Delhi High Court upholds CCI’s direction to investigate alleged anti-competitive WhatsApp Terms of Service and Privacy Policy, 2021; Prima facie case established to investigate; FB a proper party

Delhi High Court

Delhi High Court: The appeals were filed by WhatsApp (‘Appellant’) and its parent company Facebook (‘Appellant’) challenging the jurisdiction of Competition Commission of India (‘respondent’) to direct investigation into the 2021 Terms of Service and Privacy Policy of the Appellant on the ground that it violates the provisions of the Competition Act, 2002, when the matters arising from the same issue is pending before Supreme Court. A Division Bench of Satish Chandra Sharma CJ., and Subramonium Prasad J., upheld the impugned judgment as well the direction of respondent as prima facie case was established and as there is no irreconcilable repugnancy between the jurisdiction of either of the authorities.

Brief Background

WhatsApp was originally governed by its own Terms and Privacy Policy of 2012, however after Facebook acquired WhatsApp in 2014, the policy got updated in 2016 (‘2016 Policy’). The 2016 policy informed WhatsApp users about the acquisition and how Facebook would use WhatsApp’s information for its advertisement and products giving a one-time opportunity to WhatsApp users to opt out of Facebook using their information that was shared over WhatsApp. However, users who joined WhatsApp after the 2016 Policy, were not offered this option. The policy was challenged, and the adjudication stands pending before the Supreme Court as we report it.

The policy got updated again in the year 2021 which was again challenged before Delhi high court and Supreme Court pending adjudication, as we report. CCI, thus taking Suo motu cognizance under Section 26(1) of Competition Commission Act, 2002, directed the Director-General, (‘CCI (DG)’) to conduct an investigation to examine the potential abuse of dominance exercised by both the Appellants under Section 4 of Competition Commission Act, 2002. Assailing this, a petition was filed which was rejected by the Single Judge and thus present appeals were filed primarily on the issue as to whether the CCI ought to wait till final adjudication of the issues which are pending before the Supreme Court.

Issue 1: Whether CCI should abstain from exercising its jurisdiction to maintain comity between decisions of different authorities on the same issues?

The issue is regarding overlapping jurisdictions of CCI and Constitutional Courts. Placing reliance on Competition Commission of India v. Bharti Airtel (2019) 2 SCC 521, the Court noted that while the Supreme Court is looking into whether the 2021 Policy is violative of the right to privacy under Article 21 or not, the investigation by CCI is confined to whether the 2021 Policy is in furtherance of the dominant position occupied by WhatsApp and institutes anti-competitive practices. The spheres of operation of both are vastly different. Neither this Court nor the Supreme Court are analyzing the 2021 Policy through the prism of competition law.

Scope and Ambit of Section 26 (1) Competition Act, 2002

Placing reliance on Competition Commission of India v. Steel Authority of India, (2010) 10 SCC 744, the Court noted that the jurisdiction of the CCI under Section 26(1) does not contemplate an adjudicatory function, but merely an administrative one. Thus, the function performed by the CCI under Section 26(1) Competition Act, 2002 would not be affected by the adjudication by the Supreme Court or the present Court while analyzing the potential violation of fundamental rights instigated by the 2021 Policy.

Will the principle of res-judicata apply?

The Court further noted that the 2021 Policy is a substantially modified version of the 2016 Policy inasmuch as the 2016 Policy had an “opt-out” option, which is absent from the 2021 Policy that places 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.

Issue 2: Has CCI failed to discern a prima facie case that would entail a direction to the DG to investigate the alleged anti-competitive practices?

Placing reliance on Management of the Bangalore Woollen Cotton and Silk Mills Co. Ltd. v. B. Dasappa, AIR 1960 SC 1352, the Court observed that a prima facie case need not be a case proved to the hilt, but a case which can be said to be established if the evidence which is led in support of the same were to be believed.

In order to reach a conclusion for this issue, it is important to discuss first whether or not the Appellants occupy a dominant position in the relevant geographical market and the relevant product market. Placing reliance on Harshita Chawla v. WhatsApp Inc., 2020 SCC OnLine CCI 32, the Court concluded that given its popularity and wide usage, WhatsApp seems to be dominant. Paragraph 33 of the impugned decision states details which are in stark violation of Section 4(2)(c) and (e) of the Competition Act, 2002. Thus, a prima facie case of violation of provisions of the Competition Act, 2002, has been made out against the Appellants herein that would require an investigation to be initiated by the DG.

Is Facebook a proper party?

The Court found merit in the submission of CCI that one of the key issues with the 2021 Policy is 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. Thus, Facebook is the entity from which the policy under challenge emanates thus making it proper to be a party to the proceedings.

Thus, the Court did not find it appropriate to scuttle the investigation at a nascent stage. However, it granted liberty to the applicant to take all such steps as required by it, in accordance with law, to impugn the CCI Order.

[WhatsApp LLC v. Competition Commission of India, 2022 SCC OnLine Del 2582, decided on 25-08-2022]

Advocates who appeared in this case :

For LPA 163/2021 & CM APPLs. 15908/2021, 16893/2021, 18800/2021, 18910/2021, 46058/2021, 46059/2021, 46655/2021

Counsel for WHATSAPP LLC: Mr. Harish Salve, Sr. Advocate with Mr. Tejas Karia, Mr. Shashank Mishra, Ms Supritha Prodaturi and Mr. Shashank Mishra, Advocates

For CCI: Mr. N. Venkataraman, ASG with Mr.V. Chandrashekara Bharathi, Ms.Amritha Chandramouli, Mr. S. Ram Narayan, Mr. Samar Bansal, Mr.Madhav Gupta, Mr. Vedant Kapur, Advocates for R-1. Ms Binsy Susan, Ms. Anjali Kumar, Mr. Shyamal Anand and Mr. Vishesh Sharma, Advocates for Meta Platforms Inc. Mr. Parag Tripathi, Sr. Advocate with Mr. Ajit Warrier, Mr. Yaman Verma, Mr. Swati Aggarwal and Ms. Mishika Bajpai, Advocates for Facebook India in CM APPL. 40334/2021.

For LPA 164/2021 & CM APPLs. 15931/2021, 18798/2021, 18912/2021, 40334/2021, 40335/2021, 46656/2021

Counsel for FACEBOOK INC: Mr. Mukul Rohatgi, Sr. Advocate with Ms. Sweta Shroff Chopra, Mr. Gauhar Mirza and Ms. Nitika Dwivedi, Advocates.

For CCI: Mr. Balbir Singh, ASG with Ms. Monica Benjamin, Ms. Anu Sura, Mr. Samar Bansal, Mr. Madhav Gupta, Mr. Vedant Kapur, Advocates for R-1 Mr. Varun Pathak, Mr. Mitali Daryani, Mr. Yash Karunakaran and Ms. Vani Kaushik, Advocates for R-2 Mr. Parag Tripathi, Sr. Advocate with Mr. Ajit Warrier, Mr. Yaman Verma and Ms. Mishika Bajpai, Advocates for Facebook India in CM APPL. 40334/2021.

*Arunima Bose, Editorial Assistant has put this report together.

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