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TMI Blog2020 (8) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... mant, based on the observation in the case of SAMIR AGRAWAL VERSUS COMPETITION COMMISSION OF INDIA ORS. [ 2020 (5) TMI 746 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI [LB]] alone. Next contention is that the Informant has indulged in forum shopping being closely associated with a petitioner who has approached the Hon'ble Supreme Court against WhatsApp and Facebook and this apparent nondisclosure reveals the mala fide intent and unclean hands with which the Informant has approached the Commission. The Commission notes that though on first blush this argument looks attractive, it may not be factually correct and is legally untenable, given the scheme of the Act. The Informant has alleged that WhatsApp and Facebook are abusing their dominant position under Section 4 of the Act. Specifically, the Informant has alleged contravention of Sections 4(2)(a)(i), 4(2)(d) and 4(2)(e) of the Act, by these OPs, besides a brief mention of 4(2)(b)(ii) and 4(2)(c). Primarily, the Informant has alleged that WhatsApp has abused its dominance in the 'market for internet-based messaging application through smartphones', to manipulate another market i.e. 'market for UPI enabled d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d location sharing. To use this App, one simply needs a compatible smartphone/tablet/desktop with a sim card, an Internet connection and a phone number. 4. Facebook, Inc. (OP-2), a technology company based in United states of America, is a social networking platform that allows the users to connect with other Facebook users through posts, messages, likes, comments etc. Facebook is considered as one of the Big Five technology companies along with Microsoft, Amazon, Apple, and Google. In the year February 2014 Facebook, acquired WhatsApp for the purchase price of US$19 billion and is thus the parent company of WhatsApp. 5. The Informant has alleged that Facebook backed WhatsApp, by using its dominance in the internet based instant messaging App, is bundling its messaging App with the payment option (WhatsApp Pay) thereby using such dominance to penetrate into the UPI enabled Digital Payments App Market. Moreover, by enabling automatic installation of WhatsApp Payments App in the WhatsApp Messaging App, Whatsapp is alleged to be taking advantage of its vast userbase to popularise its newly launched Whatsapp Pay App. 6. The Informant has further stated that UPI enabled Digital payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtremely beneficial for advertisers, who are willing to pay a premium to ensure that their products/services are advertised to right people at the right time. According to the Informant, OP-2 monetizes the user data, generates revenue and drives out healthy competition from the market. 9. In relation to WhatsApp's revenue model, the Informant has stated that WhatsApp does not charge a direct fee for its service to its users but it shares the data it collects automatically from the users on the WhatsApp with Facebook thereby aiding it in generating huge revenues through targeted advertisements. The Informant also claims that WhatsApp shares data with third parties permitted to interact with the users. Moreover, WhatsApp also has business application, which is currently free to download, which allows users to build their business profile along with important links to their website or Facebook page, set up auto responders, link their landline numbers with WhatsApp and can integrate the WhatsApp for Business application program interface (API) with their product offering. While there is no initial charge for the service, WhatsApp charges a fee if the business does not respond withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to facilitate user registration, creation of VPA and provide payment services to the users. Users are thus, not bound to use the app of their own bank and can instead choose the app of any bank or any Third-Party Apps facilitating payments through UPI. Google Pay, PhonePe, PayTM and BHTM are some of Third-Party Apps facilitating UPI payments. WhatsApp Pay also acts as a Third-Party App for facilitating payments between users. 13. The Informant claims that such Third-Party App (TPA) providers constantly strive to make their business more viable in the UPI ecosystem to sustain in the competing market with multiple market players. To become a part of the UPI ecosystem, a TPA (a non-banking entity) must comply with procedural guidelines, at the initial stage, to be able to ensure safety and security of transactional data at a national level. Even post entry, because of the existence of technology giants in the digital payments market, the TPAs are necessitated to invest huge amount of money and skill and devise strategies to be able to survive fierce competition and acquire customers. Some TPAs attract customers through various modes including but not limited to cash backs, vouchers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our country and the consumers. 16. The Informant has submitted that the services provided by the Opposite Parties are amenable to scrutiny under the Act even though such services are being offered without any monetary fee/charge. The Informant has proposed the following two relevant product markets: a. Market for internet-based messaging application through smartphones; and b. Market for UPI enabled digital payment applications. 