INTRODUCTION
In 2021, WhatsApp users got a notification that, it would be updating its privacy terms and service policies. The terms and condition explicitly mentioned that it would be sharing the user’s data with the Meta companies (then known as ‘Facebook’). The notification is stated below;
WhatsApp is updating its terms and privacy policy;
Key Updates include more information about;
- WhatsApp’s service and how we process your data
- How businesses can use Facebook hosted services to store and manage their WhatsApp chats
- How we partner with Facebook to offer integrations across the Facebook Company Products.
By tapping AGREE, you accept the new terms and privacy policy, which take effect on Febuary 8, 2021. After this date you will need to accept these updates to continue using WhatsApp. You can also visit the Help Centre if you would prefer to delete your account and would like more information.
The updates made above specifically stated that businesses can use Facebook-hosted services to store and manage WhatsApp chats. It was a take it or leave it policy, as users were not given the choice of rejecting the new version. The rules specifically stated that users who wants to deactivate their account can do so by visiting the help centre. Hence, in order to access the garb of this policy update, the commission had directed the Director General to come up with a report for the same.
RELEVANT MARKET
Section 2(r) of the Competition Act, 2002 defines Relevant Market as “the market which may be determined by the commission with reference to the relevant product market or the relevant geographic market or with reference to both the market”. Hence, one of the most critical parts of detecting abuse of dominant position is determining which relevant market WhatsApp was dominant in. There were two relevant markets discovered by the commission. These were;
- Market for OTT messaging apps through smartphones in India
- Market for Online Display Advertising in India.
The Commission held that Meta holds a dominant position in the market for OTT messaging apps. While WhatsApp argued that alternatives like Telegram and Signal exist in the market, this argument was not upheld. The Commission emphasized that WhatsApp distinguishes itself as the only online platform offering a comprehensive suite of services, including video calling, messaging, and multimedia sharing, all within a single application. As a result, it cannot be directly compared to other platforms like email, Telegram, or Signal, which lack the same useful functionalities. It was observed that OTT messaging apps have unique features which indicate that it forms a separate and a distinct market and cannot be substituted or interchanged with the traditional electronic commutations such as texts, messages, voice calls etc. WhatsApp on the other hand provides, all these facilities in one platform and hence it forms a distinct platform for which there is barely any alternative present in the market.
KEY ALLEGATIONS
Whatsapp has contravened Section 4 of the Competition Act, 2002 which states “Abuse of Dominant Position”. The term “abuse of dominant position” describes anticompetitive business practices where a dominating organization commits illegal acts to limit or eradicate effective competition or to preserve or strengthen its market position.
Section 4(2)(a)(i) of the act prohibits the imposition of unfair or discriminatory conditions in the purchase or sale of goods and section. Herein, users were only given the choice to accept WhatsApp’s one-sided terms and conditions, also referred to as the “take it or leave it” policy, or to delete their account. These terms of data sharing were exploitative and infringed upon the autonomy and choice of the user. Meta collected and shared a lot of data, which allowed them to take advantage of its users. This policy is an abuse of Meta’s dominating position because it compels its users to conform, diminishing their power.
Secondly, the commission investigated denial of market access and leveraging by Meta together. The report made by the DG also mentioned that WhatsApp has allegedly violated Section 4(2)(c) of the act which prohibits the practices that deny market access in any manner possible. This mandatory acceptance of the updated privacy policy created entry barriers for other competing OTT messaging apps. There is a denial of market access when the WhatsApp data is shared between Meta companies. Moreover, Section 4(2)(e) prohibits the use of dominance in one market to enter into or protect a position in another market. By mandating its updates and enabling the sharing of personal data among Meta companies, including Facebook and Instagram, Meta gains a significant competitive advantage over rival businesses. The shared data allows Meta to develop highly targeted advertising solutions. It was alleged that WhatsApp collects extensive user information, including age, gender, location, income profile, and behavioural patterns. This data enables advertisers to create detailed profiles of potential customers, thereby facilitating the delivery of precise and personalized advertisements. This is again a violation of data privacy and such sharing of data gives them an edge for targeted advertising and there is a denial of market access for other competing businesses in targeted advertising.
FINAL ORDER
The commission determined that WhatsApp is engaging in Denial of Market Access, imposing unfair conditions on its users, and using its dominating position in OTT messaging apps. Through Section 27(a) of the Competition Act of 2001, the commission urged the parties to stop engaging in anti-competitive practices. In its order, the commission mandated that WhatsApp not to share data obtained on its platform with other Meta companies or Meta company products for advertising reasons for a period of five years. Furthermore, it was directed that WhatsApp begin sharing a full explanation of user data with other Meta firms. Furthermore, the commission mandated that users have a clear opt-out option for data sharing via in-app notifications, as well as the ability to review and change their preferences. Finally, the commission levied a Rs. 213.14 Crore penalty on Meta for violating Section 4 of the Competition Act of 2002.
CONCLUSION
WhatsApp’s 2021 privacy policy update, which forces users to agree new terms that allow for the sharing of their data with Meta companies, is a clear example of anti-competitive behaviour that violates various provisions of the Competition Act of 2002. By enforcing unreasonable terms and limiting user options, Meta used its authority to hinder competition and acquire an advantage in targeted advertising. The Competition Commission’s decision, which includes a penalty and directions to restrict data sharing, is an important step toward resolving anti-competitive behavior. This verdict emphasizes the need of IT businesses adhering to user privacy and competition regulations while also providing openness and choices.
By Stuti Kuzur, Ductus Legal
DUCTUS EDGE 