[By Tavashya Kumar]

The author is a student at National Law University, Delhi.

Introduction

WhatsApp, one of the largest online messaging services in India and across the world, recently updated its privacy policy for users across the world which introduced changes to the manner in which a user’s data is stored and utilised when interacting with a business account on WhatsApp. It also seeks to enhance Whatsapp’s integration with Facebook, its parent company, by increasing the sharing of certain types of information such as account and transaction data. However, it has claimed that personal information such as private messages and videos will not be shared and that end-to-end encryption will prevail.

The catch, however, lies in two facts- firstly, the privacy update is mandatory for users to accept. If they fail to agree to the terms within a stipulated deadline or refuse to do so, their accounts shall be deactivated. The second crucial factor is that WhatAapp has been discriminatory in the nature of its updates rolled out across the world. In fact, as pointed out by the Govt. of India in a letter to WhatAapp, it has rolled out a relatively less stringent update in Europe owing to the protections enshrined in the EU General Data Protection Regulations.

The blog intends to examine this recent update in light of the provisions of the Competition Act, 2002 (Section 4 & Section 19) to ascertain whether this privacy update, and its mandatory and discriminatory nature, constitute an ‘abuse of dominant position’ on behalf of WhatsApp.

Existence of Dominant Position

According to Section 4 of the Act, abuse of dominance is established when an enterprise imposes unfair and discriminatory conditions on the purchase of goods and/or creates conditions that result in denial of market access. However, before determining whether the actions taken by a corporation amount to an abuse of its dominant position, it is first essential to establish that it enjoys a dominant position in the relevant market, failing which it cannot be scrutinised for abusive behaviour. This is because what may be commercially justified behaviour for non-dominant firms, may become exploitative or exclusionary in the case of dominant firms. There is a simple rationale for such a distinction- since non-dominant firms are bound by market forces, consumers can simply elect not to purchase their products and instead purchase from a competitor, which is not the case when the firm is in a dominant position. Accordingly, an enterprise is said to be dominant if it enjoys a position of strength in the market which enables it to operate independently of competitive forces in the market or affect its competitors or consumers in a manner which is beneficial for it.

Section 19(4) of the Act provides an illustrative list of factors that must be considered by the CCI while establishing whether or not an enterprise is in a dominant position. This includes factors such as market share, size & resources of enterprise & its competitors, vertical integration & network effects, dependence of consumers on such enterprise etc. However, since dominant position refers to a position of strength enjoyed by an enterprise in the “relevant market”, assessment of dominance is to be preceded by delineation of the correct relevant market in which dominance is to be assessed. As laid down is subsections 6 & 7 of Section 19, this relevant market has two components- ‘relevant geographic market’ and ‘relevant product market’.

In context of WhatsApp, the CCI has previously established that it is in a dominant position in the market in two noteworthy cases. In the case of Harshita Chawla v. Whatsapp & Facebook Inc., wherein the informant accused WhatsApp of violating Section 4 by using its dominance in the online messaging apps market to capture a different market (online payments), the CCI delineated the relevant market as ‘the market for over-the-top (OTT) messaging apps through smartphones in India’. Similarly, in Vinod Kumar Gupta (for ‘Fight for Transparency Society’) v.Whatsapp Inc., the CCI adopted a similar viewpoint, stating that its market is instant, internet based communication services through third-party communication apps on smartphones, which is different from text messaging services.

Additionally, in both of the aforementioned cases, the CCI also held that WhatsApp was in a dominant position in this relevant market, on several grounds. Firstly, with regard to Market Share, the CCI observed that WhatsApp is the most downloaded and widely-used instant messaging app in India. It reached this conclusion by using publicly available information to ascertain that it had over 500 million active users, was installed on 96% of smartphones and was used by 64% of all Indian mobile users. It further observed that these figures were far ahead of its closest competitors such as Snapchat or, more recently, Telegram & Signal. Further, in both cases, it was held by the CCI that factors such as the network effect created by its vertical integration with Facebook and increased costs of switching from one platform to another create a dependence of consumers and constitute significant barriers to entry.

Abuse of Dominance By WhatsApp

Despite holding that WhatsApp is in a dominant position in both of the aforementioned cases, the CCI refused to hold it accountable for abuse of dominance in either scenario. Since the case of Harshita Chawla (supra) was in context of WhatsApp Pay, it did not raise privacy policies as an issue and hence is not relevant in the present context. However, the case of Vinod Kumar Gupta, which was filed subsequent to the takeover of Whatsapp by Facebook, is of immense relevance to the present situation. This is because it was filed in the context of a privacy update, akin to the present update, introduced by WhatsApp subsequent to the takeover. Through this update, users were forced to share certain personal information and account details with Facebook in order to continue availing services of Whatsapp. The informant alleged that these details were used by Facebook for purposes such as creating targeted advertisements. Further, it was alleged that the manner in which consent was sought from users was deceptive, since they were not equipped to understand, or even read the policy properly. The CCI, however, construed in that case that the new privacy policy did not constitute an abuse of dominant position. This was primarily due to several observations recorded by the commission from the submissions of WhatsApp. It contended in Vinod Kumar Gupta that users’ messages and media sent on WhatsApp were end-to-end encrypted, meaning that no third person including WhatsApp could access them, and that the data would be used to improve service delivery and fighting spam. Similarly, in the present context WhatsApp claims that despite this privacy update, it will not be able to see messages and media exchanged on personal chats. However, there are significant deviations between the 2016 update and the present update with regard to sharing of other data such as account information, transaction data and interaction with business accounts with Facebook. The 2016 policy explicitly mentioned, as averred in Vinod Kumar Gupta, that the users will be able to ‘opt out’ of the data sharing with Facebook through the privacy settings on the app. It also averred that no such information will be shared externally. However, as per the new update, only users in the European Union will have the option of opting out of the policy (owing to the strict standards prescribed by the EU GDPR). For all other users, including those in India, this privacy update is of mandatory nature. Since the optional nature of the update was a crucial factor for the CCI to conclude that WhatsApp was not abusing its dominant position, the one-sided contract prompted by its absence may amount to the imposition of an unfair condition on the purchase (in this context, use) of the service.

Conclusion

In light of the aforementioned information, it can be ascertained that this privacy update, and its mandatory and discriminatory nature, may constitute an abuse of dominant position by WhatsApp, since the pre-requisites for establishing the same have been met. As held by the CCI, WhatsApp is in a position of dominance in the relevant market (over-the-top OTT internet messaging apps through smartphones), owing to its dominant share in the market and the network effects produced by it. Further, it is abusing this dominant position by introducing this mandatory privacy policy, which imposes an unfair condition on the use of services provided by it. The mere existence of competitors such as Signal & Telegram, which consumers may shift to, is not sufficient to argue otherwise owing to the network effects produced by its large consumer base and vertical integration with Facebook, which renders the choice to shift to other platforms illusory in nature.