Amazon and Flipkart found violating Competition law in India-DG investigation report out
While reporting on the initial media news in my earlier blog on the same topic published on 23 April 21 , I had promised to come back with a detailed reporting on the above judgment which was then not uploaded on the website.
Now that the full text of the Delhi High Court judgment dated 22 April 21 (“judgment”) is available, let me quickly analyze the same for benefit of readers.
Contentions before High Court –
The main ground of challenge of the CCI’s impugned order dated 24 March 21 directing investigation into the 2021 policy of WhatsApp (“impugned order”/”prime facie order”) was that that despite the judicial challenge to the 2021 Update pending before the Supreme Court[1] and before the Delhi High Court[2], the CCI wrongly took suo moto action and passed the Impugned Order.
Mr. Harish Salve, the learned senior counsel for WhatsApp LLC., and Mr. Rohatgi, learned senior counsel appearing for Facebook Inc., argued that the issue as to whether the sharing of the information available with WhatsApp with Facebook violates the right of privacy of the users protected under Article 21 of the Constitution of India, and as to whether the petitioner(s) are under any legal obligation to provide an ‘opt-out’ facility to the users of WhatsApp, are issues that are pending adjudication before the Constitutional Court, and especially the Constitutional Bench of the Supreme Court, and , therefore, it was not open for CCI to consider the same issues in exercise of its suo moto powers under the Competition Act, 2002 ( the Act) . They submitted that judicial discipline would demand that CCI ought to have refrained from adjudicating on the said issues till the same are pronounced upon by the Supreme Court and this Court in the above-referred proceedings. They also placed reliance on the judgment of the Supreme Court in Competition Commission of India vs. Bharti Airtel Limited & Ors., (2019) 2 SCC 521 in support of their submission that CCI should have restrained from proceeding with the investigation until the issues pending adjudication before the Supreme Court and this Court are first decided by the said Courts.
Further, as reported earlier , Mr. Salve also submitted that even otherwise, the challenge to the 2016 Update was rejected by CCI by its order dated 01.06.2017 passed in Case No. 99/2016, Shri Vinod Kumar Gupta v WhatsApp Inc. The same is pending adjudication in an appeal before the learned National Company Law Appellate Tribunal (NCLAT), being Compt. Appeal (AT) No.13/2017 titled Vinod Kumar Gupta vs. Competition Commission of India & Anr. , and ,therefore, CCI could not have re-opened the issues already decided and should have awaited the outcome of the appeal.
Mr. Mukul Rohatgi, appearing for Facebook, while reiterating the submissions of Mr. Salve, further submitted that Facebook could not have been involved in the investigation directed by the Impugned Order since Facebook Inc. is merely the parent company of WhatsApp LLC, and the 2021 Update is in relation to the Terms of Service and Privacy Policy offered by WhatsApp alone. He submitted that the said update is not applicable for the Facebook users and, therefore, Facebook could not have been added as a party in such an investigation into WhatsApp’s Terms and Conditions of Service to its users.
On the other hand, Mr Aman Lekhi, the learned Additional Solicitor General appearing for the respondent no.1, placing reliance on the Supreme Courts celebrated judgement in the SAIL Case [3], submitted that the impugned order was merely an administrative order which could not have been challenged in terms of the SAIL judgment. He also differentiated between the constitutional issued pending adjudication before the Supreme Court and the High Court in the above referred cases and submitted that CCI is examining the 2021 Update in relation to any violation of the provisions of Section 4 of the Act and whether the excessive data collection by WhatsApp and the use of the same has any anti-competitive implications. He submits that the concentration of data in the hands of WhatsApp may itself raise competition concerns, thereby resulting in violation of the provisions of Section 4 of the Act.
High Court’s decision
The High Court after hearing the rival contentions as above has decided as under –
- Accepted the contention of Ld. ASG (for CCI) that based upon the SAIL judgment, the impugned order was only an administrative order which does not entail any consequence on the civil rights of the petitioner(s). In fact, the Impugned Order could have been passed without notice or granting an opportunity of hearing to the petitioner(s). Though the CCI is to give reasons in the Impugned Order, it is not to give any conclusive findings but is to form only a prima facie opinion to order an investigation, it need not deal with all the submissions of the petitioner(s) in detail.
