NCLAT: WhatsApp Abused Dominant Position; Massive Rs. 213 Cr Penalty on Meta Stands
The National Company Law Appellate Tribunal (NCLAT) said that WhatsApp placed unfair and unequal conditions on its users by using a “take it or leave it” policy. This means that people who wanted to use WhatsApp had no real choice; they either had to accept all the terms or stop using the app completely.
According to NCLAT, WhatsApp forced users to agree to share a large amount of their personal data with Facebook and other related companies as a condition for using its services. The platform did not give users any genuine or effective option to refuse or opt out of this data sharing.
NCLAT further stated, “We find that mandatory acceptance of broad and vague data sharing terms amounted to coercion and unfair conditions on users,” which is violative of Section 4(2)(a)(i) of the Competition Act.
A Meta spokesperson said while commenting on the NCLAT ruling, “We welcome the NCLAT’s decision. While we await the written order, we continue to reiterate that WhatsApp’s 2021 privacy policy update did not change the privacy of people’s personal messages, which remain end-to-end encrypted. WhatsApp’s optional business features make people’s lives more convenient with services like bill payments, ticket booking, and shopping while supporting local businesses and furthering India’s digital economy.”
NCLAT, in one of its long orders of 184 pages, said that cross-platform data sharing between WhatsApp and Meta increased Meta’s advantage in the display advertising market, creating an entry barrier for rival firms in digital advertising that did not have equivalent access to WhatsApp data.
It said, “We note that Meta is not dominant in Market but is a leading business entity and by its conduct has created a situation of market denial and thus Meta has violated Section 4(2)(c). It needs to be noted that Section 4(2)(c) gets attracted herein due to special circumstances existing in this case.”
However, NCLAT said the CCI “order holding breach of Section 4(2)(e) is not sustainable” as it cannot be concluded that Meta has leveraged its dominance in one market (OTT messaging) to protect or extend dominance in another, online display advertising.
The NCLAT bench comprising Chairperson Justice Ashok Khushan and Member Arun Baroka said this is the main reason that WhatsApp and Meta are two different legal entities.
NCLAT said, “The directions issued by the CCI to cease and desist in paragraph 247.1, i.e., ‘247.1 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 5 years from the date of receipt of this order…’ is not sustainable and is set aside.” However, the rest of the impugned order is upheld.
NCLAT further stated, “The penalty of Rs 213.14 crore imposed only by CCI upon Meta is upheld.”
The NCLAT said that while Meta is not dominant in India’s online display advertising market, it is still one of the leading players, and its actions have caused anti-competitive effects in that market. It found that WhatsApp is dominant in the market for smartphone messaging apps in India and has abused this position, violating Section 4(2)(a)(i) of the Competition Act, which justifies the penalty imposed on it.
The tribunal also noted that Meta has full control over WhatsApp, as the messaging platform has no separate financial statements and both share common executives. Due to the extensive data sharing between WhatsApp and Meta, a situation of market denial has been created, leading the tribunal to uphold a joint penalty on both companies as imposed by the Competition Commission of India.
In September, the National Company Law Appellate Tribunal (NCLAT) finished hearing the appeals filed by Meta and WhatsApp against a penalty imposed by the Competition Commission of India (CCI). The CCI had fined Meta Rs. 213.14 crore, saying the company used unfair business practices related to WhatsApp’s 2021 privacy policy update.
Both Meta and WhatsApp challenged this decision. Earlier, in January, the NCLAT had temporarily stopped a part of the CCI’s order that banned data sharing between WhatsApp and Meta for five years for advertising purposes. This gave Meta some relief while the case continued.
