WhatsApp's New Privacy Policy Shares Sensitive Data With Facebook, Forces Users Into Agreement By Providing Mirage Of Choice: Delhi HC

"The 2021 Policy 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," the Delhi High Court has observed while upholding the proposed investigation of Competition Commission of India (CCI) into WhatsApp's privacy policy.

A division bench comprising of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad dismissed the appeals filed by WhatsApp and its parent company Meta (formerly Facebook) against a single bench order declining to interfere with CCI's investigation into the 2021 privacy policy.

Noting that WhatsApp occupies a dominant position in the relevant product market, the Court observed that there exists a strong "lock-in effect" which renders its users incapable of shifting to another platform "despite dissatisfaction with the product" which is exemplified by how, despite an increase in the downloads of other applications like Telegram and Signal when the 2021 Policy was announced, the number of users of WhatsApp remained unchanged.

"By and large, to ensure retention of its user base and to prevent any other disruptive technology from entering the market, data is utilised by tech companies to customise and personalise their own platforms so that its user base remains hooked. When data concentration is seen through this prism, it does give 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 upon its users, thereby violating Section 4(2)(a)(i) of the Act," the Court observed.

The Court rejected the reliance placed by Whatsapp and Facebook on CCI's Order in Vinod Kumar Gupta case wherein the 2016 Policy was upheld with the finding that there had been no abuse of dominance by the Whatsapp.

The Court said that the reliance was misplaced for the simple reason that 2016 Policy provided its users the option to "opt-out" of sharing user account information with Facebook within 30 days of agreeing to the updated Terms of Service and Privacy Policy.

"The 2021 Policy, however, 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. Therefore, it cannot be said that the CCI is bound by its own findings in Vinod Kumar Gupta (supra) when the issue at hand as well as the circumstances are different," the Court said.

The Court also adjudicated on the issue of overlapping jurisdiction of the CCI and the Constitutional Courts, and whether CCI should abstain from exercising its jurisdiction to maintain comity between decisions of different authorities on the same issues.

It was argued by Whatsapp and Facebook that since the underlying issues arising before the Apex Court and High Court, and the investigation that was sought to be conducted by the CCI were common, this could lead to conflicting opinions.

It was their case that while the Apex Court was looking into the question of privacy violation qua 2021 Policy under Article 21 of the Constitution of India, the investigation by CCI was confined to whether the 2021 Policy was in furtherance of the dominant position occupied by WhatsApp and institutes anti-competitive practices.

Thus rejecting Whatsapp's said contention, the Court said:

"The sphere of operation of both are vastly different. Neither this Court nor the Supreme Court are analysing the 2021 Policy through the prism of competition law."

The Court was of the view that even if the issues were the same, the approach of the authorities was vastly dissimilar, and that there existed no inviolable rule that the CCI would completely lack jurisdiction in the instant matter.

"Parallel inquiries by two different authorities in their respective spheres of adjudication is not uncommon and a slight overlap between the inquiries does not mean that one must lead to the ouster of the other. Therefore, in the absence of any irreconcilable repugnancy between the jurisdiction of both the authorities, i.e. CCI and the Constitutional Courts, the CCI has the liberty to proceed ahead with its investigation under Section 26(1) of the Act," the Court said.

It added "The investigation conducted by the CCI will not be affected by the outcome of the proceedings pending before the Apex Court and this Court. In the event the Supreme Court upholds the 2021 Policy, then surely CCI can venture into the question as to whether the provisions of the Act have been violated or not. In the event that the 2021 Policy is set aside by the Supreme Court, the CCI will still possess the jurisdiction to investigate the violation of the Act, if any, during the pendency of the matter before the Supreme Court when the 2021 Policy was in operation. In either of the cases, it cannot be stated that the CCI does not have the authority look into this affair being the market regulator."

The Court noted that the 2021 Policy was a substantially modified version of the 2016 Policy inasmuch as the 2016 Policy had an "opt-out" option, which was absent from the 2021 Policy that placed its users in a "take-it-or-leave-it" situation.

"It is the "opt-out" option that primarily led to CCI rendering its conclusion that the 2016 Policy did not violate the Competition Act, 2002. However, in the face of changed circumstances, considering the dominant position occupied by WhatsApp, the investigation proposed to be conducted by CCI does not warrant interference, and res judicata would, thus, not be applicable in the instant case," the Court held.

The Court also accepted the CCI's submission that that one of the key issues with the 2021 Policy was its propensity to share the data of its users with Facebook Inc., the parent company of WhatsApp.

"Solely for the reason that the policies itself do not emanate out of Facebook Inc., the Appellant cannot hide behind the fact that it is the direct and immediate beneficiary of the data sharing mechanism envisaged by the policies," the Court said.

The Competition Commission of India had ordered a probe into the new privacy policy of WhatsApp after making a prima facie observation that it was violative of the Competition Act 2000.

A single judge bench of Justice Navin Chawla in April last year dismissed the pleas by Whatsapp and Meta finding no merits in the same. and refused to quash the CCI probe.

Issuing notices to both WhatsApp and its parent company, CCI had observed that the privacy policy terms on sharing of personalised data with Facebook companies was "neither fully transparent nor based on specific, voluntary consent of users".

The CCI had made a prima facie observation that the policy was an abuse of dominant position resulting in violation of Section 4 of the Competition Act.

The anti-trust regulator termed the privacy policy terms "take-it-or-leave-it' terms set by a dominant messaging platform, without providing much information to the users, and observed that the policy prima facie appeared to be "unfair and unreasonable".

The CCI bench comprising Ashok Kumar Gupta(Chairperson), Sangeeta Verma(Member) and Bhagwant Singh Bishnoi(Member) observed that "a thorough and detailed investigation is required to ascertain the full extent, scope and impact of data sharing through involuntary consent of users".

Accordingly, the Commission directed the Director General ('DG') to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act. The Commission also directed the DG to complete the investigation and submit the investigation report within a period of 60days from the receipt of this order.

Case Title: Whatsapp LLC v. CCI, Facebook v. CCI

Citation: 2022 LiveLaw (Del) 799

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