Anonymous suo moto case examining WhatsApp apps privacy policy updating which requires mandatory data sharing with Facebook conditions violating Competition Act Section 4 and without proper response from parties following regulatory procedures.
Direction to DG to conduct investigation under Section 26(1) of the Act within 60 days.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
COMPETITION COMMISSION OF INDIA
Suo Moto Case No. 01 of 2021
In Re : Updated Terms of Service and Privacy Policy for WhatsApp Users
Against:
WhatsApp LLC 1601 Willow Road, Menlo Park California 94025, USA
Opposite Party No. 1
Facebook, Inc. 1 Hacker Way, Menlo Park California 94025, USA Opposite Party No. 2
CORAM:
Mr. Ashok Kumar Gupta Chairperson
Ms. Sangeeta Verma Member
Mr. Bhagwant Singh Bishnoi Member
Order under Section 26(1) of the Competition Act, 2002
1https://www.business-standard.com/article/companies/whatsapp-mandates-data-sharing-with- facebook-in-updated-privacy-policy-121010601431_1.html;
S. M. Case No. 01 of 2021
1
WhatsApp is updating its terms and privacy policy.
Key updates include more information about:
By tapping AGREE, you accept the new terms and privacy policy, which take effect on February 8, 2021. After this date, you will need to accept these updates to continue using WhatsApp. You can also visit the Help Center if you would prefer to delete your account and would like more information.
S. M. Case No. 01 of 2021
2
S. M. Case No. 01 of 2021
3
be arrayed as a party to these proceedings, and WhatsApp is the appropriate entity to provide the Hon’ble Commission with the information sought ….”. The Commission has given careful consideration to the response filed by Facebook and notes that the same is not only evasive but is in clear non-compliance with the directions issued by the Commission vide its order dated 19.01.2021. As one of the avowed objectives of the key updates included more information about inter alia as to how WhatsApp partners with Facebook to offer integrations across the Facebook Company Products, it is surprising that Facebook instead of providing its response thereon, as sought by the Commission, is trying to evade its comments. Facebook is a direct and immediate beneficiary of the new updates and in these circumstances, it is egregious that Facebook is feigning ignorance about the potential impact of the updates altogether and avoiding from providing its perspective thereon. In these circumstances, Facebook is proper party in the present matter and its presence is required for effective and complete determination of the issues involved in the present matter. Accordingly, the issue of deletion of its name from array of parties does not arise and the request of Facebook in this regard is rejected.
S. M. Case No. 01 of 2021
4
the Competition Act and the General Regulations ”. An authorization letter dated 22.02.2021 was also enclosed along with the letter dated 25.02.2021. WhatsApp also filed certain additional submissions detailing the progress in the various proceedings against the update in terms of service and privacy policy before multiple fora as well as the introduction of in-app notifications by WhatsApp to inform its users about the same.
Signing of information or reference. –
Commission shall be signed by–
(b) the Karta in the case of a Hindu Undivided Family (HUF);
(d) the President or the Secretary in the case of an association or society or similar body or the person so authorized by the legal instrument that created the association or the society or the body;
S. M. Case No. 01 of 2021
5
(g) in the case of any other person, by that person or by some person duly authorized to act on his behalf.
(3) Without prejudice to the provisions of this regulation, the counsel may also append his or her signature to the information or reference as the case may be.
S. M. Case No. 01 of 2021
6
S. M. Case No. 01 of 2021
7
S. M. Case No. 01 of 2021
8
announced its privacy policy and terms of service and, as such, the conduct has already taken place which can be appropriately examined within the purview of Section 4 of the Act. The deadline fixed by WhatsApp, i.e. 15.05.2021 is for acceptance of such updated terms by the users failing which they would not have full functionality of WhatsApp. Thus, in nutshell, the conduct has already occurred, and the time has started running for the users to comply therewith. Pursuant to such policy updates, the users are already getting prompts for acceptance of updated terms and giving of consent thereto by the users, are reflective of the fact that the actionable conduct has already taken place which can be examined by the Commission within the framework of Section 4 of the Act. In this regard, 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 foregoing, the plea is legally untenable and unsustainable.
