2017 (6) TMI 1399 - Commission - Companies Law

Abuse of dominant position by WhatsApp Inc. - contravention of the provisions of Section 4 of 19(1)(a) of the Competition Act, 2002 - alleged abusive conduct of the OP in compelling the users, through change in its terms of service and privacy policy, to share their account details and other information with 'Facebook' and indulging in the practice of predatory pricing by not charging any subscription fee from its users in violation of the provisions of Section 4 of the Act. Dominance of the OP in the relevant market - HELD THAT - The Commission notes that in India a number of other players such as Apple with iMessage, BlackBerry with BBM, Samsung with ChatON, Google with Google Hangouts and Microsoft with Skype are providing consumer communication apps and are also active in the provisions of smartphone hardware and operating systems - According to a study conducted by 'TNS/TNC Connected Life Study 2015', 56% of the internet users in India use 'WhatsApp' and 51% use 'Facebook' every day. Further, amongst India's internet users, 'WhatsApp' tops the list of instant messaging apps. Further, citing a study conducted by Global Web Index, the Informant has submitted that 64% of mobile users in India use 'WhatsApp' which is the largest as compared to any other mobile messaging app usage. Based on the above, the Commission is of the opinion that the OP is in a dominant position in the relevant market. Abusive conduct of the OP in the relevant market - HELD THAT - There are no significant costs preventing the users to switch from one consumer communication apps to another. It may be due to the following reasons (i) all consumer communication apps are offered for free of cost or at a very low price (mostly free), (ii) all consumer communication apps are easily downloadable on smartphones and can co-exist on the same handset (also called 'multi homing') without taking much capacity along with other apps, (iii) once consumer communication apps are installed on a device, users can pass on from one app to its competitor apps in no-time, (iv) consumer communication apps are normally characterised by simple user interfaces so that costs of switching to a new app are minimal for consumers, and (v) information about new apps is easily accessible given the ever increasing number of reviews of consumer communication apps on apps store like google play store etc. - the Commission is of the view that even though 'WhatsApp' appears to be dominant in the relevant market, the allegations of predatory pricing have no substance and the OP has not contravened any of the provisions of Section 4 of the Act. The Commission finds that no prima facie case of contravention of the provisions of Section 4 of the Act is made out against the OP in the instant matter. Accordingly, the matter is closed under the provisions of Section 26(2) of the Act.

Summary

Issues Involved:
1. Alleged abuse of dominant position by WhatsApp Inc. (OP) under Section 4 of the Competition Act, 2002.
2. Alleged predatory pricing by WhatsApp Inc.
3. Alleged breach of privacy policy and IT Act, 2000.

Detailed Analysis:

1. Alleged Abuse of Dominant Position by WhatsApp Inc. (OP) under Section 4 of the Competition Act, 2002:
The Informant, a Chartered Accountant representing Fight for Transparency Society, filed information against WhatsApp Inc. (OP) under Section 19(1)(a) of the Competition Act, 2002, alleging contravention of Section 4 of the Act. The Informant claimed that WhatsApp's updated privacy policy forced users to share their account details and other information with Facebook, which was used for targeted advertisements. The Commission observed that the relevant market was "the market for instant messaging services using consumer communication apps through smartphones in India." It was noted that WhatsApp holds a dominant position in this market with a substantial user base in India. However, the Commission found that WhatsApp provides an option to users to opt-out of sharing their account information with Facebook within 30 days of agreeing to the updated terms. Additionally, WhatsApp messages are protected by end-to-end encryption, ensuring third parties cannot read them. Hence, the Commission concluded that no prima facie case of contravention of Section 4 was made out against WhatsApp.

2. Alleged Predatory Pricing by WhatsApp Inc.:
The Informant alleged that WhatsApp engaged in predatory pricing by not charging any subscription fee since January 2016, thereby abusing its dominant position. The Commission noted that several other applications in the relevant market, such as Hike, Messenger, and Viber, also do not charge any fee from users. It was observed that not charging a subscription fee appears to be a standard industry practice. The Commission also highlighted that there are no significant costs preventing users from switching between different consumer communication apps, indicating a competitive market environment. Therefore, the Commission concluded that the allegations of predatory pricing had no substance and WhatsApp had not contravened any provisions of Section 4 of the Act.

3. Alleged Breach of Privacy Policy and IT Act, 2000:
The Informant claimed that WhatsApp's new privacy policy violated the IT Act, 2000, and the right to privacy. The Commission referred to the Delhi High Court's order in the case of Karmanya Singh Sareen and Others vs. Union of India and Others, which addressed similar concerns. The High Court had observed that the issue of the right to privacy was still pending before a larger bench of the Supreme Court. Furthermore, the High Court noted that users have the option to delete their WhatsApp account if they do not want their information shared with Facebook. The Commission concluded that allegations of breach of the IT Act, 2000, do not fall within the purview of examination under the Competition Act, 2002.

Conclusion:
The Commission found no prima facie case of contravention of the provisions of Section 4 of the Competition Act, 2002, against WhatsApp Inc. and accordingly closed the matter under Section 26(2) of the Act. The Secretary was directed to inform all concerned accordingly.