- Appreciated the CCI’s prima facie view that WhatsApp is dominant in the relevant market for Over-the-Top (OTT) messaging apps through smartphones in India; due to lack of/restricted interoperability between platforms, the users may find it difficult to switchover to other applications except at a significant loss; there is opacity, vagueness, open-endedness and incomplete disclosures in the 2021 Update on vital information categories; concentration of data in WhatsApp and Facebook itself may raise competition concerns; data-sharing amounts to degradation of non-price parameters of competition. Therefore, it cannot be said that the issues raised by the CCI are beyond its jurisdiction under the Act or that there is a total lack of jurisdiction in the CCI.
- Noted the submission of the Ld ASG that the scope of inquiry before the CCI is not confined only to the issues raised before the Supreme Court or before this Court, but is much vaster in nature.
- Held that the issue as to whether the 2016 Update/2021 Update announced by WhatsApp in any manner infringes upon the Right of Privacy of the users guaranteed under Article 21 of the Constitution of India is pending adjudication before the Supreme Court and this Court. The question regarding the 2016 Update/2021 Update not giving an option to opt-out is also an issue before the Supreme Court and this Court. However, the same cannot necessarily mean that during the pendency of those petitions, the respondent no.1 is completely denuded of the jurisdiction vested in it under the Competition Act, 2002 or that it must necessarily await the outcome of such proceedings. Therefore, it is not a question of lack of jurisdiction of the respondent no. 1, but rather one of prudence and discretion.
- Referring to the earlier decisions of the Supreme Court and Delhi Court [4] which did not hold adjudication on merits on the moot issue by even smaller Benches of the High Court/Supreme Court when the same issue was pending decision before the larger Bench of the same court, held that as mere pendency of a reference before the larger bench does not denude the other courts of their jurisdiction to decide on the lis before them. Similarly, merely because of the pendency of the above proceedings before the Supreme Court and before this Court, the respondent no. 1/CCI cannot be said to be bound to necessarily hold its hands and not exercise the jurisdiction otherwise vested in it under the statute. Maybe, it would have been prudent for the respondent no.1 to have awaited the outcome of the above-referred petitions before the Supreme Court and before this Court, however, merely for its decision not to wait, the Impugned Order cannot be said to be without jurisdiction or so perverse so as to warrant to be quashed by this Court in exercise of its extra-ordinary jurisdiction.
- Rejected the contention of Facebook that its impleadment in the investigation was unwarranted. A reading of the Impugned Order passed by the respondent no.1 itself shows that Facebook shall be an integral part of such investigation and the allegations in relation to sharing of data by WhatsApp with Facebook would necessarily require the presence of Facebook in such an investigation.
Comment: The judgment, which is most likely to be challenged again, was on expected lines since (a) After the conclusive SAIL judgment , no High Court has till date quashed any CCI order under Section 26(1) of the Act, being administrative in nature, (b) The scope of inquiry under the Act to probe into unilateral market conduct by an admittedly dominant player like WhatsApp is entirely different than the constitutional question of right of privacy under Article 21 ,which in any case, was apparently being curtailed by the new 2021 Update of the new Privacy policy.
#WhatsApp #Facebook #DataPrivacy #Competition #CCI #AbuseofDominance
#Antitrust
[1] The 2016 Update was challenged in Public Interest Litigation, being W.P.(C) 7663/2016 titled Karmanya Singh Sareen & Anr. vs. Union of India & Ors. Filed inDelhi High Court disposed vide order dated 23.9.2016 with certain directions to WhatsApp, which were challenged by WhatsApp by a before the Supreme Court in SLP(C) No.804/2017, however, no interim order has been passed therein and the petition remains pending for adjudication.
[2] The 2021 Update was also challenged in several judicial fora, including Delhi High Court and the Supreme Court, that is, W.P.(C) No.677/2021 titled Chaitanya Rohilla vs. Union of India & Ors., and W.P.(C) No.1355/2021 titled Dr.Seema Singh & Anr. vs. Union of India & Anr seeking to restrain WhatsApp from implementing the 2021 Update. The said applications are also pending before the Supreme Court.
[3] Competition Commission of India vs. Steel Authority of India Ltd. & WP(C) Nos.4378/2021 & 4407/2021 Page 8 Anr., (2010) 10 SCC 744
[4] State of Maharashtra and Anr. vs. Sarva Shramik Sangh, Sangli and Ors.; (2013) 16 SCC 16; P. Sudhakar Rao & Ors. vs. U. Govinda Rao & Ors., (2013) 8 SCC 693; Union of India & Anr. vs. V.K. Vashisht; (judgment dated 19.12.2012 in WP (C) No. 5036/2012); Ashok Sadarangani and Anr. vs. Union of India and Ors., AIR 2012 SC 1563.
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