The division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad dismissed the petition, on Thursday. The decision was made public on Friday.
According to the Bench, WhatsApp has a dominant market position and a strong lock-in effect, making its users unable to switch to another platform despite dissatisfaction. The court stated that this is demonstrated by the fact that, despite an increase in Telegram and Signal downloads when the 2021 policy was announced, the number of WhatsApp users has remained constant.
The court stated in its August 25 judgement that data is used by tech companies to customise and personalise their own platforms in order to retain their user base and prevent any other disruptive technology from entering the market.
“When data concentration is viewed through this prism, it gives meaning to the new adage that ‘data is the new oil,’ and, as noted in the CCI Order dated 24.03.2021, it raises competition concerns because it prima facie amounts to imposition of unfair terms and conditions on its users, thereby violating Section 4(2)(a)(i) of the Act,” the verdict stated.
The CCI last year ordered an investigation after concluding that WhatsApp’s “sharing of users’ personalised data with other Facebook companies, in a manner that is neither fully transparent nor based on voluntary and specific user consent” appears unfair to users. On April 22, 2021, a single bench of the Delhi High Court dismissed the petitions filed by WhatsApp and Facebook against the CCI order. The companies filed an appeal against the decision.
It went on to say that if the Supreme Court upholds the 2021 policy, the CCI investigation will undoubtedly continue. It went on to say that even if the 2021 policy is overturned by the Supreme Court, the CCI will still have the authority to investigate any violations of The Competition Act that occur while the case is pending and the policy is in effect.
On the claim that CCI has already assessed the 2016 policy and determined that the violation of the IT Act does not fall under its purview, the court stated that the competition regulator has made it clear in its order that it is only concerned with data accumulation that may result in exploitative and exclusionary competitive practises.
“It is important to note that the 2021 policy is a significantly modified version of the 2016 policy in that the 2016 policy included an ‘opt-out’ option, which is missing from the 2021 policy, which forces its users to ‘take-it-or-leave-it.’ “It is the ‘opt-out’ option that primarily led CCI to conclude that the 2016 policy did not violate the Competition Act, 2002,” the judgement states.
Referring to the CCI order, the court stated that Facebook can collect and process personal data from WhatsApp for the purposes of consumer profiling that allows targeted ads, which has the potential to undermine competitive processes and create additional barriers to market entry in clear violation of competition law.
“In light of these observations, it is clear that CCI has, after careful consideration, concluded that a prima facie case of violation of provisions of the Competition Act, 2002, has been made out against the appellants herein, necessitating an investigation by the DG,” the court said.
The bench also stated that reliance on the CCI’s order regarding the 2016 policy is misplaced because it provided users with the option to “opt-out” of sharing user account information with Facebook. “The 2021 policy, on the other hand, places its users in a ‘take-it-or-leave-it’ situation, virtually forcing its users into agreement by providing a mirage of choice, and then sharing their sensitive data with Facebook companies envisaged in the policy,” according to the ruling.