WhatsApp, in January 2021 announced its revised privacy policy which would impact the user interactions with business accounts, including those which may be using Facebook’s hosting services. The text of the notification reported in the Media read as follows:
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 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.
This updated privacy policy presented users with the option of either mandatorily accept the privacy policy of greater data sharing between WhatsApp and Facebook in its entirety or being unable to use the platform after 15th May 2021. This had arisen a huge debate throughout the world concerning protection of the privacy of individuals as well as the abuse of data sharing by the technologically giant companies.
WhatsApp on January 13 2021 published a blog post as a response and clarified through it that the updated privacy policy did not apply to personal chats or communications i.e. with friends, families, or relatives, but applied only to communications with business accounts via the WhatsApp platform. According to the blog, “But whether you communicate with a business by phone, email, or WhatsApp, it can see what you’re saying and may use that information for its own marketing purposes, which may include advertising on Facebook.”
The Competition Commission of India (CCI) relying on these media reports and the concern of potential harm to the competition framework in the country, decided to take suo moto cognizance of the matter In Re: Updated Terms of Service and Privacy Policy for WhatsApp Users, and seek a response from both WhatsApp and its parent company Facebook about the said privacy update. Similar issue was discussed by the Hon’ble Supreme Court of India, however, in this article, I shall restrict the analysis only from the angle of Competition Law and discuss the order of the Competition Commission of India which held WhatsApp and Facebook prima facie in violation of abuse of dominance under Sec 4 of the Competition Act, 2002 and hence, ordered the DG (Director General) investigation into the said matter.
PAST ENQUIRIES
In 2016, WhatsApp had announced similar privacy and data sharing policy with Facebook, wherein WhatsApp would share some user data with Facebook for several purposes like target advertising. Targeted advertising is a form of online advertising that focuses on the specific traits, interests, and preferences of a consumer. Advertisers discover this information by tracking the activity of the user or collecting specific data from the user on the Internet. This privacy policy was challenged before the Competition Commission of India In Re: Shri Vinod Kumar Gupta v. WhatsApp Inc. Case No. 99 of 2016, (hereinafter referred as Vinod Gupta case) for alleged abuse of dominance of WhatsApp in the relevant market for instant messaging services using consumer communication apps through smartphones in India under Sec 4 of the Competition Act. However, the Commission then had held in favour of WhatsApp on the grounds that it had provided its users the option of opting out from the sharing of user account information with Facebook within 30 days of agreeing to the updated privacy policy. The Commission held that, “We are therefore, of the view that it is always open to the existing users of “WhatsApp” who do not want their information to be shared with “Facebook” to opt for deletion of their account…….”
Additionally, in 2020, WhatsApp was again brought before the CCI In Re: Harshita Chawal v. WhatsApp Inc. Case No. 15 of 2020, (Hereinafter referred to as the Harshita Chawla Case) for anti-competitive conduct by integrating its payment option (WhatsApp Pay) into its user application. The Commission even then had held in favour of WhatsApp on the grounds that mere installation of WhatsApp messenger does not coerce the user to use WhatsApp Pay exclusively or to influence the consumer choice implicitly in any other manner. The Commission in this case did not discuss the allegations of data sharing with Facebook, as there was a lack of specific information and evidence provided by the Informant.
The present order
The general approach of the CCI is that before passing the order of investigation to the DG under Sec 26(1) of the Competition Act, the CCI, in most cases, relies on the information produced by the Informant in forming a prima facie opinion. In its previous orders, the CCI relied on the information provided by the informant, the market analysis, statistics, and market data while deciding in favour of WhatsApp, this time it simply relied on media reports and took a suo moto cognizance of the matter. This is, however not the first time that the CCI has taken a suo moto cognizance of contravention of the competition law. In Re: Alleged anti-competitive conduct by Maruti Suzuki India Limited (MSIL) in implementing discount control policy vis-à-vis dealers, Suo Moto Case No. 01 of 2019, wherein it had received an anonymous mail and on that basis, the CCI took suo moto cognizance of the matter against Maruti Suzuki. This demonstrates the evolving approach of the CCI while taking up matters by giving more importance to harm to the competition framework rather than the procedural requirements.
In the present matter, while presenting its contentions, WhatsApp relied on the previous approach of the CCI in its decisional practice in the Harshita Chawla Case, Vinod Kumar Case, and also in the case of XYZ v. Alphabet Inc. Case No. 07 of 2020, and contended that allegations against data sharing, data localizations cannot be looked in under the Competition Law. However, in this order, the CCI observed that 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. This shows the evolving approach of the CCI while taking up matters related to the digital economy wherein consumer data is the most important consideration and can severely impact the dominance of an enterprise and its conduct in the market. This is also in consonance with the global decisional practices under antitrust laws wherein the competition regulators across the globe are considering the non-price competition factors involved in the dominant conduct of the enterprise in the market. The European Commission in Microsoft/LinkedIn merger case, Case Comp/ M.8124, had noted that although privacy concerns fell under data protection laws, it could be seen as a non-price competition factor in merger control assessments to the extent that consumers saw it as a significant factor in the quality of the services offered.
