The division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad said that WhatsApp occupies a dominant position in the relevant product market and has a strong lock-in effect which renders its users incapable of shifting to another platform despite dissatisfaction with the product. The court said the same is exemplified by the fact that despite an increase in the downloads of Telegram and Signal when the 2021 policy was announced, the number of WhatsApp users has remained unchanged.
The court in the judgment dated August 25 further said that to ensure retention of its user base and to prevent any other disruptive technology from entering the market, data is utilised by tech companies to customise and personalise their own platforms so that its user base remains hooked.
“When data concentration is seen through this prism, it does give meaning to the new adage that ‘data is the new oil’, and, as noted in the CCI Order dated 24.03.2021, it raises competition concerns because it prima facie amounts to imposition of unfair terms and conditions upon its users, thereby violating Section 4(2)(a)(i) of the Act,” it said in the verdict made public on Friday morning.
While ordering an investigation, the CCI last year had come to a prima facie conclusion that the conduct of WhatsApp in “sharing of users’ personalised data with other Facebook companies, in a manner that is neither fully transparent nor based on voluntary and specific user consent” appears unfair to the users. A single-bench of the Delhi High Court on April 22, 2021 had dismissed the petitions filed by WhatsApp and Facebook against the CCI order.
It further said in the event the Supreme Court upholds the 2021 policy, then surely the CCI probe can go on. However, it further said that if the 2021 policy is set aside by the apex court, the CCI will still possess the jurisdiction to investigate the violation of The Competition Act, if any, during the pendency of the matter when the policy is in operation.
On the argument that CCI has already assessed the 2016 policy and come to a conclusion that the breach of the IT Act does not come under its jurisdiction, the court said that the competition regulator in its order has made it clear that it is only concerned with data accumulation that may result in exploitative and exclusionary competitive practices.
“It is pertinent to note that the 2021 policy is a substantially modified version of the 2016 policy in as much as the 2016 policy had an ‘opt-out’ option, which is absent from the 2021 policy that places its users in a ‘take-it-or-leave-it’ situation. It is the ‘opt-out’ option that primarily led to CCI rendering its conclusion that the 2016 policy did not violate the Competition Act, 2002,” reads the judgment.
Referring to the CCI order, the court said that the accumulation and processing of personal data from WhatsApp can be done by Facebook for the purposes of consumer profiling that allows targeted ads, which in turn, has the potential to undermine competitive process and create further barriers to the market entry in stark violation of the competition law.
“In view of these observations, it is evident that CCI has, after due consideration, arrived at its decision that a prima facie case of violation of provisions of the Competition Act, 2002, has been made out against the appellants herein that would require an investigation to be initiated by the DG,” said the court.
The reliance on CCI’s order regarding 2016 policy is misplaced, the bench said further, as it provided users the option to “opt-out” of sharing user account information with Facebook. “The 2021 policy, however, places its users in a ‘take-it-or-leave-it’ situation, virtually forcing its users into agreement by providing a mirage of choice, and then sharing their sensitive data with Facebook companies envisaged in the policy,” the judgment read.