[Ali Ahmed Chaudhary is a fourth year law student at National Law University, Delhi]
Introduction
The Competition Commission of India (CCI), after taking suo moto cognizance under Section 19 of the Competition Act, 2002 (the Act), of WhatsApp's 2021 Privacy Policy update, issued a prima facie order directing the Director General (DG) to initiate an investigation under Section 26(1) of the Act. Following the investigation, on 18 November 2022, the CCI imposed a penalty of ₹213.14 crore on Meta Platforms, Inc. (Meta) under Section 4 of the Act for abusing its dominant position in the relevant market for over-the-top (OTT) messaging apps through smartphones in India via WhatsApp LLC (WhatsApp).
This blog analyses the CCI’s recognition of data exploitation as a form of abuse of dominance in digital markets. Furthermore, it examines the implications of this decision for the draft Digital Competition Bill, 2024 (DCB), which aims to introduce an ex-ante regulatory framework.
Data Monopolisation and Entry Barriers in Integrated Ecosystems
The CCI's findings highlighted that WhatsApp’s 2021 Privacy Policy update imposed unfair conditions on users, mandating acceptance of expanded data collection practices and compulsory data sharing with Meta companies for advertising and business purposes. Users accepted these due to lack of viable alternatives.
The CCI identified two relevant markets: the market for OTT messaging applications via smartphones in India and the market for online display advertising within India and concluded that WhatsApp has a dominant position in the former as can be reflected by its substantial user base of approximately 535 million active users in India, financial resources, and high download rates. As per the European Commission’s 10th Report on Competition Policy also, a dominant position can be considered to exist when a market share reaches 40% to 45%. WhatsApp has attained such a user base in India.
While dominance is not unlawful per se, the CCI observed that WhatsApp had unilaterally imposed unfair conditions on users by altering its Privacy Policy. This violated users' legitimate expectations regarding the collection and use of their data and deprived them of the ability to opt out of the updated terms. Such conditions, presented on a “take-it-or-leave-it” basis (Para 183), were deemed exploitative and constituted the imposition of unfair conditions under Section 4(2)(a)(i) of the Act. Additionally, Meta's integration across platforms such as WhatsApp, Facebook, Instagram, and Messenger created an ecosystem of “lock-in” (Para 77) for users by enhancing user experience across its platforms. This integration, coupled with the mandatory data-sharing policy, posed significant entry barriers and denied market access in the online display advertising market, violating Section 4(2)(c) of the Act. Moreover, the conduct of WhatsApp, leveraging its dominant position in the market for OTT messaging applications via smartphones in India to protect its market share in the online display advertising market, was deemed a violation of Section 4(2)(e) of the Act.
The CCI’s decision aligns with international precedents, such as the German Federal Cartel Office’s ruling in Meta Platforms Inc. v. Bundeskartellamt, wherein Facebook’s extensive collection and integration of user data were deemed an abuse of its dominant position, as prohibited under Section 19 of the German Competition Act. Recently, the federal court of Brazil also ordered WhatsApp to provide users an option to withdraw their consent to the 2021 Meta Privacy Policy. The CCI’s findings thus underscore the challenges posed by data monopolization in integrated ecosystems, a challenge that necessitates a more proactive regulatory approach.
From Ex-Post to Ex-Ante: The Shift Needed for Digital Market Regulation
The CCI’s decision underscores the convergence of competition law and data privacy principles in regulating digital markets. While the Act provides an ex-post mechanism, the draft DCB proposes a proactive, ex-ante framework to regulate Systemically Significant Digital Enterprises (SSDEs).
The DCB aims to mitigate enforcement delays inherent in the existing framework, which often allows anti-competitive practices to persist until investigated and penalised. For instance, under the DCB, platforms like WhatsApp, which qualify as SSDEs by meeting both the quantitative thresholds and qualitative criteria outlined in Section 3 of the bill, would be required to self-notify their SSDE status. This preempts jurisdictional challenges, such as those faced by the CCI in this case before a single bench of the Delhi High Court, which upheld the CCI’s jurisdiction to investigate abuse of dominance by WhatsApp—a decision subsequently upheld in the latter patent appeal before the Division Bench of the Delhi High Court and the Supreme Court.
