Frequent user engagement was considered to be a key metric for evaluating the performance of digital communication platforms and an empirical analysis of the Daily Active Users (DAU) and Monthly Active Users (MAU) showed that WhatsApp’s DAUs were way beyond the cumulative number of its rivals suggesting a strong market position followed by Facebook Messenger i.e., another Meta product. The exponential increase in DAU and MAU numbers of WhatsApp also evidenced direct network effects. Additionally, these positive direct network effects were also seen to be accompanied by indirect network effects in the multi-sided market ecosystem, where the growth in the user base attracted more third-party developers, advertisers, and content creators. This was found to further consolidate Meta's market position in the display advertising market, as more users meant more opportunities for monetization through targeted advertising and other services. Moreover, this enabled introduction of business features on WhatsApp in the form of WhatsApp Business App and WhatsApp Business API.
The CCI in this instance has specifically considered ‘privacy’ as a critical non-price parameter of competition, which is valued by users on par with other service attributes like quality, customer, service, and innovation.
The Abuse
The Policy Update made access to the messaging service to consumers conditional upon sharing of consumer data with other Meta platforms at the cost of consumer choice. This conduct was found to be unfair and abusive.
It was also noted that the language of the Policy Update was such that the exact scope of data being collected by WhatsApp and being shared with other Meta entities remained undeterminable. It was found that the Policy Update which enabled cross platform integration of data strengthened Meta’s ability to offer more personalized and targeted advertisements leading to denial of market access to other advertisers and amounting to leveraging its dominance in the OTT messaging market to protect and consolidate its leading position in the display advertising market.
Privacy as a competition issue
Meta challenged CCI’s jurisdiction to examine its conduct arguing that the subject matter of the proceedings viz. nature of consent of users and extent of data collection is covered by data protection and privacy laws and the same are being adjudicated by the constitutional courts. Dismissing the challenge, CCI observed that data related practices can trigger concerns that require simultaneous intervention from multiple branches of law and the existence of parallel proceedings or involvement of other authorities does not strip the CCI of its jurisdiction. It was specifically noted that data protection and competition law have distinct intervention tools to address data related concerns and that active oversight by the CCI is necessary to ensure that data does not become a tool for perpetuating anti-competitive behaviour.
The CCI noted that reduction in data protection results in diminished quality of service for consumers and creates insurmountable entry barriers for potential competitors which is a competition concern removed and independent of privacy concerns which may be assessed by the data protection authority.
Penalty on the Group
WhatsApp is a wholly owned subsidiary of Meta which exercises absolute control over its operations. Further, the contravention related to both the OTT messaging services provided by WhatsApp as well as display advertising services provided by Meta. As a result, penalty was imposed on the relevant turnover derived from both services offered by Meta.
Pertinently, this is the first case in which penalty was imposed under the recently introduced Competition Commission of India (Determination of Monetary Penalty) Guidelines 2024. The penalty was reduced after consideration of mitigating factors such as cooperation, first time contravention, ceasing the unfair imposition etc.
In addition to the monetary penalty, CCI also issued certain remedial directions to WhatsApp regarding its data sharing policies for advertising purposes and for purposes other than advertising. Inter alia, WhatsApp was directed to not share any user data collected on its platform with other Meta companies or Meta company products for advertising purposes for a period of 5 years.
CCI order partially stayed
Meta challenged the CCI’s order before the appellate tribunal on grounds of commercial viability of the business. The appellate tribunal partially stayed the operation of the CCI order, specifically the direction to WhatsApp to stop sharing any user data collected on its platform with other Meta companies for advertising purposes for a period of 5 years (“Stay Order”). The tribunal observed that the ban of 5 years may lead to the collapse of business model followed by WhatsApp which provides services to its users free of cost.
Separately, the Stay Order observed that the Indian data protection legislation is likely to be enforced within 6 months, may address all issues pertaining to data protection and data sharing.
Conclusion
The CCI has taken a firm stand that its jurisdiction will not be compromised in cases of potential overlap with another regulator, in this case the data protection authority, when the subject matter of the case has the potential of having an appreciable adverse effect on competition in India.
This is first of many investigations in the digital markets relating to abusive conduct on account of data-related practices. The Indian competition regulator is proactively investigating large digital enterprises on the one hand and has simultaneously proposed ex ante legislation, the Digital Competition Bill, 2024 which is under consideration to intensify the regulation of digital markets. With increased resources, a specialised division focused on digital markets and an armoury of tools, this sector is going to be a key area of focus for the Indian competition regulator in the foreseeable future.
On the other hand, the appellate tribunal in an interim order has considered the commercial viability of the directions of the CCI. The Stay Order raises questions regarding jurisdiction of the CCI with respect to data related conduct and overlaps with a regulator that is yet to come into existence. The coming months will be an interesting period for the evolution of the jurisdiction of the overlapping legislations and regulators.