17. The Informant has claimed that services provided by the internet-based messaging Apps through smartphones form a separate and distinct market and cannot be substituted or interchanged with the traditional electronic communication services such as text messaging, voice calls, etc. that are provided by telecom service providers for reason of their prices, functionality and basic characteristics. 18. As regards the geographic market, the Informant has stated that as such the functionality of consumer communication apps through smartphones does not differ depending on 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the year 2017 was 175 million which rose to 500 million in the first quarter of 2019. b) Size and resources of enterprise: The Informant alleged that Facebook, which is the parent company of WhatsApp, is among the big five technology companies of the world and has been known to eliminate its competition in the market by buying out the competitors. The major revenue of the Opposite Parties is claimed to come from targeted advertisements and huge user data is alleged to be the biggest driving force behind it. c) Size and importance of competitors: The Informant has referred to Hootsuite survey according to which WhatsApp messenger holds first rank and Facebook holds second rank based on the 'mobile application used by active users' in January 2019 and holds the same position in January 2020 too. As against this, its competitors lag behind. d) Dependence of consumers on the enterprise and countervailing buyer power: The Informant claims that there exists no countervailing buyer power which can effectively impact and constrain the market power of the OPs. The users are largely dependent upon WhatsApp for availing the internet based instant messaging services as there is abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y WhatsApp i.e. 'WhatsApp Pay' installed on their smartphones. This automatic installation of the Payment option into the Messenger App is nothing short of 'pre-installation' which is forced upon a user of the dominant product, WhatsApp messenger. This, as per the Informant leads to contravention of Section 4(2)(a)(i) of the Act as automatic installation of WhatsApp Pay on existing WhatsApp Messenger user's device amounts to imposition of unfair condition on the users/consumers. 24. The Informant further stated that there exist two separate markets for Internet based Messaging Apps on smartphones and for UPI enabled Digital Payments Apps and that there exists a sufficient consumer demand for use of these apps separately and independently. Thus, the conduct of WhatsApp amounts to bundling since the two products are offered as a package and are not available independent of each other, which contravenes Section 4(2)(d) of the Act. This bundling arrangement allegedly has an element of 'coercion' as WhatsApp enjoys a dominant position in the internet based instant messaging app market, having a pre-existing user base of more than 400 million monthly active us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various news articles to substantiate the foregoing facts. 27. Besides the aforesaid, the Informant has also made some miscellaneous allegations e.g. serious non-compliance of critical and mandatory procedural norms pertaining to data localisation and storage by the OPs, data privacy issues etc. Further, the Informant has alleged contravention of Section 4(2)(b)(ii) and 4(2)(c) of the Act, though no conduct has been specifically mentioned with regard to these sub-sections. 28. Based on the foregoing facts and allegations, the Informant has prayed for an investigation against WhatsApp under the Act and directions to the OPs to immediately cease and desist their anti-competitive operations of bundling the Internet based Instant Messaging App and UPI enabled Digital Payments Apps together. Further, the Informant has briefly sought interim relief asking the Commission to restrain abuse of dominance by WhatsApp, vide which it bundles its digital payment service with its messenger service. The Informant has averred that in case interim relief as sought is not granted, the Informant would suffer irreparable loss and injury. 29. The Commission considered the information in its ordinary mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commission. 33. Facebook has also submitted that WhatsApp and Facebook are separate and distinct entities and any alleged strengths of Facebook cannot be attributed to WhatsApp. Facebook has also objected to the Informant's allegations regarding Facebook's previous acquisitions stating that such legitimate and legal acquisitions cannot be equated with abuse of dominance under Section 4 of the Act, more so when Facebook obtained all necessary approvals for the acquisitions referred to by the Informant. It further stated that mergers and acquisitions are essential for driving innovation, and developing products and services that adapt to consumer needs. 34. While denying the allegation pertaining to sharing of data and its misuse, Facebook stated that the Informant has falsely claimed that WhatsApp automatically shares WhatsApp Pay user data with Facebook for use in targeted advertisements. Facebook further submitted that this claim does not raise any competition concern and need not be looked into by the Commission. 35. As regards the Informant's reliance on cases against Facebook in other jurisdictions, Facebook stated that the Commission has held in the past that m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joy a dominant position in the market proposed by it or even in the narrow market proposed by the Informant. The assessment of the Informant, it has been argued, does not meet the test for dominance under the Act as the Informant has failed to provide any comparative analysis to demonstrate that WhatsApp acts independent of competitive constraints from other messaging applications active in India such as Google Hangouts, iMessage, Viber, Hike, Zoom, Skype, Telegram, or Truecaller, or SMS services offered by every telecommunications operator in India. Moreover, details of other messaging or communication applications and their numbers other than WhatsApp, which is critical for dominance assessment, has not been provided. 