Facebook had failed to file a response altogether. Both companies later responded to the CCI's directions by email on February 25..On going through the response of WhatsApp, the CCI noted that the company failed to respond in accordance with the 2009 Regulations. The order states,"...despite an opportunity having been granted by the Commission, WhatsApp has not only failed to comply with the directions of the Commission but has also taken the pleas which are ex facie untenable.".WhatsApp also made the following preliminary objections to the CCI taking up the matter:Its current Terms of Service and Privacy Policy and the 2021 update fall within the purview of the information technology law framework and these issues are currently sub judice before various courts and other fora in IndiaThe Commission should only exercise jurisdiction after the proceedings before the sectoral regulator has concluded and attained finalityThe Commission has previously, in Vinod Kumar Gupta case, assessed the Terms of Service and Privacy Policy as updated in 2016, and held that allegations of breach of the Information Technology Act do not fall within its purview.Terming WhatsApp's reliance on the judgments cited in its response as "erroneous and misplaced", the CCI noted,"Needless to add, the Commission is examining the policy update from the perspective of competition lens in ascertaining as to whether such policy updates have any competition concerns which are in violation of the provisions of Section 4 of the Act. Further, the Commission is of the considered view that in a data driven ecosystem, the competition law needs to examine whether the excessive data collection and the extent to which such collected data is subsequently put to use or otherwise shared, have anti-competitive implications, which require anti-trust scrutiny......in digital markets, unreasonable data collection and sharing thereof, may grant competitive advantage to the dominant players and may result in exploitative as well as exclusionary effects, which is a subject matter of examination under competition law...".WhatsApp's next objection was that the 2021 update has not been rolled out yet, and thus, the allegation of abuse of dominance was premature. The CCI responded that the company has already announced a deadline of May 15, 2021 by which date users have to accept the terms of the new update, failing which they would not have full functionality of WhatsApp..Citing Section 33 of the Competition Act, 2002, the CCI stated,"... it is also pertinent to mention the provisions of Section 33 of the Act, which empower the Commission to intervene even in respect of acts which are in contravention of the provisions of Sections 3/4/6 of the Act if such acts are about to be committed. A plain reading of the long title to the Act also makes it beyond any pale of doubt that the Commission is obligated to ‘prevent’ practices having adverse effect on competition...".In view of the Commission in the Harshita Chawla case, it was concluded that WhatsApp is dominant in the relevant market for OTT messaging apps through smartphones in India. It was also noted,"The Commission has also taken note of the recent developments wherein the competing apps, i.e. Signal and Telecom witnessed a surge in downloads after the policy announcement by WhatsApp. However, apparently this has not resulted in any significant loss of users for WhatsApp.".Summing up the privacy policy, the CCI stated,"Simply put, it appears that consent to sharing and integration of user data with other Facebook Companies for a range of purposes including marketing and advertising, has been made a precondition for availing WhatsApp service."It further noted that while in the 2016 Vinod Gupta case, users were given the choice to opt out of sharing account information with Facebook, no such choice was provided as per the latest policy..The CCI further took note of the "lock-in" effect of using an app as widely used as WhatsApp, and opined that the scope of sharing information may extend beyond the categories expressly mentioned in the policy."Such opacity, vagueness, open-endedness and incomplete disclosures hide the actual data cost that a user incurs for availing WhatsApp services. It is also not clear from the policy whether the historical data of users would also be shared with Facebook Companies and whether data would be shared in respect of those WhatsApp users also who are not present on other apps of Facebook i.e., Facebook, Instagram, etc.".On the use of personal data of the users, the order states,"...there appears to be no justifiable reason as to why users should not have any control or say over such cross-product processing of their data by way of voluntary consent, and not as a precondition for availing WhatsApp’s services.".Such conduct, the CCI concluded appears to be in contravention of Section 4 of the Competition Act, which prohibits abuse of dominance."In view of the foregoing, the Commission is of the considered opinion that WhatsApp has prima facie contravened the provisions of Section 4 of the Act through its exploitative and exclusionary conduct, as detailed in this order, in the garb of policy update. A thorough and detailed investigation is required to ascertain the full extent, scope and impact of data sharing through involuntary consent of users.".The CCI thus called for an investigation by the Director General, who is required to submit a report within 60 days from today. It was clarified that nothing in this order shall amount to a final expression of the CCI's opinion on the merits of the case..Clubbed along with the matter taken up suo motu by the Commission was a case filed on the basis of information provided by Prachi Kohli, a final year law student at Law Centre-II, Faculty of Law, University of Delhi. This matter was argued by Advocates Taniya Malhotra, Tannavi Sharma, Abhishek Bhati, and Gurkaran Singh..[Read order]