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WhatsApp’s Privacy Policy Saga: Supreme Court Affirms CCI’s Probe Order – Privacy Protection

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The Competition Commission of India (CCI) in 2021 initiated
suo moto proceedings and ordered its investigative arm
– Office of the Director General (DG) – to investigate
into the updated ‘Terms of Service and Privacy
Policy’
introduced by WhatsApp Inc. (WhatsApp) in 2021
(2021 Privacy Policy) (CCI Order).1

The 2021 Privacy Policy which allowed sharing of user data
across Facebook Inc. (Facebook) (now Meta Platforms Inc. (Meta))
companies was prima facie seen to be a case of abuse of
dominance under the Competition Act, 2002 (Act) in the garb of a
policy update.

Since the passing of the CCI Order, WhatsApp and its parent
company, Meta, pursued an arsenal of legal remedies available
before Indian courts praying to halt the DG’s investigation.
However, the Supreme Court of India put a final stop to these
applications by choosing not to interfere into the CCI’s
proceedings against WhatsApp and Meta, initiated under its
statutory jurisdiction vested by the Act.2

CCI Order: ‘take-it-or-leave-it’ indicated a
prima facie case

In early January 2021, WhatsApp started intimating users about
updates in its terms of service and privacy policies, i.e., the
2021 Privacy Policy. In this notification to users, WhatsApp
required users to mandatorily agree to the 2021 Privacy Policy in
its entirety to be able to resume using WhatsApp’s services
from 8 February 2021.

WhatsApp also mandated users to agree to sharing of their
account data across all information categories with all Facebook
and/or Meta companies, unlike the previous updates which granted
users the option to choose whether their data would be shared with
Facebook and/or Meta.

The CCI launched suo moto proceedings into the 2021
Privacy Policy based on media and market reports. The CCI found the
mandatory data sharing provisions of the 2021 Privacy Policy to be
prima facie exploitative with possible exclusionary
effects that can potentially undercut the competitive process and
result in creation of further entry barriers into the market.

In view of this, the CCI prima facie opined that the
‘take-it-or-leave-it’ nature of the 2021 Privacy Policy
especially in relation to the information sharing clauses merited a
detailed investigation, given the dominant market position and
market power enjoyed by WhatsApp and Meta in the relevant market
for ‘Over-The-Top messaging apps through smartphones in
India’.

Therefore, the CCI held that WhatsApp’s 2021 Privacy Policy,
prima facie contravened the provisions of the abuse of
dominance provisions of the Act.

The CCI Order of 2021 followed closely on the heels of the
previous competition law case against WhatsApp in 2017, in relation
to its then privacy policy of 2016. In Vinod Kumar Gupta v
WhatsApp Inc.
3, the CCI contrastingly did not find
any prima facie contravention of the Act by WhatsApp
and/or Meta (then Facebook), given the ‘opt-out’ option
offered under the privacy policy of 2016. This allowed users to opt
out of sharing user account information with Facebook within 30
days of agreeing to the updated terms of service and privacy
policy.

Delhi High Court allowed DG’s probe

The CCI Order was first challenged by WhatsApp and Meta before
the Delhi High Court on the grounds that, in spite of the pending
constitutional challenge to the 2021 Privacy Policy before the
Supreme Court, the CCI went on to direct an investigation into the
2021 Privacy Policy.

These constitutional proceedings included the question of
whether WhatsApp was under a legal obligation to provide an
‘opt-out’ facility to users – an issue pending
adjudication by a Constitution Bench of the apex court.

Firstly, a single judge bench of the Delhi High Court dismissed
the applications and held that the CCI would not be stripped of its
statutory jurisdiction under the Act solely because an issue
surrounding the underlying arrangement was pending before the
Supreme Court or a High Court. Upon appeal, a two-judge quorum of
the Delhi High Court re-affirmed the single judge’s
order.4

Supreme Court’s final decision of
non-intervention

WhatsApp and Meta then challenged the Delhi High Court Order
before the Supreme Court, contending again that there was a
jurisdictional bar on the CCI as the Supreme Court was reviewing
the validity of the 2021 Privacy Policy.

The Supreme Court however stood by the market regulator and
resolutely ruled that there was no need for interference into the
matter. It noted that, once the CCI has formed a prima
facie
opinion that there is a case of violation of the
provisions of the Act and has initiated its proceedings thereunder,
such proceedings cannot be said to lack jurisdiction.

The bench remarked that the CCI should not be delayed any
further from proceeding with its inquiry. Additionally, all
contentions available to Meta and/or WhatsApp would be open for
consideration by the CCI on their own merits, and all observations
made by the Delhi High Court would be deemed strictly prima
facie
or tentative.

Takeaways

The judgment of the Supreme Court re-validates the competition
regulator’s independent statutory jurisdiction to inquire into
and adjudicate upon possible contraventions of the provisions of
the Act. It also demonstrates that constitutional courts are now
less willing to interfere with CCI’s probe orders unless
prima facie flaw can be illustrated. Further, considering
that probe orders are merely a departmental inquiry or a
preparatory step which do not determine the rights and liabilities
of the parties, it appears that the common thrust of such
non-intervention orders is to prevent stifling of CCI’s
investigation powers.

Another facet which is worth noting is that while the Supreme
Court affirmed the right of the CCI and the DG to investigate, it
simultaneously clarified that the Delhi High Court’s
observations are at best tentative. Arguably, this remark protects
the Meta’s ability to possibly agitate the same issues in the
future. That said, for now, the Supreme Court’s message is
simple – cooperate with the CCI’s investigation in all
earnest.

Footnotes

1. In Re: Updated Terms of Service
and Privacy Policy for WhatsApp Users,
Suo Moto Case No. 01 of
2021.

2. Meta Platforms Inc. v Competition
Commission of India & Anr.,
Special Leave to Appeal (C)
No. 17121/2022

3. Shri Vinod Kumar Gupta v WhatsApp
Inc.
, Case No. 99 of 2016.

4. WhatsApp LLC & Anr. v
Competition Commission of India
, LPA 163/2021 & CM APPLs.
15908/2021, 16893/2021, 18800/2021, 18910/2021, 46058/2021,
46059/2021, 46655/2021.

The content of this document do not necessarily reflect the
views/position of Khaitan & Co but remain solely those of the
author(s). For any further queries or follow up please contact
Khaitan & Co at legalalerts@khaitanco.com

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