S. M. Case No. 01 of 2021
9
previously opted out agrees to the 2021 Update, WhatsApp will acknowledge their agreement to the 2021 Update and also continue to honour the 2016 opt-out.
S. M. Case No. 01 of 2021
10
position in launching their payment app services. While noting that WhatsApp operates in the ‘ market for Over-The-Top (OTT) messaging apps through smartphones in India , the Commission made the following observations while delineating the relevant market in the said matter:
71. WhatsApp is primarily an Over-The-Top (OTT) messaging App, linked to a smartphone device and mobile number, which has features of communicating personally, both one-to-one or group. It uses the internet to send and receive text messages, images, audio or video content, sharing of
S. M. Case No. 01 of 2021
11
location etc. from one user to another as opposed to the mobile network used for traditional texting/SMSing.
72. Facebook, on the other hand, is a social networking app which connects many users simultaneously. The users can post text, photos and multimedia which is visible to all those other users whom they have agreed to be their ‘friend’ or with a different privacy setting, with any other user. Users can also use various embedded apps, join common-interest groups, receive notifications of their Facebook friends’ activities etc.
73. Thus, even within the OTT consumer communication services market, services provided by OTT service providers may not be substitutable. One of the economic tools widely used by competition authorities for gauging substitutability and for defining relevant market in traditional markets is the SSNIP (Small but Significant Non-transitory Increase in Price) Test. However, given that ‘price’ is the most significant consideration for application of SSNIP Test, it may be difficult to contextualise substitutability from SSNIP point of view for OTT communication Apps as they do not levy monetary charge on the users.
-----------
75. Taking into consideration these features and the different parameters cited supra, yet not being overly influenced by strict compartmentalisation, the Commission is of the view 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 largely covers the same set of players and competition dynamics.
76. As regards the geographic market, the Commission agrees with the Informant that the functionality of OTT messaging apps through smartphones does not differ depending upon the region or country concerned, either in terms of price, functionality or operating system.
S. M. Case No. 01 of 2021
12
However, the competitive conditions, regulatory architecture and players may vary in different countries/regions. 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.”
85. The Commission is cognizant that the data relied upon by the Informant cannot be said to be free from infirmities and is based on global usage or users. However, in the absence of concrete data/information available in the Indian context other than the subjective information on popularity of WhatsApp, the Commission is of the view that these trends and results can be used as a proxy. More so, these trends appear to be intuitively in sync with the information available in public domain, which though does not confirm market share/strength of WhatsApp in any quantitative terms, nevertheless point towards its dominance.
86. Further, with respect to the dependence of consumers on the enterprise and countervailing buyer power, WhatsApp undeniably has the advantage of reaping the benefits of network effect. Network effect in turn ensures that
S. M. Case No. 01 of 2021
13
customers do not switch to other platforms easily unless there is a new competitor entering the market with an altogether disruptive technology. Moreover, lack of interoperability between platforms is another concern, as a result of which customers may be unwilling to incur switching costs, despite the same being primarily psychological.
87. As regards the barriers to entry, they may arise indirectly as a result of the networks effects enjoyed by the dominant player in the market, i.e. WhatsApp, in the present case. Since networks effects lead to increased switching costs, new players may be disincentivized from entering the market.”
S. M. Case No. 01 of 2021
14
The choices you have. If you are an existing user, you can choose not to have your WhatsApp account information shared with Facebook to improve your Facebook ads and products experiences. Existing users who accept our updated Terms and Privacy Policy will have an additional 30 days to make this choice by going to Settings > Account
S. M. Case No. 01 of 2021
15
appears to be unduly expansive and disproportionate. This is borne from the fact that it seeks to capture, amongst others, transactions and payments data; data related to battery level, signal strength, app version, mobile operator, ISP, language and time zone, device operation information, service related information and identifiers etc .; location information of the user even if the user does not use location related features besides sharing information with Facebook on how user interacts with others (including businesses) when using WhatsApp services. All such data c ollected by WhatsApp would be shared with Facebook Companies for various usages envisaged in the policy. The Commission also took note of the submission of WhatsApp that it would continue to honour the ‘opt-out’ option exercised by users during 2016 Update; however, the 2021 Update do not create any carveout for such users who opted for not sharing their information with Facebook.
