By way of a June 1 2017 order, the Competition Commission of India (CCI) closed the case for alleged abuse of dominance against popular messaging service WhatsApp.(1) The CCI found no prima facie case to investigate the alleged conduct of WhatsApp, despite affirming its dominant position in the relevant market.

Facts

The complaint against WhatsApp was filed by Vinod Kumar Gupta on behalf of non-governmental organisation Fight for Transparency Society.

In February 2014 WhatsApp was acquired by Facebook Inc and in August 2016 it introduced changes to its privacy policy that allegedly forced users to share their account details and other information with Facebook in order to continue to use WhatsApp's services. According to the complaint, this enabled Facebook to use customers' data for targeted advertising in a highly deceptive manner. It alleged the following:

  • The vast majority of WhatsApp users in India were not equipped to read, or comprehend the consequences of, the amended terms and conditions in the WhatsApp privacy policy.
  • The use of customers' mobile data – including vital user information (eg, contacts) – for commercial benefits by Facebook violated the Information Technology Act 2000, as well as an unfair condition constituting an abuse of dominance under Section 4 of the Competition Act 2002.

It was also alleged that by offering a free service since January 2016, WhatsApp had indulged in the practice of predatory pricing in violation of Section 4 of the Competition Act.

Decision

The CCI concluded on the basis of various reports that WhatsApp held a dominant position in the relevant market for "instant messaging services using consumer communication apps through smartphones in India". It found WhatsApp to be the most popular messaging service on the grounds that it:

  • has been installed by 97% of smartphone users in India on 96% of devices;
  • has more daily active users than any other communication app in India; and
  • has been installed on over twice as many devices as homegrown messaging apps (eg, Hike).

However, regarding the allegation of abuse of dominance, the CCI noted that WhatsApp provided users with the option to opt out of sharing their information with Facebook within 30 days of agreeing to the updated terms of service and privacy policy. The CCI agreed with the submission made by WhatsApp that it used end-to-end encryptions to safeguard calls so that third parties and the application itself could not decipher these, and messages could be decrypted only by the recipient. The CCI also agreed with the submission that no information shared by a user on WhatsApp – including his or her messages, photos and account information – was shared with Facebook or any other application in the "Facebook family of companies" for third-party use.

Regarding the allegation that WhatsApp's conduct when making its users sign its new private policy was in violation of the Information Technology Act and the right of privacy, the CCI noted that this issue was already under judicial consideration in an appeal pending before the Supreme Court arising from a writ petition filed with the Delhi High Court (WP(C) 7663/2016) in which similar allegations were raised by WhatsApp users. Therefore, this issue was outside the purview of the CCI as it was not pursuant to the Competition Act.

Finally, regarding the allegation that WhatsApp had indulged in predatory pricing by offering free services, the CCI noted that several other applications (eg, Hike, Messenger and Viber) were available in the relevant market which also offered free services. Therefore, it appeared to be standard practice in the industry and WhatsApp alone could not be accused of indulging in predatory pricing since it was following the revenue model. Further, the CCI noted that no significant costs prevented users from switching from WhatsApp to other communication applications, since all such applications were easily downloadable on smartphones and could coexist on the same device.

For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4929 2525) or email (mmsharma@vaishlaw.com). The Vaish Associates website can be accessed at www.vaishlaw.com.

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Endnotes

(1) CCI decision dated June 1 2017. For full text, please see the CCI's website.