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TMI Blog2021 (3) TMI 1460X X X X Extracts X X X X X X X X Extracts X X X X ..... arket for OTT messaging apps through smartphones in India. As such, in light of the said holding of the Commission in Harshita Chawla case, there is no occasion to separately and independently examine the issue of relevant market and dominance of WhatsApp therein, when there is no change in the market construct or structure since the passing of the said order in August, 2020 and announcing of the new policy by WhatsApp on January 04, 2021 which itself seems to emanate out of the entrenched dominant position of WhatsApp in the said relevant market, as detailed in this order. In VINOD KUMAR GUPTA VERSUS WHATSAPP INC. [ 2017 (6) TMI 1399 - COMPETITION COMMISSION OF INDIA (LB)] , the fact that WhatsApp provided an 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 was a critical consideration in deciding against the alleged contravention by WhatsApp. As against this, the new privacy policy has removed the opt out option given to the users and the users have now to mandatorily agree to sharing of their personalised data by WhatsApp with Facebook Companies and further the policy en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion that WhatsApp has prima facie contravened the provisions of Section 4 of the Act through its exploitative and exclusionary conduct, as detailed in this order, in the garb of policy update. A thorough and detailed investigation is required to ascertain the full extent, scope and impact of data sharing through involuntary consent of users - the Commission directs the Director General (DG) to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act. The Commission also directs the DG to complete the investigation and submit the investigation report within a period of 60 days from the receipt of this order. - Mr. Ashok Kumar Gupta Chairperson, Ms. Sangeeta Verma Member And Mr. Bhagwant Singh Bishnoi Member Order under Section 26(1) of the Competition Act, 2002 1. Recently, it has been reported in various media reports [1] that WhatsApp Inc. ( WhatsApp ) has updated its privacy policy and terms of service for WhatsApp users. It was inter alia reported that the new policy makes it mandatory for the users to accept the terms and conditions in order to retain their WhatsApp account information and provides as to how it will share personalis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both WhatsApp and Facebook on certain queries, as specified in the order dated 19.01.2021. Pursuant to the said directions, WhatsApp filed confidential version of its response on 03.02.2021. The Commission in its meeting held on 11.02.2021 considered the same and observed that the same is not in accord with Regulation 35 of the Competition Commission of India (General) Regulations, 2009 (the, General Regulations ) whereby and whereunder a party seeking confidentiality has to make an application setting out cogent reasons for seeking such treatment along with confidential and non-confidential versions of the information provided and document(s) sought to be filed. The Commission further observed that the response filed by WhatsApp is also not in compliance with Regulation 11 of General Regulations as the same is not signed in terms of the provisions contained therein. In view of the above, WhatsApp was directed to submit its response in compliance with the observations made in this order latest by 25.02.2021. The Commission further observed that despite clear directions in the order dated 19.01.2021 passed by the Commission, Facebook neither responded to the queries raised by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the General Regulations, it has been submitted that .Section 35 of the Competition Act, 2002 (Competition Act) allows an enterprise to authorize legal practitioners to present its case before the Hon ble Commission. This is also consistent with the Hon ble Commission s past practice in allowing companies to file, plead and appear through their authorized legal representatives who have also been allowed to sign the written submissions on behalf of their client . . It has been further submitted that ..requiring companies to sign every submission, responses, pleadings, etc. to be filed before the Hon ble Commission is a cumbersome obligation and may result in a delay of proceedings before the Hon ble Commission. To avoid any such delay, WhatsApp has authorized its legal representatives to act, appear, plead, and file before the Hon ble Commission on its behalf, in relation to proceedings in the captioned matter . For the reasons set out above, WhatsApp requested the Commission to accept its response and other submissions filed on behalf of WhatsApp, in accordance with Section 35 of the Competition Act and the General Regulations . An authorization letter dated 22.02.2021 was also enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of this regulation, the counsel may also append his or her signature to the information or reference as the case may be. 10. From the above, it is manifestly clear that the replies have to be filed in accordance with the stipulations made in the aforesaid regulations. No doubt, in terms of Regulation 11(3) of the General Regulations, the counsel may also append his signature but that does not absolve the parties from complying with the requirements of Regulation 11(1) as the facts are required to be verified by the concerned companies/ enterprises/ individuals etc. only. From the response of WhatsApp itself, it is evident that it has authorized its legal representatives to act, appear, plead, and file before the Hon ble Commission on its behalf, in relation to proceedings in the captioned matter . The authorization is conspicuously