S. M. Case No. 01 of 2021
16
strong lock-in effect for users, switching to another platform for whom gets difficult and meaningless until all or most of their social contacts also switch to the same other platform. Users wishing to switch would have to convince their contacts to switch and these contacts would have to persuade their other contacts to switch. Thus, while it may be technically feasible to switch, the pronounced network effects of WhatsApp significantly circumscribe the usefulness of the same. The network effects have been reflected when despite increase in downloads of the competing apps like Signal and Telegram , user base of WhatsApp apparently did not suffer any significant loss. As pointed out in Harshita Chawla case ( supra), the second largest player in terms of market share in the relevant market of instant messaging and thus the next sizeable alternative available to users is Facebook Messenger, which too is a Facebook Group company. Thus, the conduct of WhatsApp/ Facebook under consideration merits detailed scrutiny.
S. M. Case No. 01 of 2021
17
S. M. Case No. 01 of 2021
18
collected across services. Such data concentration may itself raise competition concerns where it is perceived as a competitive advantage. The impugned conduct of data-sharing by WhatsApp with Facebook apparently amounts to degradation of non-price parameters of competition viz. quality which result in objective detriment to consumers, without any acceptable justification. Such conduct prima facie amounts to imposition of unfair terms and conditions upon the users of WhatsApp messaging app, in violation of the provisions of Section 4(2)(a)(i) of the Act.
S. M. Case No. 01 of 2021
19
advantage besides safeguarding and reinforcing market power of dominant firms. For Facebook, the processing of data collected from WhatsApp can be a means to supplement the consumer profiling that it does through direct data collection on its platform, by allowing it to track users and their communication behaviour across a vast number of locations and devices outside Facebook platform. Therefore, the impugned data sharing provision may have exclusionary effects also in the display advertising market which has the potential to undermine the competitive process and creates further barriers to market entry besides leveraging, in violation of the provisions of Section 4(2)(c) and (e) of the Act. As per the 2021 update to the privacy policy, a business may give third-party service provider such as Facebook access to its communications to send, store, read, manage, or otherwise process them for the business. It may be possible that Facebook will condition provision of such services to businesses with a requirement for using the data collected by them. The DG may also investigate these aspects during its investigation.
S. M. Case No. 01 of 2021
20
hearing, nor can any party claim, as a matter of right, notice and/or hearing at the stage of formation of opinion by the Commission, in terms of Section 26(1) of the Act that a prima facie case exists for issuance of a direction to the Director General to cause an investigation to be made into the matter .”
Sd/- (Ashok Kumar Gupta) Chairperson
Sd/- (Sangeeta Verma) Member
Sd/-
(Bhagwant Singh Bishnoi) Member
New Delhi Date: 24 / 03 / 2021
S. M. Case No. 01 of 2021
21
3 issues framed by the court
Whether mandatory sharing of WhatsApp user data with Facebook without an opt-out option prima facie violates Section 4 of the Competition Act.
Whether the pending proceedings in other forum preclude CCI from examining the privacy policy update.
Whether unauthenticated responses from parties violate General Regulations and affect proceedings.
Colour shows how this judgement treated each authority
Competition Commission of India v. Bharti Airtel Limited and othersDistinguished¶57
(2019) 2 SCC 521 · Who else cites this
Star India Private Limited v. Competition Commission of IndiaDistinguished¶57
2019 SCC OnLine Bom 3038 · Who else cites this
Jitesh Maheshwari v. National Stock Exchange of India LimitedDistinguished¶57
Case No. 47 of 2018
Harshita Chawla v. WhatsApp Inc.Relied on¶77
Case No. 15 of 2020
XYZ v. Alphabet Inc.Distinguished¶57
Case No. 07 of 2020
Competition Commission of India v. Steel Authority of India Ltd.Relied on¶35
Civil Appeal No. 7779 of 2010
5 provisions across 2 enactments
WhatsApp LLC
Facebook Inc.
Ashok Kumar Gupta
Sangeeta Verma
Bhagwant Singh Bishnoi
As recorded by the court registry
2 orders share this CNR
Judgements on the same questions, provisions and authorities, from every court
