CCI Imposes Rs 213 Cr Penalty On Meta For Abusing Domination Position; Meta Disagrees & Plans To Appeal

The Competition Commission of India (CCI) has imposed a penalty of Rs 213.14 crores on Meta (formerly Facebook) for abusing its dominant position. This relates to WhatsApp’s 2021 Privacy Policy being implemented and how user data was collected and shared with other Meta companies. 

India’s competition watchdog has also issued cease-and-desist directions and directed Mark Zuckerberg’s Meta and WhatsApp to implement certain behavioural remedies within a defined timeline.

In this matter, CCI delineated two relevant markets i.e., the market for OTT messaging apps through smartphones in India; and the market for online display advertising in India. Further, Meta Group operating through WhatsApp was found to be dominant in the market for OTT messaging apps through smartphones in India. Moreover, it was also found that Meta holds a leading position compared to its competitors in online display advertising in India.

Starting from January 2021, WhatsApp notified users about updates to its terms of service and privacy policies. The in-app notification stated that, effective February 8th, 2021, users were required to accept these terms, including expanded scope of data collection as well as mandatory data sharing with Meta companies, to continue using WhatsApp. 

Under the previous privacy policy dated August 25th, 2016, WhatsApp users were given the option to decide whether they wanted to share their data with Facebook. However, with the latest policy update in 2021, WhatsApp made data sharing with Meta mandatory for all users, removing the earlier option to opt out. As a result, users had to accept the new terms, which include data sharing with Meta, in order to continue using the platform.

Furthermore, CCI has concluded that the 2021 policy update by WhatsApp on a ‘take-it-or-leave-it’ basis and that constitutes an imposition of unfair condition under the Competition Act 2002, as 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, CCI has found that Meta (through WhatsApp) has contravened Section 4(2)(a)(i) of the Act.

Further, as regards sharing of data between Meta companies, CCI has concluded that- 

1. Sharing of WhatsApp users’ data between Meta companies for purposes other than providing WhatsApp Service creates an entry barrier for the rivals of Meta and thus, results in denial of market access in the display advertisement market, in contravention of the provisions of Section 4(2)(c) of the Act
2. Meta has engaged in leveraging its dominant position in the OTT messaging apps through smartphones to protect its position in the online display advertising market and the same is in contravention of Section 4(2)(e) of the Act.

In view of the anti-competitive harm elaborated in this order and for the purpose of addressing such harm, the OPs are further directed to implement the following directions- 

1. WhatsApp will not share user data collected on its platform with other Meta Companies or Meta Company Products for advertising purposes, for a period of five years from the date of receipt of this order. After expiry of the said period, the directions at para 6.2 (except para 6.2.1) will apply mutatis mutandis in respect of such sharing of data for advertising purposes
2. With respect to sharing of WhatsApp user data for purposes other than advertising-
3. WhatsApp’s policy should include a detailed explanation of the user data shared with other Meta Companies or Meta Company Products. This explanation should specify the purpose of data sharing, linking each type of data to its corresponding purpose
4. Sharing of user data collected on WhatsApp with other Meta Companies or Meta Company Products for purposes other than for providing WhatsApp services shall not be made a condition for users to access WhatsApp Service in India
5. In respect of sharing of WhatsApp user data for purposes other than for providing WhatsApp Services, all users in India (including users who have accepted 2021 update) will be provided with-

   a) the choice to manage such data sharing by way of an opt-out option prominently through an in-app notification
   b)the option to review and modify their choice with respect to such sharing of data through a prominent tab in settings of WhatsApp application
   c)All future policy updates shall also comply with these requirements.

As per reports, in response to CCI’s order, the tech giant has stated that it disagrees with the decision and plans to appeal.

“As a reminder, the 2021 update did not change the privacy of people’s personal messages and was offered as a choice for users at the time. We also ensured no one would have their accounts deleted or lose functionality of the WhatsApp service because of this update,” the reports quoted a Meta spokesperson.

Meta has also clarified, “The update was about introducing optional business features on WhatsApp and provided further transparency about data collection and usage.”