silent about signing of pleadings. The Commission finds the contention of WhatsApp that compliance with such requirement is a cumbersome obligation and may result in a delay of proceedings before the Hon ble Commission , as rather egregious and being inconsistent with the General Regulations. The past instance alluded by WhatsApp is of no consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy laws, and held that allegations of breach of the Information Technology Act do not fall within its purview. WhatsApp has also relied on the decisions of the Commission in Harshita Chawla v. WhatsApp Inc., Case No. 15 of 2020 ( Harshita Chawla case ) as well as XYZ v. Alphabet Inc., Case No. 07 of 2020 to contend that issues related to data localization and data sharing need not be looked in under the Competition law. 13. In relation to the above mentioned contentions of WhatsApp, the Commission is of the view that the judgments relied by WhatsApp have no relevance to the issues arising in the present proceedings and its plea is misplaced and erroneous. The judgment of the Hon ble Supreme Court in Bharti Airtel Case has no application to the facts of the present case as the thrust of the said decision was to maintain comity between the sectoral regulator (i.e. TRAI, in the said case) and the market regulator (i.e. the CCI). WhatsApp has failed to point out any proceedings on the subject matter which a sectoral regulator is seized of. Needless to add, the Commission is examining the policy update from the perspective of competition lens in ascertaining as to whether such policy up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady taken place which can be examined by the Commission within the framework of Section 4 of the Act. In this regard, it is also pertinent to mention the provisions of Section 33 of the Act, which empower the Commission to intervene even in respect of acts which are in contravention of the provisions of Sections 3/4/6 of the Act if such acts are about to be committed. A plain reading of the long title to the Act also makes it beyond any pale of doubt that the Commission is obligated to prevent practices having adverse effect on competition. In view of the foregoing, the plea is legally untenable and unsustainable. 15. After addressing the abovementioned procedural issues/preliminary objection(s), the Commission now proceeds to examine the issues on merit to prima facie assess whether the Opposite Parties have violated provisions of Section 4 of the Act. 16. Before adverting to the examination of issues on merit, it would be appropriate to note, in brief, the response submitted by WhatsApp, in response to the clarifications sought by the Commission: 16.1 The primary aim of the 2021 Update is twofold: (i) to provide users with further transparency about how WhatsApp collects, uses an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commission had an occasion to examine the relevant market in the context of business practices of WhatsApp and Facebook in Harshita Chawla case wherein an Information was filed before the Commission alleging inter alia contravention of the provisions of Section 4 of the Act against WhatsApp and Facebook for abusing their dominant position in launching their payment app services. While noting that WhatsApp operates in the market for Over-The-Top (OTT) messaging apps through smartphones in India, the Commission made the following observations while delineating the relevant market in the said matter: 70. The Commission observes that WhatsApp and Facebook are third-party apps broadly providing internet-based consumer communications services. Consumer communications services can be sub-segmented based on different parameters e.g. on the basis of functionality, some apps enable real-time communication in various forms, such as voice and multimedia messaging, video chat, group chat, voice call, sharing of location, etc., while others provide services such as communication with a wider set of people in an impersonal setting such as sharing status and posts. Further, while some consumer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extualise substitutability from SSNIP point of view for OTT communication Apps as they do not levy monetary charge on the users. ----------- 75. Taking into consideration these features and the different parameters cited supra, yet not being overly influenced by strict compartmentalisation, the Commission is of the view that the relevant product market in which WhatsApp operates is the market for Over-The-Top (OTT) messaging apps through smartphones . The Commission observes that though in terms of nomenclature this relevant product market appears different from the one proposed by the Informant, it largely covers the same set of players and competition dynamics. 76. As regards the geographic market, the Commission agrees with the Informant that the functionality of OTT messaging apps through smartphones does not differ depending upon the region or country concerned, either in terms of price, functionality or operating system. However, the competitive conditions, regulatory architecture and players may vary in different countries/regions. Since conditions for competition are homogenous in India, the geographic area of India has been taken as the relevant geographic market for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joyed by the dominant player in the market, i.e. WhatsApp, in the present case. Since networks effects lead to increased switching costs, new players may be disincentivized from entering the market. 