Analysing the CCI Order on the Updated Whatsapp Privacy Policy

- by Aditi Saxena, IInd year student at Rajiv Gandhi National University of Law, Punjab

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Introduction

In November 2024, the Indian antitrust watchdog, CCI, observed that Meta Platforms, Inc. (“Meta”) has abused its dominant position in the “messaging market” through WhatsApp 2021 terms of service and privacy policy update (“2021 Policy”). Further, the CCI slapped a fine of Rs 213.14 crore along with a few remedies ordered to be implemented in the next three months. CCI has observed Meta’s conduct to be anti-competitive under Section 4 of the Competition Act 2002 (“the Act”) with respect to imposing unfair conditions, denial of market access in the online display advertising market and further leveraging the dominant position of WhatsApp in the OTT messaging market to bolster its market position in the online advertising market. 

This order, passed by CCI, derives its genesis from the investigation that CCI ordered against the WhatsApp Privacy Policy of January 2021.  The new privacy policy of WhatsApp placed an embargo on user consent and discretion to opt out of the same. Therefore, per the latest terms and conditions, the user’s account shall be suspended or deleted if the same is not accepted. Further, the provision of sharing user data with Meta and the affiliates was also added. The author aims to analyse the CCI’s order by unravelling the legal stances taken by the CCI while rejecting Meta’s claim. 

Decoding the Meta Judgment  

Meta clarified that WhatsApp services will not be discontinued, and users can continue to use them as usual. However, no clarification was given on the scope of data sharing with the parent company. The CCI inquiry adopted a three-pronged approach. First, whether the new policy amounts to imposition of unfair conditions with a take-it-or-leave-it approach; Secondly, did the data collection practises through WhatsApp lead to market access denial for Meta’s competitors; Lastly, did the policy enable Meta to leverage its dominance in the OTT messaging app market to protect its market share in the online display advertising market. One of the preliminary objections made by Meta to the DG investigation was that the subject matter of the present proceedings is covered by data protection and privacy laws. The CCI citing Excel Crop Care Limited v. CCI held its legitimate jurisdiction that runs independently and concurrently as a guardian of competition principles irrespective of the overlap of subject matters, thus rejecting Meta’s claim. 

Delineation of relevant market 

DG’s assessment of Opposite Party’s (OP) dominance in two key markets in India—OTT messaging apps on smartphones and online display advertising—stems from latter's financial strength, large user base, data control as an entry barrier, strong lock-in effect, and lack of countervailing buying power. Negating the contention as claimed by the OP that the market where they operate is a “market for user attention”, the CCI averred it to be too broad since the same contradicts the competition law principles of substitutability. Thus, a holistic approach of attributing the OTT market with significantly different fundamental characteristics vis-a-vis modern consumer experiences was accepted. The stance of the geographical market as “globally” was rejected due to varied regulatory policies, data localisation and privacy laws across jurisdictions. CCI relying on the European Commission in the Google Search (AdSense) case held the relevant market to be online advertising because of its immediate interaction and higher return on investment. CCI further considered the UK Competition & Markets Authority (CMA) in its Online Platforms and Digital Advertising Report underscoring the lack of substitutability and core difference in characteristics in the search and display Ads. 

Attributing Dominance 

The CCI observed that Digital platforms and networks often exhibit a natural tendency towards concentration due to pronounced indirect and direct network effects. Further, High Daily Active Users figures also suggest a strong network value and a significant market position. Meta’s claim of a total number of downloads as a threshold for assessing dominance was rebuffed, for the CCI observed that the same may not necessarily be a reliable metric for determining market presence or competitive strength. Further, the direct network effect emanating from a large number of users creates high switching costs for its users. When the interoperability is less, there are entry barriers for newer platforms to engage with consumers. Thus, creating a winner-takes-all scenario in the market. Moreover, the indirect network effect in the form of a self-reinforcing cycle is essential to take into consideration. The incorporation and expansion of WhatsApp Business with a Payment integration mechanism is one illustration to substantiate the impact. Ergo, this establishes network effect as a detrimental factor while assessing competitors’ ability to compete effectively and efficiently. Consumers' dependence on a single platform was also factored in while determining WhatsApp's dominance. The prevalence of multi-homing is dismissed due to user concentration on primary platforms, with multi-homing limited to only secondary platforms.

Assessment of Abuse of Dominance 

The CCI order also underscored the compulsory nature of the new policies and the lack of flexible data-sharing options available to Indian users. In light of the same, it is imperative to note that the concept of “imposition” under Section 4(2)(a)(i) is derived from the element of compulsion and stripping the user away from genuine choices. Additionally, the notion of “unfairness” in the competition law ensures the prevention of imposition of arbitrary and one-sided conditions by the dominant enterprise. Further, as analysed above WhatsApp enjoys the position of a hegemon in the relevant market, making it arduous for users to switch platforms sans incurring significant costs creating a lock-in effect. Thus, as in the present case leaving users with little or no bargaining power.

The CCI noted that the larger number of people accepting the privacy policy is due to the assumption of the same being mandatory, and thus does not count as free user choice. This highlights the “imposed” nature, with users having no practical alternative but to agree. Further underscoring that anti-competitive harm by way of WhatsApp’s exclusionary conduct has already ensued. 

Data sharing and collecting practice 

The data collected and shared by WhatsApp was categorised as too broad, vague and unintelligible. It is also submitted that excessive data collection and inter-platform linkage with other Meta companies is not justified vis-s-vis the services that the platform offers to the users i.e., messaging services. The use of non-exhaustive lists in the policy suggests that WhatsApp retains the flexibility to expand the scope of data collection at any time and justify it as being covered under previous policies. Therefore, the opaque and ambiguous data policy without real accountability alludes to the inherent competition concerns. One of the kernel observations of the CCI was on the vehemence of “competition of privacy” and establishing privacy as an imperative non-price competition parameter. Further, the data-driven model of Meta can effectively create entry barriers, limit consumer choice, and impact the competitive dynamics of the digital marketplace.

Market denial and Leveraging 

It is conspicuous that data-led targeted advertising increases user experience. In a similar light, Meta’s access to WhatsApp data has strengthened Meta’s targeting capabilities for ads. Tying-in of acceptance of WhatsApp 2021 policy update with the sharing of data with Meta will further enhance Meta's status as a dominant advertising partner. This effectively impacts competitors' impressions and profitability. Further, the OP counterclaims that in the online advertising service it has no dominant position. It is pertinent to note that there is no statutory pre-requisite for an enterprise to be dominant for it to be held guilty of market access denial. In this case, it is a multi-product platform market, where the conduct of the incumbent in one market has an exclusionary effect in another related market. Thus, the aspect of cross-platform integration of data is factored in by CCI which creates a denial of market access for competitors. Additionally, the term denial of market access “in any manner” is of wide import and must be given its natural meaning.

Conclusion

Based on the legal analysis of the CCI order undertaken by the author, one of the kernel implications of the same is its jurisprudential value. The CCI unequivocally held that the privacy breach might be occurring at a policy level impairing consumer interest, however the same causes a ripple effect in the competition spectrum. Further, the CCI’s analysis of its legitimate jurisdiction assures a consumer-centric approach including better choice, quality etc. when it comes to scrutiny under competition law. Another crucial implication of this order is a much-needed push to the ex-ante rules as prescribed under the Digital Competition Bill underscoring the fundamental aspect of timely correction of market competition. Concludingly, as observed above a holistic demarcation of the relevant market and assessment of abuse of dominant position lays out the “special obligation” on dominant enterprises to ensure transparency and fairness in their data practices.