India: Competition Commission Of India Negates Challenge To WhatsApp Contravening Provisions Of Section 4 Of The Competition Act, 2002.

The Competition Commission of India (Hereafter "CCI"), in the matter of Shri Vinod Gupta v. WhatsApp Inc.¹ negated a challenge made under section 19(1)(a)² of the Competition Act, 2002, (Hereafter the "Act") against WhatsApp Inc. (Hereafter "WhatsApp,") alleging contravention of Section 4³ of the Act.⁴

The Informant, Mr. Vinod Gupta, filed an information, under section 19(1)(a) of the Act, alleging that about 95% of smart phones in India have WhatsApp installed, and with more than 70 million users,⁵ WhatsApp holds a substantial market share, which has further increased from 450 million to 1 billion, due to WhatsApp decision to dispense charging fees from its users.⁶

The Informant's grievance was that WhatsApp on being acquired by the Facebook on 19.02.2014, changed its privacy policy in August, 2016, as per which WhatsApp is sharing its data with Facebook, which is thereafter used by the latter for targeted advertisements.⁷ The informant alleged that the new privacy policy enables copying, downloading, and extracting of the database, and other information for the commercial benefits of WhatsApp/Facebook in violation of the provisions of the Information Technology Act, 2000.⁸

The Informant therefore prayed for prohibiting WhatsApp from; i) sharing users' information with Facebook; and ii) a direction to WhatsApp, not to discontinue its services to users, who did not opt for the change in the privacy policy.⁹

Per Contra WhatsApp contended that all types of messages, and calls made through WhatsApp are protected by end to end encryption, thereby making the same immune from being read either by the third parties, or even WhatsApp itself, except for the intended recipient.¹⁰

CCI Finds WhatsApp Is In Dominant Position In The Relevant Market¹¹;

The CCI apart from cited sources, relied on information available in public domain, and noted that a number of other players such as Apple with iMessage, Blackberry with BBM, Samsung with ChatOn, Google with Google Hangouts, and Micosoft with Skype provide consumer communication apps, and other communication apps such as Hike, Viber, We Chat are also active in the market. However, WhatsApp within India has 160 million monthly active users, with 97% of the smart phone users in the country using some communication apps daily of which the most popular is WhatsApp, being installed on 96% of devices i.e. 2.3 times more devices than other messaging applications,¹² and 56%, and 51% of internet users in India use WhatsApp, and Facebook respectively,¹³ therefore WhatsApp is in the dominant position in the relevant market.¹⁴

CCI Finds Allegations Of Breach Of The Information Technology Act , 2002, Do Not Fall Within The Ambit Of The Competition Act ;

The CCI noted that the WhatsApp privacy policy had been updated in relation to the sharing of users' data, and information with Facebook (including with "Facebook Family of Companies,") for the purpose of improving infrastructure, delivery systems, securing system, online advertisements, and product experiences available to the users on their Facebook pages, fighting spams, abuse, and infringements.¹⁵ Additionally, WhatsApp also provides the users with an option to opt out of sharing information with Facebook within 30 days of agreeing to the updated terms of service, and privacy policy.¹⁶ The CCI also accepted WhatsApp's submission that all messages, and calls are protected by end-to-end encryption so that the third parties, and even WhatsApp itself cannot read them, and the messages can only be decrypted by the intended recipient.¹⁷ Additionally, CCI also noted that nothing that a user shares on WhatsApp is shared on Facebook, or any other apps of "Facebook Family of Companies," for an third party to see.¹⁸

The CCI relied upon the judgment of Hon'ble Delhi High court in Karmanya Singh Sareen & ors v. Union of India & ors,¹⁹ wherein it had been inter alia held that it was open to existing users of WhatsApp, who did not want their information to be shared on Facebook, to opt for deletion of their account.²⁰ In these circumstances, the CCI observed that the examination of the allegations of the breach of the Information Technology Act, 2002, did not fall within the ambit of the Act.²¹

CCI Finds What sApp Is Not Indulging in Predatory Pricing;