41. In relation to dominance assessment based on market shares, WhatsApp has claimed market shares are static, fixed at a point in time, and thus do not adequately reflect the realities of competition in this industry where share swings substantially over short periods, successful entry occurs frequently, demand (user preferences) change very quickly, and there is significant multi-homing by consumers. Therefore, in such a market, a snapshot of historical market sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the users retain full discretion and optionality in choosing whether to use WhatsApp Pay; therefore, the Informant cannot demonstrate that WhatsApp has actively restricted or imposed obligations on users to do anything. Rather, WhatsApp simply offers users WhatsApp Pay as a feature, should they choose to use it. There is no restrictive or abusive conduct or any use of an alleged dominant position as required under Section 4(2)(e) of the Competition Act. In addition, WhatsApp has averred that a close associational link between two markets under scrutiny must be established for a leveraging allegation to be sustained under Indian competition law. Without such a link, it would not be necessary to demonstrate dominance in any segment to prove that an abuse has occurred, and the strategy in question could be replicated by any competitor who would not need particular market power to affect this strategy. For example, any instant messaging application can introduce a payment feature and, therefore, it is not by virtue of any alleged dominant position of WhatsApp that WhatsApp has been able to introduce the payment feature. Accordingly, dominance has nothing to do with entry into the alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , both the Opposite Parties have raised a preliminary obj ection to the locus of the Informant in filing the present information, placing reliance on the recent decision of the Hon'ble National Company Law Appellate Tribunal (hereinafter, 'NCLAT') in Samir Agarwal vs. Competition Commission of India [Competition Appeal (AT) No. 11 of 2019 decided on 29.05.2020] (hereinafter, 'Samir Agarwal case'). The argument made by them is two-pronged--firstly, the Informant is not an aggrieved party as she has not claimed any injury or has not suffered invasion of her legal rights as a consumer or beneficiary of healthy competitive practice to have a locus standi to file the present information. Secondly, the Informant has indulged in forum shopping as she is closely associated with a petitioner who has approached the Hon'ble Supreme Court of India by filing a petition against WhatsApp and Facebook recently and this apparent non-disclosure of the pending litigation reveals the mala fide intent of the Informant and the unclean hands with which she has approached the Commission. 48. The Commission finds it imperative to deal with the twin arguments before delving into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, Section 28 empowers the Commission to direct division of an enterprise enjoying a dominant position to ensure that such enterprise does not abuse its dominant position, even without a finding of a contravention. Also, under Section 35, the words 'complainant or defendant' were substituted by the words 'person or an enterprise' through the Competition (Amendment) Act, 2007 signifying the intent of the legislature to depart from an approach to cases guided by adversarial adjudication. This approach is also evident from the powers available to the Commission to direct investigation and hold inquiries even against persons or entities, who were not party to the information, but who are also suspected to be involved in an anti-competitive conduct. When passing an order under Section 26(1) of the Act, the direction of the Commission is to investigate 'into the matter' which is significant and advances the inquisitorial regime under the Act. All these provisions and subsequent amendments points towards the inquisitorial system being envisaged under the Act. 52. The Hon'ble Supreme Court of India had occasion to examine the scheme of the Act in detail i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hand, the Commission has the power to take action, on its own or upon information provided, to identify any possible anticompetitive conduct in the market. Hence, the powers and duties of the Commission are much wider. The proceedings before the Commission are inquisitorial in nature and targeted toward overall market correction and subsequent effects which may or may not be confined to a specific sector. Therefore, any decision by PNGRB upon a lis between the parties will be a decision granting relief in personam as opposed to a ruling/action by the Commission which is a decision in rem, intended to achieve market correction. The role of the two, the Board and the Commission are, thus, different in spirit. The Board, under the PNGRB Act, aims at resolving the disputes between the parties upon a complaint filed by an aggrieved party. Juxtaposed to this, the Commission aims to regulate the market and penalise the market player that is engaging in anticompetitive conduct/practice. 