New Delhi: The National Company Law Appellate Tribunal (NCLAT) on Thursday granted partial relief to WhatsApp from the Competition Commission India’s (CCI) November 2024 against its 2021 privacy policy update. The CCI order had forbidden WhatsApp from sharing user data with Meta (Facebook, Instagram, etc.) for advertising purposes for five years and imposed a ₹213.14 crore penalty for violating the Competiton Act by using its market dominance to “coerce” users into accepting the update.
NCLAT chairperson Ashok Bhushan stayed the 5-year moratorium on data sharing but said that WhatsApp will have to pay the 50% of the penalty within two weeks. Other parts of the CCI order — such as providing an opt-out option — have not been stayed.
“We are of the prima facie view that ban of five years imposed in paragraph 247.1 needs to be stayed. We are however of the view that the directions issued by the CCI under paras 247.2 and 247.3 need not to be stayed and they need to be complied with,” he said.
Under paragraphs 247.2 and 247.3, for data shared with Meta companies and products for purposes other than advertising, the CCI directed WhatsApp to specify in its policy what kind of data are shared and why. When WhatsApp user data are shared for any purpose other than providing WhatsApp services, the users must be given the choice to opt out of such data sharing, and modify their choice in–app. This option must be made available to all users, including those who accepted the 2021 update. The CCI, in its November 18 order, had directed these changes to be made within three months of the order being passed.
While pronouncing the order, Bhushan noted that the 5-year moratorium could “lead to the collapse of the business model” of WhatsApp, and that WhatsApp provided free services to users.
“We have also noticed that the honourable Supreme Court has not granted interim orders staying 2021 privacy policy and Digital Personal Data Protection Act has also been passed and is likely to be imposed which may cover all issues related to data protection and data sharing,” Bhushan said.
On January 16, senior advocates Kapil Sibal and Mukul Rohatgi, on behalf of Meta and WhatsApp, respectively, had submitted that WhatsApp had already paid 25% of the penalty. The NCLAT directed WhatsApp to pay 50% percent of the penalty within two weeks.
NCLAT allowed both the CCI and WhatsApp to seek modifications to the order if the Digital Personal Data Protection (DPDP) Act, or any other law related to data protection and sharing, is enforced. NCLAT directed both parties to complete pleadings within six weeks, and listed the matter for hearing on March 17.
“We welcome the NCLAT’s decision to grant a partial stay on the Competition Commission of India’s (CCI) order. While we will evaluate next steps, our focus remains on finding a path forward that supports millions of businesses that depend on our platform for growth and innovation as well as providing high-quality experiences that people expect from WhatsApp,” Meta said in a statement after the Thursday hearing.
In November, the CCI through its investigation had concluded that WhatsApp is the dominant player in the market for OTT (over-the-top) messaging apps through smartphones in India, and Meta holds a “leading position” in the online display advertising market in India.
It had concluded that the 2021 policy update, which made it mandatory for users to accept the new terms – which included data sharing with Meta – and removed the earlier option to opt-out, was an “unfair condition” under the Competition Act. It had said that because of network effect and lack of effective alternatives, the policy update forced users to comply, undermined their autonomy and meant that Meta had abused its dominant position.
The CCI also said that by sharing WhatsApp users’ data between Meta companies for purposes other than providing WhatsApp services created an entry barrier for Meta’s rivals, and resulted in the denial of market access in the display advertisement market.
Meta and WhatsApp challenged this order. On January 16, the company’s battery of lawyers, led by Sibal and Rohatgi argued on four grounds.
First, the policy concerns data protection and with the notification of DPDP Act (which hasn’t been enacted yet), this was a data protection and privacy concern, and not within the ambit of the CCI or the Competition Act.
Second, the 5-year moratorium imposed by the CCI is arbitrary. “Why five? Will after five years things be okay?” Rohatgi had asked.
Third, the CCI order adversely affects WhatsApp’s business model, making it unsustainable for the for-profit entity to survive. Sibal had said that “no app can survive without monetisation”.
Fourth, Rohatgi had called WhatsApp’s sharing of user’s metadata with Meta companies a “benign kind of sharing” that improves user experience and is crucial for small and medium businesses on the messaging platform to flourish. Sibal had also argued that the CCI had not done an “effects analysis” or “even examined what is the data being shared”.
Both Sibal and Rohatgi had argued that since the apex court and Delhi High Court were already examining the matter in the Karmanya Singh Sareen case (challenging the 2016 policy update) and the Chaitanya Rohilla case (challenging the 2021 policy update), orders from the two courts should be heard first.
Samar Bansal, on behalf of CCI, had argued that the conflict between privacy and competition, proposed by WhatsApp, was a “bogey”. He also said that DPDP Act governs personal data of users, not business data. He said that in the EU, WhatsApp gave users the option to opt out, a feature not available in India.