CCI Order Threatens Entire Business Model, Meta Tells NCLAT

The CCI's order against WhatsApp LLC's 2021 privacy policy has far-reaching implications and if allowed to continue, will "destroy" its business model itself, Meta Platforms Inc. argued before the NCLAT on Thursday.

The Competition Commission of India contended before the National Company Law Appellate Tribunal that a stay on its order would set a dangerous precedent.

Meta alleged that the CCI did not conduct a thorough thorough effect analysis before passing its order. It contended that its business model of sharing data among its group companies was not a sinister one and that WhatsApp, being a free app, has to earn its revenue from somewhere.

A five-judge bench of the Supreme Court is already hearing a petition that deals with the 2021 privacy policy and it has refused to halt it in the interim, WhatsApp said.

Meta added that the CCI's order restricts the rights of users in addition to curtailing its own rights under Article 19(1)(g) of the Constitution.

The competition regulator said it conducted a complete effect analysis in its order and that the regulator's order is not going against the case that is before the top court.

The Supreme Court is dealing with the privacy policy case from the angle of Article 21 of the Constitution, and the CCI is dealing with it from a competition angle, the regulator said.

In Europe, Meta gives an opt-in/opt-out option to the users, whereas no such option is extended to Indian users. Once a user in India opts in to the policy, they cannot subsequently opt out of it, the CCI said.

After hearing both sides of the arguments, the NCLAT said it would decide on Meta's stay application against the CCI's order on Jan. 23.

In November, 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 conditions 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.

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.

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.