"Policy is virtually forcing its users into the agreement": Delhi High Court uphold Probe ordered By CCI Into WhatsApp's New Privacy Policy

The Delhi High Court has upheld the order of the Competition Commission of India directing a probe against WhatsApp's Privacy Policy while observing that the policy is virtually forcing its users into the agreement by providing a mirage of choice.

A division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad dismissed appeals filed by WhatsApp & Facebook (now Meta) challenging a single-judge bench's order refusing to stay the probe by the Competition Commission of India (CCI) into WhatsApp's new privacy policy.

A bench of Justice noted, "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."

The High Court said that the CCI's order has been passed after due consideration while referring to the observation made by the CCI that the accumulation and processing of personal data from WhatsApp, in addition to its own direct data collection, can be done by Facebook for consumer profiling that allows for targeted ads, inter alia, which in turn has the potential to undermine competitive processes and create further barriers to market entry in stark violation of Section 4(2)(c) and (e) of the Act.

The bench observed that WhatsApp occupies a dominant position in the relevant product market and that there exists a strong lock-in effect which renders its users incapable of shifting to another platform despite dissatisfaction with the product. The bench clarified the situation by mentioning that despite an increase in the downloads of Telegram and Signal when the 2021 Policy was announced, the number of users of WhatsApp has remained unchanged.

CJ Sharma also opined that to ensure retention of the 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 their userbase remains hooked.

The above-mentioned logic gives meaning to the new adage that “data is the new oil” and it raises competition concerns as it prima facie amounts to imposition of unfair terms and conditions upon its users, thereby violating Section 4(2)(a)(i) of the Act.

In July this year, the High Court had reserved its order in the petition filed by WhatsApp and its parent company Meta.

CCI had ordered an investigation into the app's new privacy policy last year on its own, claiming that it violated the Competition Act of 2000. The commission had issued notices to both platforms, claiming that their privacy policies were neither transparent nor based on users' voluntary consent.

The commission dubbed the new terms and conditions "take-it-or-leave-it," claiming that they lacked clarity and did not provide users with a clear understanding of them.

In May last year, the Division Bench of Chief Justice DN Patel & Justice Jasmeet Singh had issued notice in an appeal against the dismissal of a petition filed by Facebook & Whatsapp challenging the CCI’s order for probe.

The appeal was filed against the order dated April 22, 2021, passed by the Single Bench of Justice Navin Chawla wherein, Whatsapp’s & Facebook’s appeal against the order dated March 24, 2021, passed by the CCI in Re: Updated Terms of Service and Privacy Policy for WhatsApp Users (Suo Moto Case No. 01 of 2021) vide which the Commission ordered a probe into Whatsapp updated privacy policy for breaching Competition Law was dismissed.

Justice Chawla had noted that CCI’s order could not be quashed merely because it did not await the outcome of the cases pending before the Supreme Court & High court. The court said that it did not see any merits in the petitions of Facebook & Whatsapp to interdict the investigation directed by the CCI.

The investigation ordered u/s 26(1) of the Competition Act, 2002 came against the backdrop of the registration of a Suo Moto case by CCI after various media reports reporting of WhatsApp Inc’s updated privacy policy & terms of service as per which WhatsApp users were mandatorily required to accept the terms & conditions to retain their WhatsApp account information.

Case Title: WhatsApp LLC vs. CCI