The allegation that WhatsApp is indulging in predatory pricing was negated for the following reasons; i) the standard practice in the market is to provide services without charging the users (as a matter of fact, apart from WhatsApp, good many other apps like Hike, messenger, etc also do not levy any charge);²² ii) the revenue model of WhatsApp is similar to other competitors in the market;²³ iii) users can shift from one communication app to another without incurring any costs since;²⁴ (a) all consumer communication apps are either free of cost, or minimally priced;²⁵ (b) all consumer communication apps are easily downloadable on smart phones, and can co-exist on the same handset without taxing much system capacity;²⁶ (c) once consumer communication apps are installed on a device, users can change its competitor apps for e.g. uninstalling, or otherwise deactivating the similar apps;²⁷ (d) the user interfaces of all such consumer communication apps being simplistic, the costs of switching to a new app are minimalistic;²⁸ and (e) information about new apps is easily accessible because of the number of reviews of consumer communication apps on apps store. There being no significant barriers for the entry of new communication apps, and the consumers being price sensitive.²⁹

In the light of aforesaid, the CCI closed the information under section 26(2)³⁰ of the Act, observing that while the WhatsApp is in a dominant position, nevertheless it has not resorted to any predatory pricing, and thus not flouted the provisions of Section 4 of the Act.

Footnotes

1 MANU/CO/0036/2017.

2 19. (1) The Commission may inquire into any alleged contravention of the provisions contained in subsection (1) of section 3 or sub-section (1) of section 4 either on its own motion or on— (a) 29[receipt of any information, in such manner and] accompanied by such fee as may be determined by regulations, from any person, consumer or their association or trade association; or

3 Section 4 prohibits abuse of dominant position

4 Ibid., at p. 6, Para 20.

5 Ibid., at p. 1, Para 4.

6 Ibid., at p. 2, Para 5.

7 Ibid., at p. 2, Para 9.

8 Ibid., at p. 2, Para 6.

9 Ibid., at p. 2, Para 7.

10 Ibid., at p. 4, Para 15.

11 Qua the "relevant product market," the CCI, in para 11 noted that Whatsapp was unlike the traditional electronic communication(s) such as text messaging, voice calls etc. since it was an instant communication application, which provides a platform for communication through texting, group chats, voice, and video calls using the internet, and other functionalities. Additionally, the CCI also noted that whereas the traditional electronic communication services could be used through any mobile phone, the instant communication apps could only be used through Smart phones. Furthermore, the CCI noted the while the Whatsapp didn't charge any fee from its users, which was no so in case of traditional communication services. Lastly, the instant messaging services require the users to use the same communication application platform, whereas the traditional electronic communication could be effected between people who did not use the mobile service of the same provider. In this view of the matter, the CCI held that the relevant product market in the case could be considered as "the market for instant messaging services using consumer communications Apps through smart phones." (Emphasis supplied).

Qua the "relevant geographic market," the CCI, in para 12 noted that the functionality provided by consumer communication apps through smart phones was inherently cross-border, with consumers free to install any app they want, without any geographical limitations, and the functionality of apps differing from either region to region or country to country either in terms of price fluctuations, functionalities, platforms, or operating systems. However, in view of the fact that the allegations of the informant pertained to "anti-competitive" conduct of WhatsApp view of the fact that the allegations of the informant pertained to "anti-competitive" conduct of WhatsApp within the geographic boundary of India, and the competition conditions for instant messaging services using such apps through smart phones was homogenous throughout the country, hence the geographic area of India was considered to be the relevant geographic area. (Emphasis supplied).

Having considered the relevant product market, & relevant geographic market, the CCI was of the view that the relevant market, in the facts of the case, may be considered as "the market for instant messaging services using consumer communications applications through smart phones in India"

12 Ibid., at p. 4, Para 14 relying upon Jana and mCent.

13 Id., relying upon TNS/TNC Connected Life Study, 2015.

14 Ibid., at p. 4, Para 14.

15 Ibid., at p. 4, Para 15.

16 Id.

17 Id.

18 Id.

19 233 (2016) DLT 456 (DB) = MANU/DE/2607/2016. The Hon'ble DB inter alia opined that the legal position regarding the existence of the fundamental right to privacy is yet to be authoritatively decided (referring to K.S. Puttaswamy (Retired) and Anr. v. Union of India. (2015) 8 SCC 735). The three judge bench in K.S. Puttaswamy had referred the matter to a larger bench, and the reference is currently pending adjudication.

20 Ibid., at p. 5, Para 17.

21 Id.

22 Ibid., at p. 5, Para 19.

23 Id.

24 Id.

25 Id.

26 Id.

27 Id.

28 Id.

29 Id.

30 Section 26(2) reads "Where on receipt of a reference from the Central Government or a State Government or a statutory authority or information received under section 19, the Commission is of the opinion that there exists no prima facie case, it shall close the matter forthwith and pass such orders as it deems fit and send a copy of its order to the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be."

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