Amazon and Flipkart found violating Competition law in India-DG investigation report out
The legal and regulatory tide seems to be blowing against WhatsApp and Facebook in India.
The Delhi High Court vide its recent judgment pronounced today , the 22 April 2021 , has refused to stay the Competition Commission of India’s (CCI) order dated 24 March 21 directing investigation against WhatsApp’s new data privacy policy for its alleged abuse of dominant position in the ‘market for Over-The-Top (OTT) messaging apps through smartphones’.
Since the judgment of the High Court is still to be uploaded on its website, note the initial media reports emanating on this important verdict –
[BREAKING] Delhi High Court refuses to set aside CCI order calling for DG investigation into WhatsApp privacy policy
“The order was passed by a Single Judge Bench of Justice Navin Chawla opined that the order of investigation could not be quashed merely because the Commission did not await the outcome of the pending cases before the Supreme Court and High Court.
“Respondent No 1 cannot be said to be bound to hold its hand..“, the Court said as it noted that the challenge to the 2021 privacy policy was only by way of applications and it was not stated if the Supreme Court had taken cognizance of the issue or passed any order.
The Court further recorded that WhatsApp, Facebook mounted an independent challenge to the Commission’s order without moving an application before the Supreme Court and the High Court for clarification, and the same was not maintainable.
Facebook’s stand that an investigation could have been ordered against it was also rejected.
Facebook and WhatsApp had moved the High Court earlier this month against the CCI order calling for a Director General (DG) probe to ascertain the full extent, scope and impact of data sharing through involuntary consent of users.
WhatsApp argued that the anti-trust regulator “jumped the gun” by starting suo motu proceedings in relation to WhatsApp’s privacy policy of 2021 when the issue was pending before two constitutional courts- the Supreme Court and the Delhi High Court.
It was contended that privacy was a constitutional issue that could not be gone into by CCI.”
[Source: Bar & Bench ,22 April 2021- https://www.barandbench.com/news/litigation/delhi-high-court-refuses-set-aside-cci-order-probe-whatsapp-privacy-policy]
High Court dismisses Facebook, WhatsApp pleas against CCI order to investigate privacy policy
WhatsApp had contended that since the issue of its privacy policy was before the Supreme Court, the Competition Commission of India did not need to order the probe.
The Delhi High Court on Thursday dismissed plea of instant messaging app WhatsApp challenging a decision of the Competition Commission of India (CCI) calling for an investigation into its controversial new privacy policy.
WhatsApp had contended that since the issue of its privacy policy was before the Supreme Court, the CCI did not need to order the probe. Not only WhatsApp, but social media giant Facebook, which owns the instant messaging app, also filed a similar petition challenging the competition watchdog’s March 24 decision.
WhatsApp had said the CCI “jumped the gun” and started the probe when this was not a competition issue. It had said the issue with respect to personal data of users and sharing of personalised data was already before the Supreme Court, hence CCI ought not to have intervened.
The High Court, however, noted that CCI’s order of investigation could not be quashed merely because it did not await the outcome of the pending cases before the Supreme Court and High Court.
CCI, on the other hand, had argued the probe order was made to gauge whether access to data would lead to abuse of dominant position.
The commission had said it was dealing with the instant messaging app’s new privacy policy that could lead to “excessive data collection” of consumers, the use and sharing of the data in anti-competitive context.
The commission had said it was not concerned with the privacy aspect of the issue as the Supreme Court was already seized of it.
[Source: The Hindu ,22 April 2021- https://www.thehindu.com/news/national/hc-dismisses-facebook-whatsapp-pleas-against-cci-order-to-probe-privacy-policy/article34382221.ece ]
Interestingly, WhatsApp had vehemently pleaded before the High Court ( and also before the Commission earlier) that the investigation ordered by the Fair Market regulator was a complete turnaround from its earlier order dated 01 June 2017 almost on similar facts (except that it related to a challenge to WhatsApp’s existing data privacy policy of 2016) in the Vinod Kumar Gupta Case and that it had then decided not to inquire into data privacy policy of WhatsApp since it related mainly to the alleged violation of the Information Technology (IT) Act, 2000 and was held as not being a competition issue.
[Let’s check the facts. In the said case , which was duly reported in this Blog , CCI, though found WhatsApp dominant in the market for “instant messaging services using consumer communication App through Smartphones in India”, being themost popular messaging service which is installed on 96% of Smartphone but did not find it an abuse of dominant position as the data policy as updated by WhatsApp on 25 August 2016, provided the option to its users to ‘opt out’ of sharing user account information with ‘Facebook’ within 30 days of agreeing to the updated terms of service and privacy policy . CCI had also agreedwith the submission of WhatsApp that nothing that a user shares on WhatsApp including his messages, photos and account information will be shared on to Facebook or any other apps of “Facebook family of companies” for any third party to use. CCI had also rejected the allegation that the conduct of WhatsApp making its users sign its new private policy is in breach of the IT Act, 2000 and the right of privacy, and had noted that this issue was already sub-judice in an appeal pending before the Hon’ble Supreme Court and was, therefore, outside the purview of the CCI being not a competition issue under the Act.]
Similarly, WhatsApp also referred before the High Court (and also before the Commission earlier ) another order of the Commission dated 18 August 2020 in the Harshita Chawla Case . In this case, the allegations of possible abuse of dominance were levelled against both Facebook and WhatsApp in the market for digital payments through WhatsApp Pay, where despite finding that WhatsApp was dominant in the related market for instant messaging applications through Smartphones , dismissed allegations of abuse of dominant position , since WhatsApp Pay, had received regulatory approvals to act as a payment app in India in February 2020 in beta version, and only recently, it seemed to have complied with the data localisation norms stipulated by NPCI to operate fully and therefore, its actual conduct was yet to manifest in the market and therefore the complaint against its leveraging its market position in the instant messaging market to dominate the market for digital payment was premature.
