CRUX: In Re: Updated Terms of Service and Privacy Policy for WhatsApp Users v. WhatsApp LLC. (24th March, 2021)- The issue that the present case deals with is whether or not WhatsApp’s new privacy policy is violative of the provisions of the Competition Act, 2002.
DATE OF JUDGMENT: 24th March, 2021.
JUDGES: Ashok Kumar Gupta, Sangeeta Verma, Bhagwat Singh Bishnoi.
PARTIES
- Re: Updated Terms of Service and Privacy Policy for WhatsApp Users (Appellant).
- WhatsApp LLC (Respondent).
SUMMARY: The following case deals with the issue of whether or not the new privacy terms brought forth by WhatsApp were violative of the provisions of the Competition Act, 2002.
OVERVIEW
- The present case is in connection to the recently released privacy policy norms by messaging platform WhatsApp.
- The privacy policy made it mandatory for users to share their personalized data with its parent company, Facebook and its other companies.
- The Competition Commission took suo moto cognizance of the matter after reports concerning the potential impact of WhatsApp’s users in the media arose.
- WhatsApp contended that the new privacy policy agreement was to ensure transparency among its users with regards to the data being shared by the platform and that it does not expand its ability to share data with Facebook.
- However, the Competition Commission took a different view in the matter and held that the new policy merited a detailed investigation in the matter.
- Therefore, the Competition Commission, on consideration of the matter, ordered its investigative arm, the Director General (DG) to complete the investigation into the new privacy policy within 60 days.
ISSUES
The following issues were analyzed by the Competition Commission:
- Whether the new privacy policy is violative of the provisions of the Competition Act with regards to abuse of dominant position under Sec. 4 of the Act.
- Whether the Competition Commission of India can intervene in respect of acts which are in contravention of the provisions of Sec. 4 of the Act if such acts were to be committed.
IMPORTANT PROVISIONS
- Sec. 4 of the Competition Act: Abuse of dominant position.
- Sec. 26(1) of the Competition Act: Power of inquiry on receipt of complaint or a reference from the Central Government or the State Government.
- Sec. 33 of the Competition Act: Power to grant interim relief.
- Sec. 35 of the Competition Act: Appearance before the Commission.
- Sec. 62 of the Competition Act: Application of other laws not barred.
- Regulation 11 of the General Regulations, Competition Commission of India: Signing of information or reference.
ANALYSIS OF THE JUDGMENT
- WhatsApp and its parent company, Facebook, made separate submissions regarding the matter. Facebook submitted even though it is the parent company of WhatsApp, they are both separate entities. Facebook contended that the privacy policy issued by WhatsApp is a matter that WhatsApp has to deal with as the policy was issued in its platform. Facebook, therefore, concluded by requesting the court to not be included as a party to the case.
- The Commission, after taking into consideration to the response filed by Facebook, held that the response was not only evasive but was in clear non-compliance with the directions issued by the Commission.
- WhatsApp, by making a reference to the provisions of Sec. 35 of the Competition Act, contended that Section 35 of the Competition Act allowed an enterprise to authorize legal practitioners to present its case before the Commission.
- WhatsApp also contended that this view was consistent with the Commission’s past practice in allowing companies to file, plead and appear through their authorized legal representatives who have also been allowed to sign the written submissions on behalf of their client.
- WhatsApp further submitted that requiring companies to sign every submission, responses and pleadings to be filed before the Commission was a cumbersome obligation and may result in a delay of proceedings before the Commission. To avoid any such delay, WhatsApp had, therefore, authorized its legal representatives to act, appear, plead, and file before the Commission on its behalf, in relation to proceedings in the captioned matter.
- 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 forums as well as the introduction of in-app notifications by WhatsApp to inform its users regarding the same.
- WhatsApp, while relying on the decisions given by the Supreme Court in the case of Competition Commission of India v. Bharti Airtel Limited and others, (2019) 2 SCC 521, contended that its current Terms of Service and Privacy Policy as well as the proposed update in the same fall within the purview of the information technology law framework and these issues are currently sub judice before various courts and other forums in India. It has also been averred that the examination of the present update by courts and the Government of India was not merely limited to data protection/ privacy laws but extends to assessing more broadly whether the current update is in conformity with principles of fairness, public policy and national security considerations.
- The Commission, on careful consideration of the submissions made by WhatsApp, held that reference to the provisions of Section 35 of the Act by WhatsApp was thoroughly misplaced. This provision dealt with appearance of parties before the Commission. It does not deal with signing of pleadings. In this regard, the Commission held that the reference had already been made to the provisions of Regulation 11 of the General Regulations which inter alia provides for signing of replies which are filed pursuant to the directions of the Commission.
- With regards to contentions made by WhatsApp in relation to the privacy policy, the court held that the judgment relied by WhatsApp had no relevance to the issues arising in the present proceedings and its plea is misplaced and erroneous. The judgment of the Supreme Court in the Bharti Airtel Case has no application to the facts of the present case as the thrust of the said decision was to maintain ‘comity’ between the sectoral regulator (i.e. TRAI, in the said case) and the market regulator (i.e. the CCI). WhatsApp has failed to point out any proceedings on the subject matter which a sectoral regulator is seized of.
- The Commission held that it was examining the privacy policy from the perspective of competition lens in ascertaining as to whether such policy updates have any competition concern which are in violation of the provisions of Section 4 of the Act. Furthermore, the Commission was of the consideration 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.
- However, the Commission held, in digital markets, unreasonable data collection and sharing thereof, may grant competitive advantage to the dominant players which may result in exploitative as well as exclusionary effects, which is a subject matter of examination under competition law. It was, therefore, trite to mention that the provisions of the Act were in addition to and not in derogation of the provisions of any other law, as declared under Sec. 62 of the Act.
- Therefore, in view of the submissions made by WhatsApp, the Commission ordered the Director General to conduct an investigation under the provisions of Section 26(1) of the Act and ordered the Director General to submit the investigation report within 60 days.
CONCLUSION
The issue that the present case deals with is whether or not WhatsApp’s new privacy policy is violative of the provisions of the Competition Act. The court, in the present case, held in the affirmative as it contended that the privacy policy was in violation of the provisions of Sec. 4 of the Competition Act and held that the terms of the policy were an abuse of dominant position by WhatsApp.
It was noted by the Commission that despite the rise in downloads of other messaging platforms like Telegram and Signal, the user base of WhatsApp was not affected. Therefore, it can be conclusively stated that WhatsApp was indeed in violation of the provisions of Sec. 4 of the Act. It is noted that Section 4 of the Act proscribes abuse of dominance by an entity commanding dominant position in relevant market. Thus, delineation of relevant market is essential to define the boundaries of the market to ascertain dominance and for analysing the alleged abusive conduct. Recently, the Commission had an occasion to examine the relevant market in the context of business practices of WhatsApp and Facebook in the case of Harshita Chawla v. WhatsApp (Case No. 15 of 2020) wherein it was held that since networks effects lead to increased switching costs, new players may be disincentivized from entering the market.
Therefore, it can be opined that the current privacy policy is in violation of the provisions of Sec. 4 of the Act by forcing its users to accept it without giving them information of where the users’ personalized data would be shared and it amounts to imposition of unfair terms and conditions upon the users, in violation of the provisions of Sec. 4(2)(a)(i) of the Act.
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