Delhi HC dismisses WhatsApp’s appeal to restrain CCI from investigating its Privacy Policy

tl;dr

Remember when WhatsApp rolled out its revised Privacy Policy in January 2021 and tried to force users to accept it? In response, the Competition Commission of India (‘CCI’) directed an investigation on whether WhatsApp was abusing its dominant position. WhatsApp and Facebook filed a petition in the Delhi High Court against CCI’s decision to investigate. On April 22, 2021, a single judge of the Delhi High Court dismissed the petition. Now another bench of the Delhi High Court comprising of two judges has upheld the order of the single judge. Because of the decision, the CCI can now continue investigating WhatsApp’s Privacy Policy and since we are one of the parties before the CCI, we will provide assistance at every step of the investigation.

Why should you care?

WhatsApp dominates the market for messaging services. While Signal and Telegram have a presence, most Indians nevertheless continue to use WhatsApp. But WhatsApp ought not to act with impunity just because we do not have realistic alternatives to WhatsApp. This is where the role of the CCI becomes important. CCI, as a market regulator, is tasked with ensuring that entities which control the market do not abuse their dominance by imposing unfair conditions upon users. To that end, CCI directed an investigation into WhatsApp’s 2021 Privacy Policy. On August 25, 2022, the Delhi High Court in its judgment did not find any fault in CCI’s decision. If CCI finds that WhatsApp has abused its dominant position, it can impose penalties on WhatsApp and even ask it to roll back its privacy policy.

Delhi High Court’s decision dated August 25, 2022

The two-judge bench of the Delhi High Court was tasked with deciding the correctness of the decision of the single-bench dated April 22, 2021. While dismissing WhatsApp and Facebook’s appeal, the Court rules on four issues which have been detailed below:

  • Whether CCI should have abstained from exercising its jurisdiction as the issue of the constitutionality of WhatsApp’s Privacy Policy is pending before the Supreme Court and the Delhi High Court?

The issue arose before the Delhi High Court because WhatsApp contended that it was improper on part of CCI to examine the correctness of WhatsApp’s privacy policy since that issue was already pending before the Supreme Court and the Delhi High Court. In response to WhatsApp’s contention, the Delhi High Court held that the scope of issues pending before Constitutional Courts and the CCI was entirely different. While the Constitutional Courts are examining whether WhatsApp’s Privacy Policy violates Article 21 of the Constitution, the CCI had to examine the said policy from a competition perspective, i.e. whether WhatsApp’s policy was unfair for its users or if it affected competitiveness in the market for messaging services (Para 32).

Notably, the Delhi High Court observed that the proceedings before CCI would not be impacted by any decision the Constitutional Courts may take on the constitutionality of the policy. Even if Constitutional Courts uphold the Privacy Policy, CCI could examine if it violated the Competition Act, 2002 (‘Act’). If Constitutional Courts set aside the Privacy Policy, CCI could examine whether it violated the Act while it was in operation (Para 33).

  • Whether there was a prima facie case against WhatsApp’s 2021 Privacy Policy to allow CCI to direct a detailed investigation into it?

On this issue, the Court found that there were sufficient reasons to investigate WhatsApp’s Privacy Policy, which were stated in CCI’s order to direct investigation. The Court reproduced observations from CCI’s decision at Para 43 which noted that - a) WhatsApp was the most dominant player in the market; b) It is difficult for users to leave WhatsApp and shift to other messaging services because of strong network effects; c) Users are entitled to be informed about how their personal data is used but WhatsApp Privacy Policy was opaque, vague and open-ended; d) WhatsApp could share personal data of users with Facebook and users could not opt-opt, and if the market for messaging services was more competitive, users would have had more control; and e) Data collected by WhatsApp could be used by Facebook to profile users and increase its ability to advertise to them, and as a result create an entry-barrier in the market it operates in.

The Order records that the Ld. ASG appearing on behalf of the CCI submitted that “the long-term objective of such technology and devices is to consume every inch of human time, and to capitalise on it. [...] in pursuance of this, exclusionary tactics are adopted by such entities which are backed by the dominant position that these entities occupy. [...] there is a design and object behind these tech companies, and that the Competition Act, 2002, was brought in to ensure that these companies did not use their position to institute anti- competitive practices to the detriment of their users.” (Para 22)

  • Was CCI correct in making Facebook Inc. (now Meta), including Facebook India, a party in the proceedings since it is a separate entity?

While Facebook adopted the contentions of WhatsApp in these proceedings, it also contended that it should not have been made a party. Facebook India, through an impleadment application, made the same argument. The Court held that it was proper to make Facebook a party as one of the key issues in the 2021 Privacy Policy was the decision of WhatsApp to share user data with Facebook. The Court observed that just because the 2021 Privacy Policy did not emanate out of Facebook, it could not hide behind the fact that it was not a direct beneficiary of the data sharing mechanism established by the said policy (Para 47).

The Court held that the CCI was not bound by its decision in Vinod Kumar Gupta. Unlike the 2016 Policy which provided the users with an option to ‘opt-out’ of sharing their information with Facebook, the 2021 Policy placed users in a ‘take-it-or-leave-it’ situation, ‘virtually forcing its users into an agreement by providing a mirage of choice, and then sharing their sensitive data with Facebook Companies envisaged in the policy.’ (Para 46)

Conclusion

We welcome the decision of the Delhi High Court. It is extremely important for the Director General to investigate the 2021 Privacy Policy of WhatsApp. We believe that Competition Law is an underexplored facet of the larger issue of abusive practices by Big Tech companies, and is a necessary aspect of ensuring that large social media platforms act responsibly with user data.

We were not a part of the present proceedings before the Delhi High Court, either before the Single Judge, or before this Division Bench led by the Hon’ble Chief Justice of Delhi. We are involved in the proceedings initiated by CCI as an informant. We are also involved in the proceedings pending before the Supreme Court on the constitutionality of the 2021 Privacy Policy. As correctly pointed out by the Delhi High Court, both proceedings are independent of each other. We will continue to assist both the CCI and the Supreme Court as they examine the data collection practices of WhatsApp.

Important Documents

  1. Delhi High Court’s judgment dated August 25, 2022 (link)
  2. Previous post dated October 14, 2021 titled ‘Big Opportunity! CCI accepts IFF’s expert information in its investigation of WhatsApp’s 2021 Privacy Policy (link)
  3. Previous Post dated January 11, 2021 titled “Explainer: WhatsApp Privacy Policy Changes #SaveOurPrivacy” (link)
  4. CCI’s order dated March 24, 2021 ordering the investigation (link)
  5. CCI’s order dated October 12, 2021 accepting our Information and tagging it with the main case (link)