55. The judgment of erstwhile Hon'ble Competition Appellate Tribunal (hereinafter, 'COMPAT'), in Surendra Prasad vs. Competition Commission of India and others in Appeal No. 43 of 2014, decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parliament. Further, it is because of the inquisitorial scheme of the Act, that the Commission in appropriate cases, defends its orders in higher forums, regardless of the fact as to who brought such case before it, which is not a normal feature in adversarial proceedings. Moreover, given that there are divergent decisions of the Hon'ble Appellate forum on the question of locus of the Informant, it may not be appropriate for the Opposite Parties to challenge the maintainability of the information filed by the Informant, based on the observation in the case of Samir Agarwal case alone. 57. Coming to the second leg of the argument, i.e. that the Informant has indulged in forum shopping being closely associated with a petitioner who has approached the Hon'ble Supreme Court against WhatsApp and Facebook and this apparent nondisclosure reveals the mala fide intent and unclean hands with which the Informant has approached the Commission. The Commission notes that though on first blush this argument looks attractive, it may not be factually correct and is legally untenable, given the scheme of the Act. 58. The OPs have highlighted that on 28.02.2020, a public interest litigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of trade carried on by other participants in the markets. Towards that end, the Commission is more concerned with the fair functioning of the market and the underlying intent of the Informant in approaching the Commission is secondary to that objective. Thus, though it may be factually correct that a political rivalry between rival factions may have played a role leading to a revelation of the alleged anticompetitive conduct in the present matter; however, as long as such revelation is based on cogent evidence, the information/case cannot be quashed for want of benign motive. While the Commission does not encourage sham/pretentious information filed to settle scores between the parties, however, if there is merit in the anti-competitive conduct being reported to the Commission, the bona fide/locus/motive of an informant will become subservient to the duty of the Commission to ensure fair functioning of the markets. [...] (emphasis supplied) 62. Yet again, in Case No. 64 of 2014 [Madhya Pradesh Chemists and Distributors Federation (MPCDF) And Madhya Pradesh Chemists and Druggist Association (MPCDA) Others] decided on 03.06.2019, the Commission discarded the claim of the opposite p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosure regarding pending dispute/litigation between the informant and parties. Apparently, the Informant in the present case and the petitioner in the PIL filed before the Hon'ble Supreme Court are not the same. The OPs have tried to draw some linkages, which, in the view of the Commission, are not relevant to the facts of the present matter given the inquisitorial scheme of the Act. More so, when such a disclosure being a technical requirement, and not a factum leading to dismissal of an information, the assertion of the OPs that the 'Commission should not consider the present Information on the ground of the Informant's unclean hands alone' is not tenable. 66. Based on the aforesaid, the Commission rejects the preliminary objection of the OPs as regards the locus of the Informant. Any interpretation contrary to the expressive legislative mandate and judicial pronouncements, as elucidated in the aforesaid paras, may not be appropriate. 67. Having dealt with the preliminary objection, the Commission will now deal with the merits of the case. The Informant has alleged that WhatsApp and Facebook are abusing their dominant position under Section 4 of the Act. Specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. Having said that the Commission is cognizant of the peculiar features which these consumer communication apps possess, where for some functions they may appear substitutable while not so for others, making it all the more challenging to compartmentalize them into water-tight categories. Thus, it is important to identify the primary or most dominant feature(s) of an app to categorise it into a particular relevant market. 71. WhatsApp is primarily an Over-The-Top (OTT) messaging App, linked to a smartphone device and mobile number, which has features of communicating personally, both one-to-one or group. It uses the internet to send and receive text messages, images, audio or video content, sharing of location etc. from one user to another as opposed to the mobile network used for traditional texting/SMSing. 72. Facebook, on the other hand, is a social networking app which connects many users simultaneously. The users can post text, photos and multimedia which is visible to all those other users whom they have agreed to be their 'friend' or with a different privacy setting, with any other user. Users can also use various embedded apps, join common-interest groups, receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market and has leveraged such dominance to take advantage in another market i.e. 'market for UPI enabled digital payment applications in India'. 