WhatsApp also contended that the privacy policy update has not been implemented yet and has been postponed to 15th May, 2021, hence, the CCI taking up the matter is premature. The CCI observed that the conduct has already taken place and the deadline of 15th May 2021 is just for acceptance to the updated terms. Sec 33 of the Competition Act also empowers the commission to intervene in the acts which are in contravention of Sec 3,4, or 6 of the Competition Act, if such acts are about to be committed. The CCI in its interim order In Re: Federation of Hotel & Restaurant Associations of India (FHRAI) v. Make My Trip India Pvt. Ltd. (MMT) and others, Case No. 14 of 2019 and Case No. 01 of 2020, had observed, that in digital markets which have a winner takes all potential, the likely outcome of any impugned conduct cannot be ignored till the conduct takes place in actual. Early redressal of such conduct and eliminating the same at its earliest is of utmost importance. The CCI also observed that, “Network effects coupled with even small actions by the platforms may exclude and marginalize rivals, and further strengthen these effects that may be difficult to dilute at a later stage. Any remedy at that stage will be too little and too late as the suppliers’ side of the market, i.e. the franchisee service providers, can be potentially eliminated due to the alleged anticompetitive conduct.” Hence, in digital markets, a slightly different approach than traditional markets is required and the conduct should be analyzed on its merits and its potential harm to the competition.
ANALYSIS
The CCI in this order has touched upon many aspects of abuse of dominance in the digital markets. Digital markets involve structural risks such as network effects, walled gardens, locked-in effects, increased switching costs to alternate platforms, etc. CCI held WhatsApp to be dominant in the relevant market for OTT messaging apps through smartphones in India, which was arrived on the basis of its previous orders in the Harshita Chawla and Vinod Sharma Case. This new privacy policy of WhatsApp removed the option of “opt-out” to the users which it provided in the Vinod Sharma Case and hence, this approach of “take it or leave” leaves no option for the users but to mandatorily accept the new policy to continue using the services of WhatsApp. WhatsApp is in the position to mandate such policies due to the network effects it has acquired. A communication network/platform gets more valuable as more users join it, thereby benefiting from network effects. Hence, the popularity or the value of WhatsApp for a user increases even more as his/her friends, family, and relatives register on the network. This has helped WhatsApp to strengthen its position and limit its substitutability with other similar platforms. The users tend to get locked-in in the ecosystem with less incentive to switch to any alternate network.
According to the Working Paper of the University of Cambridge on Big data for Big Business (March, 2014), the lock-in effect refers to a situation where consumers become dependent on a single manufacturer or supplier for a specific service and cannot move to another without substantial costs. Lock-in trends impact the level of competition in an industry, especially those in which network effects exist. If products are incompatible, switching costs, and network effects bind customers to vendors, locking-in not only customers but also markets to early choices. Even when efficient options are available, customers find themselves hindered by lock-in, giving vendors lucrative ex-post market power over the same buyer.
The CCI also analyzed the presence of such network effects from the fact that despite downloads of the rival apps like Signal and Telegram increased after WhatsApp announced its privacy policy, the user base of WhatsApp did not suffer any significant impact. Hence, on these lines and aspects, the CCI ordered a DG investigation against WhatsApp and Facebook for the alleged abuse of dominance under Sec 4 of the Competition Act.
CONCLUSION
As it was recently said by the CCI Chairperson Ashok Kumar Gupta that, “one-size-fits-all” approach does not work for digital markets and a nuanced assessment of cases based on facts is the need of the hour”. This order of the CCI opens up a new dimension for adjudication the matters that involve big data and the big data companies. Today, though the users might feel that they are able to use the tech services for free, but in this era of digital markets, nothing comes for free. These tech giants are able to access the data of the users and adapt their policies in consonance with such user data. The user data acts like one of the most crucial asset of these tech giant companies. In the words of one former Amazon employee who worked on the Prime team, “It was never about the US$ 79, it was really about changing people’s mentality so they wouldn’t shop anywhere else. (CCI Report on Market Study on the Telecom Sector in India, 20.01.2021). Hence, it becomes evident that the tech giant companies are constantly involved in capturing the user’s time, attention, and data and leaves them with almost no incentive to leave the platform. For example, once a user registers himself/herself on Amazon, the user can access Amazon Prime for visual entertainment, Amazon Kindle for reading, Amazon Music for music, Online Shopping, etc. and finally, there remains no incentive for the user to go anywhere else for availing these services.
As rightly observed by the CCI, cross-linking and integration of user data can further strengthen data advantage besides safeguarding and reinforcing the market power of dominant firms. Finally, the CCI observed that, 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 the 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.
Though this order does not conclude and hold WhatsApp and Facebook in contravention of abuse of dominance under Sec 4 of the Competition Act, it definitely sets the stage for an evolution in the competition analysis framework in India.
This updated privacy policy presented users with the option of either mandatorily accept the privacy policy of greater data sharing between WhatsApp and Facebook in its entirety or being unable to use the platform after 15th May 2021. This had arisen a huge debate throughout the world concerning protection of the privacy of individuals as well as the abuse of data sharing by the technologically giant companies.
