META /WHATSAPP FACE ANTITRUST PROBE ON ITS NEW DATA PRIVACY POLICY IN INDIA – SUPREME COURT DISMISSES THE SLP AGAINST CCI PRIMA FACIE ORDER OF INVESTIGATION

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The winds seem to be blowing against US Big Tech companies in India!!

Soon after the humiliating defeat faced by Intel in the Karnataka High Court in August, 2022 whereby the largest Chipmaker lost its challenge to the Antitrust probe ordered by India’s Fair Market watchdog, the Competition Commission of India (CCI/Commission), comes this most recent decision by India’s Supreme Court, refusing to stay the imminent investigation into alleged abuse of dominant position by WhatsApp.

The Apex Court vide its final order dated 14.10.2022 has dismissed the special leave petitions (SLP)  filed by WhatsApp and its parent company META Platforms Inc. challenging the final judgement of the Division Bench of Delhi High Court dated  25.8.2022  wherein the Division Bench had refused  to interfere with the judgement of the Single Bench of the same Court, which had also refused  to interfere with the order dated 24.03.2021 passed by the Competition Commission of India (“CCI/Commission”) directing  an investigation against WhatsApp’s Updated Terms of Service and Privacy Policy for WhatsApp Users.

Background

The issue originates from the prima facie order passed by CCI in Suo Moto Case No. 01 of 2021 In Re: Updated Terms of Service and Privacy Policy for WhatsApp Users order dated 24.03.2021 (“Impugned order”) wherein the Commission , while holding WhatsApp dominant in the market for OTT messaging apps through smartphones in India , held that WhatsApp has prima facie contravened the provisions of Section 4 of the  Competition Act,2002 ( the Act)  through its exploitative and exclusionary conduct, in the garb of policy update. The Commission had further held that a thorough and detailed investigation is required to ascertain the full extent, scope and impact of data sharing through involuntary consent of users and accordingly directed the DG to cause an investigation into the matter.

For detailed analysis of the competition issues likely to arise in the new data privacy policy of WhatsApp, please refer to my blog WhatsApp’s New Data Privacy Policy-How it affects competition?

Before Single Bench of Delhi High Court

The above impugned order of the Commission was challenged by WhatsApp and META through a writ petitions no. W.P. (C) 4378/2021 and W.P. (C) 4407/2021 before the Single bench of the Delhi High court on the ground 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. 

However the High court vide its final judgement dated 22.04.2021 rejected the contentions raised by WhatsApp and Facebook and held that the impugned order was only an administrative order which does not entail any consequence on the civil rights of the petitioner(s). The Court further held that though 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 Commission 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 Competition Commission of India, but rather one of prudence and discretion.

For detailed analysis of the Single bench Judgement of the High Court please refer to my blogs WhatsApp’s new data privacy policy in India-CCI investigation to continue? Delhi High Court refuses to intervene and Delhi High Court Judgement on CCI Inquiry into WhatsApp’s new data privacy policy in India.

Before Division Bench

The above judgement of the Single bench of Delhi High Court dated 22.4.2021 was challenged by way of Letter Patent Appeal again by (LPA 163/2021 LPA 164/2021) by WhatsApp and Meta. Both the LPA met the same fate as Division bench vide its judgment dated 25.8.2022 dismissed both the appeals and agreed with the findings of the Single bench. The Division Bench held that a perusal of the CCI Order dated 24.03.2021 reveals that sufficient reasoning has been provided before the CCI arrived at the conclusion that a prima facie case of violation of Section 4 of the Act was made.

The Division Bench concluded that “Court is of the opinion that the impugned Judgement dated 22.04.2021, passed by the learned Single Judge in W.P.(C) 4378/2021 & W.P.(C) 4407/2021, is well reasoned, and that the appeals filed by the Appellants are devoid of merit and substance that would warrant the interference of this Court” and accordingly dismissed both the appeals.

Before the Supreme Court

The above judgment dated  25.8.2022 of the Division Bench of Delhi High Court was again challenged by WhatsApp and Meta in the Supreme Court in the form of Special Leave to Appeal (C) No(s). 17121/2022 and SLP(C) No. 17332/2022. The Supreme Court vide its order dated 14.10.2022 has also dismissed the SLPs and has observed as under:

“The CCI is an independent authority to consider any violation of the provisions of the Competition Act, 2002 (for short “the Act”). When having prima facie opined that it is a case of violation of the provisions of the Act and thereafter when the proceedings are initiated by the CCI, it cannot be said that the same are wholly without jurisdiction.”

The Supreme Court also reiterated it view in Competition Commission of India vs. Steel Authority of India Limited and Another, (2010) 10 SCC 744 (para 10), that the proceedings before the CCI are required to be disposed of at the earliest and concluded that “CCI should not be restrained from proceeding further with the enquiry/investigation for the alleged violation of any of the provisions of the Act” and accordingly dismissed the appeal.

With the above dismissal of both SLPs by the Apex Court, both WhatsApp and Meta now will have to face the investigation by the Director General (DG) of CCI.

Comment:

With this final verdict the probe will now begin against WhatsApp for its alleged abuse of dominant position to ascertain the full extent, scope and impact of data sharing through involuntary consent of users. Traditionally, privacy and data protection concerns, as such, are regarded as matters falling outside the scope of competition law since in matured jurisdictions these are protected under dedicated laws, such as GDPR in the European Union. But in the absence of such dedicated law in India and with the highest number of monthly active users (MAUs) in the World, 340 million as in 2019, India being the biggest market for WhatsApp, a recourse to the relevant provisions of the competition law is the only remedy to safeguard the consumer interests. CCI has now acknowledged that data privacy can take the form of non-price competition and abuse of dominance can lower privacy protection…and that an aspect of data in the context of competition in digital communications market is the conflict between allowing access and protecting consumer privacy.

Without prejudice to the above comments on merits of the case, the above judgement by the Supreme Court seems to crystallize the law about challenges made against the prima facie orders passed by CCI under Section 26(1) of the Act. There have been innumerable writ petitions filed by parties, generally large corporates, against such prima facie orders before various High Courts and Supreme Court and most of them were dismissed. This is because of the framework of the Act, which provides that an order directing investigation is an administrative direction which does not determine the rights of the parties finally. This legal position was settled in 2010 in the SAIL judgment by the Supreme Court, yet parties knowingly take chance and are advised by lawyers to file such writ petitions, which have been proved to be futile again and again.  As already commented by me in my recent blog in the Intel case, CCI may start taking such frivolous litigations before the Constitutional Courts as aggravating factors while imposing penalties!!

#Bigdata #WhatsApp #META #dataprivacy

[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 in Delhi 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.