Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members) while addressing the complaint in regard to unfair business by WhatsApp, dismissed the same on finding no competition concern.

Informant has filed the present information under Section 19(1)(a) of the Competition Act, against Whatsapp and Facebook alleging a contravention of provisions of Sections 4 of the Act and both Facebook and Whatsapp are collectively known as “OPs”.

Users of WhatsApp automatically get the payment app owned by WhatsApp i.e. ‘WhatsApp Pay’ installed on their smartphones. This, as per the Informant leads to the contravention of Section 4(2)(a)(i) of the Act as automatic installation of WhatsApp Pay on existing WhatsApp Messenger user’s device amounts to the imposition of an unfair condition on the users/consumers.

COERCION

A user who does not wish to install the Payments App but only the Messenger App does not have the option to do so.

Contravention: Section 4(2)(e)

Automatic installation also amounts to a contravention of Section 4(2)(e) of the Act as the dominance of WhatsApp in the Internet-based instant messaging App market favours and protects it in the UPI enabled Digital Payments Applications Market.

Informant further alleges that the acquisition of WhatsApp, Instagram and Oculus by Facebook causes an adverse effect on the competition as these companies to have huge data sets of users that they can use for their commercial advantage.

Decision and Analysis

Coram observes that the preamble to the Act unequivocally voices the ethos with which the Act was enacted, keeping in view the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto.

The mere fact that a case has been filed by an aggrieved party under the Competition Act, does not take away its character of being a case in rem involving a larger question of fair and competitive markets.

Further, it was observed that the Informant need to necessarily be an aggrieved party to file a case before the Commission.

Forum Shopping

Informant has indulged in forum shopping being closely associated with a petitioner who has approached the Supreme Court against WhatsApp and Facebook and this apparent non-disclosure reveals the mala fide intent and unclean hands with which the Informant has approached the Commission.

The Commission observes that WhatsApp and Facebook are third-party apps broadly providing internet-based consumer communications services. Consumer communications services can be sub-segmented based on different parameters.

Commission agrees with the Informant that the second relevant market for assessing the allegations of the Informant would be ‘market for UPI enabled Digital Payments Apps in India’.

At the outset, the Commission observes that Facebook and WhatsApp are group entities and though they may operate in separate relevant markets, their strengths can be attributed to each-others’ positioning in the respective markets in which they operate.

Commission added that in the absence of concrete data/information available in the Indian context other than the subjective information on the popularity of WhatsApp, the Commission is of the view that these trends and results can be used as a proxy, the said trends point towards Whatsapp’s dominance.

Barriers to Entry

The barriers to entry, may arise indirectly as a result of the networks effects enjoyed by the dominant player in the market, i.e. WhatsApp, in the present case. Since network effects lead to increased switching costs, new players may be disincentivized from entering the market.

Hence, Commission prima facie finds WhatsApp to be dominant in the first relevant market — market for OTT messaging apps through smartphones in India.

As regards Section 4(2)(a)(i), the Commission does not find much merit in the allegation of the Informant as mere existence of an App on the smartphone does not necessarily convert into transaction/usage.

Incorporating the payment option in the messaging app does not seem to influence a consumer’s choice when it comes to exercising their preference in terms of app usage, particularly since there seems to be a strong likelihood of a status quo bias operating in favour of the incumbents, at present.

With regard to the allegation under Section 4(2)(d) of the Act, the Commission observes that though the Informant has used the word ‘bundling’, the nature of such allegation is more akin to ‘tying’ as understood in the antitrust context generally.

While ‘tying’ refers to a practice whereby the seller of a product or service requires the buyers to also purchase another separate product or service, which essentially is the allegation of the Informant.

Installation of the WhatsApp messenger does not appear to explicitly mandate/coerce the user to use WhatsApp Pay exclusively or to influence the consumer choice implicitly in any other manner, at present.

UPI Market

UPI market is quite established with renowned players competing vigorously. Given the fact that WhatsApp ecosystem does not involve paid services as such for normal users, it seems unlikely that the consumer traffic will be diverted by WhatsApp using its strength in the messenger market. 

Facebook and WhatsApp undeniably deal with customer sensitive data which is amenable to misuse and may raise potential antitrust concerns among other data protection issues.

In the present case, the Informant has only alleged that WhatsApp/Facebook have access to data which they are using for doing targeted advertising, hence there is no concrete allegation.

Informant has also claimed that WhatsApp is in serious non-compliance with critical and mandatory procedural norms.

In view of the above allegation, Commission, do not seem to raise any competition concern and as such may not need any further scrutiny by it.

Therefore, based on the aforesaid analysis, Commission does not find alleged contravention of the provisions of Section 4 of the Act against WhatsApp or Facebook being made out. [Harshita Chawla v. WhatsApp,  2020 SCC OnLine CCI 32, decided on 18-08-2020]

Case BriefsForeign Courts

Supreme Court of the United States: The appeal lies before the Bench of Kavanaugh, J.

The facts of the case were such that the respondent Archer and White Sales Inc. sued Henry Schein for the violation of Federal and State anti-trust laws, seeking monetary and injunctive relief. The contract between the parties provided for arbitration to resolve any dispute arising between them except for actions seeking injunctive relief. Schein, therefore, requested the District Court to refer the matter to arbitration while Archer argued that this matter was not subject to arbitration owing to injunctive relief. The Fifth Circuit affirmed with Archer’s view. However, the Supreme Court vacated the judgment of the Fifth Circuit and held that parties to such a contract may refer to an arbitrator to decide the ‘gateway questions of arbitrability.’ The Court opined that a court cannot override the contract even if it thinks that the arbitrability claim is ‘wholly groundless.’

The case was remanded for further proceedings.[Henry Schein Inc. v. Archer and White Sales Inc., 2019 SCC OnLine US SC 1, decided on 08-01-2019]