20. Based on the above, the Commission concluded that WhatsApp is dominant in the relevant market for OTT messaging apps through smartphones in India. As such, in light of the said holding of the Commission in Harshita Chawla case, there is no occasion to separately and independently examine the issue of relevant market and dominance of WhatsApp therein, when there is no change in the market construct or structure since the passing of the said order in August, 2020 and announcing of the new policy by WhatsApp on January 04, 2021 which itself seems to emanate out of the entrenched dominant position of WhatsApp in the said relevant market, as detailed in this order. The Commission has also taken note of the recent developments wherein the competing apps, i.e. Signal and Telecom witnessed a surge in downloads after the policy announcement by WhatsApp. However, apparently this has not resulted in any significant loss of users for WhatsApp. Further, as elaborated in detail in succeeding para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration in deciding against the alleged contravention by WhatsApp. As against this, the new privacy policy has removed the opt out option given to the users and the users have now to mandatorily agree to sharing of their personalised data by WhatsApp with Facebook Companies and further the policy envisages data collection which appears to be unduly expansive and disproportionate. This is borne from the fact that it seeks to capture, amongst others, transactions and payments data; data related to battery level, signal strength, app version, mobile operator, ISP, language and time zone, device operation information, service related information and identifiers etc.; location information of the user even if the user does not use location related features besides sharing information with Facebook on how user interacts with others (including businesses) when using WhatsApp services. All such data collected by WhatsApp would be shared with Facebook Companies for various usages envisaged in the policy. The Commission also took note of the submission of WhatsApp that it would continue to honour the opt-out option exercised by users during 2016 Update; however, the 2021 Update do not create ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, which too is a Facebook Group company. Thus, the conduct of WhatsApp/ Facebook under consideration merits detailed scrutiny. 27. The Commission is of further opinion that users, as owners of their personalised data, are entitled to be informed about the extent, scope and precise purpose of sharing of such data by WhatsApp with other Facebook Companies. However, it appears from the Privacy Policy as well as Terms of Service (including the FAQs published by WhatsApp), that many of the information categories described therein are too broad, vague and unintelligible. For instance, information on how users interact with others (including businesses) is not clearly defined, what would constitute service-related information , mobile device information , payments or business features , etc. are also undefined. It is also pertinent to note that at numerous places in the policy while illustrating the data to be collected, the list is indicative and not exhaustive due to usage of words like includes , such as , For example , etc., which suggests that the scope of sharing may extend beyond the information categories that have been expressly mentioned in the policy. Such opacity, vagueness, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be beyond users reasonable and legitimate expectations regarding quality, security and other relevant aspects of the service for which they register on WhatsApp. One of the stated purposes of data sharing viz. targeted ad offerings on other Facebook products rather indicates the intended use being that of building user profiles through cross-linking of data collected across services. Such data concentration may itself raise competition concerns where it is perceived as a competitive advantage. The impugned conduct of data-sharing by WhatsApp with Facebook apparently amounts to degradation of non-price parameters of competition viz. quality which result in objective detriment to consumers, without any acceptable justification. Such conduct prima facie amounts to imposition of unfair terms and conditions upon the users of WhatsApp messaging app, in violation of the provisions of Section 4(2)(a)(i) of the Act. 31. Given the pronounced network effects it enjoys, and the absence of any credible competitor in the instant messaging market in India, WhatsApp appears to be in a position to compromise quality in terms of protection of individualised data and can deem it unnecessary to even r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. It may be possible that Facebook will condition provision of such services to businesses with a requirement for using the data collected by them. The DG may also investigate these aspects during its investigation. 34. In view of the foregoing, the Commission is of the considered opinion that WhatsApp has prima facie contravened the provisions of Section 4 of the Act through its exploitative and exclusionary conduct, as detailed in this order, in the garb of policy update. A thorough and detailed investigation is required to ascertain the full extent, scope and impact of data sharing through involuntary consent of users. 35. Accordingly, the Commission directs the Director General ( DG ) to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act. The Commission also directs the DG to complete the investigation and submit the investigation report within a period of 60 days from the receipt of this order. 36. Both the Opposite Parties have also sought an opportunity to make oral submissions on its response in a hearing before the Commission. It this regard, it is suffice to note that a three judges Bench of the Hon ble Supreme Court thro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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