78. The UPI enabled Digital Payment Apps also work as third-party apps (not the banking entities) enabling instant transfer of funds (in the form of EVIPS) between users having subscribed to the Apps on their smartphones and having access to internet. This is a new technology infrastructure that existing bank apps can integrate with, in order to facilitate easy transfer of funds and other monetary transactions between two people in a secure and convenient manner. Further, these UPI enabled Digital Payment Apps, e.g. PayTM, Google Pay, Phone Pe etc., allow several value-added features besides traditional transfer of funds, such as integrating payment for utilities, mobile bills, purchasing train tickets, air tickets, movie tickets and thus, provide services which are distinct and which may not be substituted with any other mode of payment such as debit cards, credit cards, net banking, etc. Thus, the Commission agrees with the Informant that the second relevant market for assessing the allegations of the Informant would be 'mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such data shows that WhatsApp messenger is the most widely used app for social messaging, followed by Facebook Messenger in the relevant market delineated by the Commission supra. Further, it is way ahead of other messaging apps like Snapchat, WeChat etc. showing its relative strength. Given that WhatsApp messenger and Facebook Messenger are owned by the same group, they do not seem to be constrained by each other, rather adding on to their combined strength as a group. Moreover, WhatsApp Messenger works on direct network effects where an increase in usage of a particular platform leads to a direct increase in the value for other users and the value of a platform to a new user will depend on the number of existing users on that platform. Thus, given its popularity and wide usage, for one-to-one as well as group communications and its distinct and unique features, WhatsApp seems to be dominant. 85. The Commission is cognizant that the data relied upon by the Informant cannot be said to be free from infirmities and is based on global usage or users. However, in the absence of concrete data/information available in the Indian context other than the subjective information on popularity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abuses flowing from the same conduct. On the exploitative side, the Informant is aggrieved that the users of WhatsApp Messenger have been imposed with another App 'WhatsApp Pay' to which they did not subscribe or download [Section 4(2)(a)(i)] and since these two apps operate in two different markets, the tying of the latter with the former is anticompetitive [Section 4(2)(d)]. On the exclusionary side, it has been alleged that this conduct distorts another market i.e. 'market for UPI enabled digital payment applications in India'. 91. As regards Section 4(2)(a)(i), the Commission does not find much merit in the allegation of the Informant as mere existence of an App on the smartphone does not necessarily convert into transaction/usage. As highlighted by WhatsApp in its written submissions, to enable WhatsApp payment, the user has to separately register for it which necessarily requires the users to accept terms of the service agreement and privacy policy. Such registration requires providing additional information and undertaking additional steps to link their bank account, as per the NPCI laid down framework for UPI digital payment apps. As such, no transaction can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessarily use WhatsApp Pay in order to use WhatsApp messenger service, the second and third conditions are also not met. Lastly, it has been stated by WhatsApp that there is no anti-competitive effect of offering WhatsApp Pay. 95. The Commission does not fully agree with the submissions of WhatsApp in this regard. Clearly WhatsApp Messenger and WhatsApp Pay are two distinct products with different functionalities, they are in fact in two separate relevant markets, as has been elucidated by the Commission supra. It has also been prima facie held above that WhatsApp is the dominant player in the relevant market, i.e. 'market for OTT messaging apps through smartphones in India'. Thus, the first two conditions seem to have been met in the present case, and to this extent, the Commission does not agree with the submissions made by WhatsApp. 96. On the third condition, i.e. whether there is any compulsion/coercion on the users to necessarily purchase/use the tied product in order to use the tying product, the Commission observes that WhatsApp has submitted that 'WhatsApp users do not automatically or mandatorily have to use the WhatsApp Pay feature, but rather retain full d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge over the existing competitors. The Informant also seems to be distressed by the fact that while the other existing players spent considerable resources to establish themselves in the UPI enabled digital payment app market, WhatsApp will get users on its platter without making any efforts. The apprehensions of the Informant, according to Commission, does not really hold much merit. As stated above, the UPI market is quite established with renowned players competing vigorously. In such a market, it seems implausible that WhatsApp Pay will automatically garner a market share merely on account of its pre-installation. More so, given the fact that WhatsApp ecosystem does not involve paid services as such for normal users, it seems unlikely that the consumer traffic will be diverted by WhatsApp using its strength in the messenger market. Thus, this allegation under Section 4(2)(e) of the Act also does not seem to be made out. 100. Besides the aforesaid allegations, the Informant has also alleged misuse of data by the OPs, comprising Facebook as the parent entity and WhatsApp and other group entities acquired by it, to their commercial advantage at the cost of causing an adverse effec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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