Background
So what brought this change in the Regulator’s thinking on data privacy that it decided to initiate a suo motu inquiry?? This is not normal in India and there must be some background to this development. And did this inquiry really come as surprise to WhatsApp? Let me trace the background for the benefit of my readers.
It is not that the Commission was completely oblivious about the possibility of invoking provision relating to abuse of dominant position against WhatsApp in case it found any “unfair condition” such as restricting the choice of the “locked in” user by its data policies. This is manifested in the Vinod Kumar Gupta case as explained above (ibid). CCI did not find the 2016 policy abusive of dominance since it gave a 30 days’ time to users to “opt out” of its consent given at the time of joining. Nevertheless, it is true that till at least 2018, CCI was avoiding intervening directly in social media platform’s conducts on specific issue of big data.
But the origin of the “shift’ in Commission’s view can be traced to the release of a Market Study on Telecom Sector on 22 January 2021, in which, CCI for the first time acknowledged the role of big data as a factor to assess “non-price competition” in the online medium . Para 70 & 71 of the Study are worth reproducing:
70. Data Privacy and Competition: Another aspect of data in the context of competition in digital communications market is the conflict between allowing access and protecting consumer privacy. Privacy can take the form of non-price competition. In the era of data aggregation, competition analysis must also focus on the extent to which a consumer can ‘freely consent’ to action by a dominant player. Abuse of dominance can take the form of lowering the privacy protection and therefore fall within the ambit of antitrust as low privacy standard implies lack of consumer welfare. Privacy degradation can lead to an objective detriment to consumers. Lower data protection can also lead to the standard legal category of exclusionary behaviour which undermines the competitive process. Tying with other digital products will further strengthen the data advantage enjoyed by the dominant incumbent by cross-linking the data collected across services, creating a vicious circle. Thus, anti-trust law framework is broad enough to address the exploitative and exclusionary behaviour arising out of privacy standards, of entities commanding market power. No doubt, there is a school of thought, which construes privacy as fundamentally a consumer protection issue.
71. Japan has finalised guidelines, which state that any use of personal information, including users’ purchase history and location, without their consent would constitute an “abuse of a superior bargaining position,” a violation specified under Japan’s Anti-Monopoly Act. India is still to legislate on a domestic Data Protection Law. However, as pointed out, the existing antitrust tools can address the competition issues arising out of privacy standards. India is at a critical stage in its digital evolution, and for India to realise its stated digital ambitions, it is vital to lay the foundations for a strong and competitive telecommunications sector. (emphasis supplied).
The author was invited by CCI and attended the workshop conducted by CCI on 5 February 2021 with the Secretary, Department of Telecom as the Chief Guest to formally release the market study. However, the conclusion of the Commission regarding role of big data as a crucial factor for “non-price competition” as reproduced above, in the market study along with some media news highlighting that due to concerns expressed in government against WhatsApp’s new data privacy policy WhatsApp decided to defer its implementation from 8 February to 15 May ,21, encouraged me to do some quick research . Consequently , (I may submit at the cost of sounding immodest), my article-“ Privacy Puzzle: WhatsApp Diktat and Competition “ published in the Financial Express on 1 February , 2021 , perhaps , started the debate as it indicated a clear possibility of use of the competition law provisions relating to abuse of dominance to check the “unfairness” in the new data privacy policy , even in the absence of a data privacy law in India ( on the pattern of GDPR in EU) !
As if inspired by my article, a Public Interest Litigation (PIL) was filed by an engineer and start-up founder Karmanya Singh Sareen before the Supreme Court of India (SC) who sought its intervention to restrain WhatsApp from enforcing its 2021 policy. Sareen had also challenged WhatsApp’s earlier policy in 2016 and the petition is still pending in SC before a Constitution bench. The PIL was heard by the Supreme Court and the observation of the Apex Court that “we will protect privacy of the people: SC to WhatsApp” formed the news headlines on 16 February , 21. And then came the CCI detailed order dated 24 March 2021, directing investigation against WhatsApp and Facebook !
So much for the background. But this CCI order could not have come as a surprise to WhatsApp and Facebook since even in the 2017 order in the Vinod Kumar Gupta case, CCI had observed that as the 2016 policy gave an option to the users to opt out of the consent given within 30 days, WhatsApp even if found to be dominant, could not then have been accused of abuse of dominance on this account. This option of the user is now sought to be withdrawn completely in the 2021 policy, which, WhatsApp should have anticipated, was likely to be challenged by anyone before CCI.
Be it as may, the question which now emerges for consideration is how WhatsApp will justify the new data policy before the Director General during the impending investigation in the light of the admitted fact that it has been already held as dominant. The only plausible defence could be that (a) There is no evidence of harm to consumer welfare and (b) Unlike the GDPR in EU, there is no data protection law in India yet to regulate WhatsApp in giving a free service in exchange of personal data after obtaining a voluntary consent for its sharing with Facebook except the IT Act, 2000 , which is outside CCI’s purview to adjudicate upon and finally (c) the matter is sub judice before the SC in the PIL on the similar issues .
However, I am sure that all the above points must have been argued by the Ld Senior Counsels of WhatsApp before the Delhi High Court and, therefore, till the complete text of the High Court judgment pronounced on 22 April is made available, I reserve my comments!
Key Words:
#WhatsApp #Facebook #DataPrivacy #Competition #CCI #AbuseofDominance #Antitrust
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