Many now contend that the CCI acted decisively under the current Act in the absence of the DCB, implying that ex-post facto measures under the Act are sufficient. In fact, when the Committee on Digital Competition Law (CDCL) invited stakeholder comments on the DCB, Meta, in its submission (available in Annexure-III of the report), expressed opposition to the bill, arguing that the existing framework was sufficient, there was no evidence of enforcement gaps, and the bill could stifle innovation and growth. Others take a middle-ground approach, suggesting that instead of introducing a separate Digital Competition Act, the current framework under the Act could be amended to include specific provisions addressing abuses of dominance in digital markets, thereby strengthening the CCI’s powers to issue interim orders and address emerging challenges.
However, this decision underscores the importance of addressing competition issues in the digital economy and demonstrates the need for quicker implementation of the DCB. The necessity for ex-ante regulation is increased by the rapid advancement of technology and the broad influence of digital enterprises, which provide zero-priced products in exchange for user data collected through various innovative approaches. A reactive approach allows anti-competitive practices to persist unchecked, causing irreversible damage to competitors and consumers. For example, in this case, consumers were forced to give their consent before the CCI intervened. Moreover, the evolving nature of technology and software makes frequent amendments to the Act impractical and time-consuming. It is more efficient to have a separate Digital Competition Act tailored to address the unique challenges posed by digital markets. Concerns that a Digital Competition Act could harm innovation are unsubstantiated, as such frameworks have been implemented in various countries without evidence supporting this claim. In India, it was specifically contended that the DCB could negatively impact the ability of MSMEs to derive benefits from digital platforms; however, this has been countered. By holding SSDEs accountable through clearly defined obligations, the DCB reduces ambiguity in compliance requirements, fostering an ecosystem where smaller players and MSMEs can thrive without fear of predatory practices. This is critical in an era where integrated digital ecosystems, like those operated by Meta, leverage dominance in one market to entrench their position across multiple verticals.
Thus, although the CCI’s enforcement under Section 4 of the Act has been effective, its reactive nature renders it inadequate to address the systemic challenges inherent in integrated digital ecosystems. The DCB presents a vital forward-looking framework to safeguard fair competition in the digital economy.
Global Trends and Local Challenges: Enhancing India's Digital Competition Framework
The digital sector is a key contributor to India’s GDP, projected to account for one-fifth of India’s GDP by 2026. A separate ex-ante framework would enable the CCI to take a more proactive stance on growing antitrust concerns, compared to the existing ex-post regulation. Globally also, competition authorities are shifting towards ex-ante regulation to address the unique challenges of digital markets. Having the DCB will facilitate greater coherence between regulatory frameworks, enabling smoother global investigations and reducing business costs. Jurisdictions such as the European Union, Japan, South Korea, and the United Kingdom have invested heavily in regulatory capacity, including specialised units for digital market oversight. Meanwhile, the CCI in India faces a severe resource crunch, with only 195 sanctioned posts, 71 of which are vacant, highlighting the urgent need for capacity building in India, especially in developing skills to investigate violations of the Act in digital markets. This will also help address a genuine criticism of the DCB regarding "false positives", where non-anti-competitive conduct is incorrectly flagged like in the Harshita Chawla v. WhatsApp Inc. case, the CCI concluded that WhatsApp Pay's integration was optional, faced significant competition, and did not harm competition. By carefully assessing the conduct and granting a prima facie hearing, the CCI avoided wrongly labeling competitive behavior as anti-competitive and prevented an unwarranted investigation. Furthermore, the DCB will complement the Digital Personal Data Protection Act, 2023 (DPDPA) by addressing competitive concerns such as tying services, self-preferencing, and bundling—issues that fall beyond the scope of existing data protection laws in India.
Conclusion
As India strengthens its digital economy, fostering fair competition and innovation remains critical. The CCI’s ruling against WhatsApp highlights the need for robust competition and data protection frameworks to safeguard consumer interests and ensure fair market practices. While the Competition Act provides an ex-post mechanism for anti-competitive behavior, integrating the proactive, ex-ante approach of the DCB will better address the complexities of the digital economy. By aligning with global trends and prioritizing growth, consumer protection, and innovation, the DCB’s timely implementation alongside enhanced regulatory capacity can position India as a leader in digital governance.
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