Meta Challenges CCI's Rs 213 Crore Penalty Over WhatsApp's 2021 Privacy Policy At NCLAT

Meta Platforms Inc., formerly known as Facebook Inc., moved the National Company Law Appellate Tribunal on Monday, challenging an order of the Competition Commission of India that imposed a Rs 213-crore penalty on the company in relation to WhatsApp's 2021 privacy policy update.

The NCLAT was informed that the CCI order has wide ramifications for the industry as a whole, and therefore an urgent hearing in the matter will be required.

Senior counsels Kapil Sibal and Mukul Rohtagi appeared for Meta virtually and requested a hearing on Jan. 16. The NCLAT granted the request.

The case will now come up for a hearing before the appellate tribunal on Jan. 16.

In November last year, the CCI imposed a penalty of Rs 213.1 crore on Meta, the parent entity of WhatsApp, for "abusing its dominant position" in the implementation of the messaging platform's privacy policy in 2021.

The action against Meta relates to how the privacy policy "was implemented and how user data was collected and shared with other Meta companies."

The CCI issued cease-and-desist directions and also directed Meta and WhatsApp to implement certain behavioural remedies within a defined timeline.

Through its investigation, the CCI concluded that the 2021 policy update by WhatsApp on a ‘take it-or-leave-it' basis constituted an imposition of unfair condition under the Competition Act, 2002.

"It compels all users to accept expanded data collection terms and sharing of data within Meta Group without any opt out. Given the network effects and lack of effective alternatives, the 2021 Update forces users to comply, undermining their autonomy, and constitutes an abuse of Meta's dominant position. Accordingly, the Commission finds that Meta (through WhatsApp) has contravened Section 4(2)(a)(i) of the Act," the CCI said.

Also, since Meta shared WhatsApp users' data with other group companies and created an entry barrier for its rivals, it was found to abuse its dominant position in two markets — the OTT messaging app market and the online display advertising market, the antitrust regulator said. "Therefore, it was found to be in contravention of Section 4(2)(c) and Section 4(2)(e) of the Act."

As part of the penalty, WhatsApp was directed not to share user data collected on its platform with other Meta companies for advertising purposes for five years.

After five years, WhatsApp's policy will be required to provide a thorough justification for the user data it shares with other Meta companies.

Furthermore, the sharing of user data collected on WhatsApp with other Meta companies for purposes other than providing the messaging app's services will not be a condition for WhatsApp users in India.

The CCI noted that as a remedy, all users in India, including those who have accepted the 2021 update, will have the option to opt out through an in-app notification and to review and modify their choice regarding such data sharing through the WhatsApp app.

In response, a Meta spokesperson said the company disagrees with the CCI's ruling and plans to appeal against the fine and the curbs.

The 2021 update offered users a choice and did not alter the privacy of their personal messages. We also ensured no one would have their accounts deleted or lose functionality of the WhatsApp service because of this update, the spokesperson said.