2022 (8) TMI 1537 - HC - Companies Law

Overlapping jurisdiction of the CCI and the Constitutional Courts - whether CCI should abstain from exercising its jurisdiction to maintain comity between decisions of different authorities on the same issues? - HELD THAT - The investigation conducted by the CCI will not be affected by the outcome of the proceedings pending before the Apex Court and this Court. In the event the Supreme Court upholds the 2021 Policy, then surely CCI can venture into the question as to whether the provisions of the Act have been violated or not. In the event that the 2021 Policy is set aside by the Supreme Court, the CCI will still possess the jurisdiction to investigate the violation of the Act, if any, during the pendency of the matter before the Supreme Court when the 2021 Policy was in operation. In either of the cases, it cannot be stated that the CCI does not have the authority look into this affair being the market regulator. The contention of the Appellants that the CCI in Vinod Kumar Gupta 2017 (6) TMI 1399 - COMPETITION COMMISSION OF INDIA (LB) has already assessed the 2016 Policy, and has come to conclusion that the breach of the IT Act, 2000, does not fall within the purview of the CCI, is irrelevant on the ground that, as has been stated in the CCI Order as well, the CCI is only concerned with data accumulation that may result in exploitative and exclusionary competitive practices as well as the effect of data sharing on market capture and competitors offerings. Furthermore, it is pertinent to note that the 2021 Policy is a substantially modified version of the 2016 Policy inasmuch 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. The instant appeals are primarily on the issue as to whether the CCI ought to wait till final adjudication of the issues which are pending before the Apex Court. The Impleadment Application cannot be entertained in the instant appeals which have been filed by Facebook Inc. and WhatsApp. This Court, therefore, does not deem it fit to scuttle the investigation at a nascent stage and defers to the wisdom of the DG and the CCI, and rejects the Impleadment Application. However, the Applicant is granted the liberty to take all such steps as required by it, in accordance with law, to impugn the CCI Order. This Court is of the opinion that the impugned Judgement passed by the learned Single Judge 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 - the instant appeals are dismissed.

Summary

Issues Involved:
1. Jurisdiction of the Competition Commission of India (CCI) vis-`a-vis pending Supreme Court matters.
2. Formation of a prima facie case by CCI for investigation under Section 26(1) of the Competition Act, 2002.
3. Inclusion of Facebook Inc. and Facebook India Online Services Pvt. Ltd. in the investigation.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Competition Commission of India (CCI) vis-`a-vis pending Supreme Court matters:
The Appellants argued that the CCI should refrain from investigating the 2021 Policy due to overlapping issues already pending before the Supreme Court and other High Courts. The Court noted that the Supreme Court and High Courts are considering the 2021 Policy through the lens of fundamental rights violations, particularly the right to privacy under Article 21 of the Constitution, whereas the CCI's investigation pertains to potential anti-competitive practices under the Competition Act, 2002. The Court emphasized that the spheres of operation are vastly different and that parallel inquiries by different authorities in their respective domains are not uncommon. The Court concluded that the CCI has the liberty to proceed with its investigation under Section 26(1) of the Act, irrespective of the proceedings pending before the Supreme Court and other courts.

2. Formation of a prima facie case by CCI for investigation under Section 26(1) of the Competition Act, 2002:
The Appellants contended that the CCI failed to establish a prima facie case warranting an investigation. The Court referred to the CCI's Order dated 24.03.2021, which provided detailed reasoning for forming a prima facie case. The CCI observed that WhatsApp's "take-it-or-leave-it" nature of the 2021 Policy, the lack of transparency, and the potential for data sharing with Facebook Companies raised competition concerns. The CCI highlighted that WhatsApp's dominant position in the market for OTT messaging apps through smartphones in India, coupled with the absence of credible competitors, justified an investigation into potential violations of Section 4 of the Act. The Court upheld the CCI's reasoning, noting that the formation of a prima facie case does not require detailed adjudication but should be based on sufficient material to warrant an investigation.

3. Inclusion of Facebook Inc. and Facebook India Online Services Pvt. Ltd. in the investigation:
The Appellant in LPA 164/2021 argued that Facebook Inc. is a separate legal entity from WhatsApp and should not be subjected to the investigation. The Court found merit in the submission that the 2021 Policy's data-sharing mechanism directly benefits Facebook Inc., making it a proper party in the investigation. The Court also addressed the Impleadment Application filed by Facebook India Online Services Pvt. Ltd., stating that the decision to include the Applicant in the investigation stemmed from information secured from the Internet Freedom Foundation. The Court concluded that the Applicant's remedy lies in challenging the CCI Order through a writ petition rather than being impleaded in the appeal. The Court deferred to the wisdom of the DG and the CCI and rejected the Impleadment Application, granting the Applicant the liberty to take appropriate legal steps.

Conclusion:
The Court dismissed the appeals, affirming the learned Single Judge's judgment dated 22.04.2021, which upheld the CCI's jurisdiction to investigate the 2021 Policy under Section 26(1) of the Competition Act, 2002. The Court found that the CCI had provided sufficient reasoning to form a prima facie case and that the investigation into potential anti-competitive practices by WhatsApp and Facebook Inc. was justified. The Court also rejected the Impleadment Application filed by Facebook India Online Services Pvt. Ltd., emphasizing that the Applicant should seek redress through appropriate legal channels.