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TMI Blog2021 (4) TMI 1385X X X X Extracts X X X X X X X X Extracts X X X X ..... r General of the respondent no.1 to cause an investigation to be made into the WhatsApp 2021 Update to its Terms and Privacy Policy. 2. The petitioner in W.P.(C) No. 4378/2021 is providing software based application for sending and receiving variety of media texts, photos and videos, calls etc. by using the internet. It was acquired by the respondent no.2 (petitioner in W.P.(C) No. 4407/2021) in the year 2014. It is claimed that WhatsApp is used by more than a billion users throughout the world and over 400 million users in India. 3. It is stated that prior to 25.08.2016, the Agreement between WhatsApp and its users was governed by the Terms of Service and Privacy Policy dated July, 2012. On 25.08.2016, WhatsApp updated its Terms and Services of Privacy Policy (hereinafter referred to as the '2016 Update'). It is claimed that WhatsApp users prior to the 2016 Update were given a one-time opportunity to 'opt-out' of Facebook using their WhatsApp account information. The users who joined WhatsApp after the release of 2016 Update, however, were not offered this 'opt-out' option. 4. The 2016 Update was challenged in a Public Interest Litigation, being W.P.(C) 7663/2016 titl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n certain business messaging features become available to them. It is further asserted that 2021 Update does not expand WhatsApp's ability to share data with Facebook and does not impact the privacy of personal messages of the WhatsApp users; it provides more specifics on how WhatsApp works with businesses that use Facebook or third-parties to manage their communications with users on WhatsApp. 8. It is further asserted by WhatsApp that its 2021 Update has been challenged in several judicial fora, including before this Court and the Supreme Court. It makes specific reference to the two petitions pending before this Court that is, W.P.(C) No. 677/2021 titled Chaitanya Rohilla vs. Union of India & Ors., and W.P.(C) No. 1355/2021 titled Dr.Seema Singh & Anr. vs. Union of India & Anr. It is further contended that the petitioner, in the above-referred Special Leave Petition and the intervener therein (Internet Freedom Foundation), have filed applications seeking to restrain WhatsApp from implementing the 2021 Update. The said applications are pending before the Supreme Court. 9. The petitioner(s) (WhatsApp and Facebook) challenge the Impugned Order passed by the respondent n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share data with Facebook and that the said update intends to provide users with further transparency about how WhatsApp collects, uses and shares data. 13. Mr.Rohatgi, the learned senior counsel appearing for Facebook, while reiterating the submissions of Mr.Salve, has further submitted that in any case, Facebook could not have been involved in the investigation directed by the Impugned Order. He submits that Facebook Inc. is merely the parent company of WhatsApp LLC, however, the 2021 Update is in relation to the Terms of Service and Privacy Policy offered by WhatsApp alone. He submits that the said update is not applicable for the Facebook users and therefore, Facebook could not have been added as a party in such an investigation into WhatsApp's Terms and Conditions of Service to its users. 14. On the other hand, the learned Additional Solicitor General appearing for the respondent no.1, submits that apart from the issues which are pending before the Supreme Court in SLP(C) No. 804/2017 or before this Court in the petitions mentioned hereinabove, the respondent no.1 is examining the 2021 Update in relation to any violation of the provisions of Section 4 of the Competition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of preparatory nature without recording findings which will bind the parties and where such order will only pave the way for final decision, it would not make that direction as an order or decision which affects the rights of the parties and therefore, is not appealable. xxxxxx 91. The jurisdiction of the Commission, to act under this provision, does not contemplate any adjudicatory function. The Commission is not expected to give notice to the parties i.e. the informant or the affected parties and hear them at length, before forming its opinion. The function is of a very preliminary nature and in fact, in common parlance, it is a departmental function. At that stage, it does not condemn any person and therefore, application of audi alteram partem is not called for. Formation of a prima facie opinion departmentally (the Director General, being appointed by the Central Government to assist the Commission, is one of the wings of the Commission itself) does not amount to an adjudicatory function but is merely of administrative nature. At best, it can direct the investigation to be conducted and report to be submitted to the Commission itself or close the case in terms of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. In other words, the Commission is expected to express prima facie view in terms of Section 26(1) of the Act, without entering into any adjudicatory or determinative process and by recording minimum reasons substantiating the formation of such opinion, while all its other orders and decisions should be well reasoned." 18. A reading of the above clearly shows that at this stage, the respondent no.1 was merely to form a prima facie opinion for directing an investigation to be carried out by the Director General. It has not to give any final conclusions on the merit of the violation alleged or on the defence of the petitioner(s) herein. The order passed under Section 26(1) of the Act is purely administrative in nature and does not entail any consequence on the civil rights of the petitioner(s). In fact, the Impugned Order could have been passed without notice or granting an opportunity of hearing to the petitioner(s). Though the respondent no. 1 is to give reasons in the Impugned Order, in my opinion, as it is not to give any conclusive findings but is to form only a prima facie opinion to order an investigation, it need not deal with all the submissions of the petitioner(s) in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sers is enabled only when both are registered on the same network. Thus, the value of a messaging app/platform increases for users with an increasing number of their friends and acquaintances joining the network. In India, the network effects have indubitably set in for WhatsApp, which undergird its position of strength and limit its substitutability with other functionally similar apps/platforms. This, in turn, causes a strong lock-in effect for users, switching to another platform for whom gets difficult and meaningless until all or most of their social contacts also switch to the same other platform. Users wishing to switch would have to convince their contacts to switch and these contacts would have to persuade their other contacts to switch. Thus, while it may be technically feasible to switch, the pronounced network effects of WhatsApp significantly circumscribe the usefulness of the same. The network effects have been reflected when despite increase in downloads of the competing apps like Signal and Telegram, user base of WhatsApp apparently did not suffer any significant loss. As pointed out in Harshita Chawla case (supra), the second largest player in terms of market share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or say over such cross-product processing of their data by way of voluntary consent, and not as a precondition for availing WhatsApp's services. 29. As pointed out previously, users earlier had such control over sharing of their personal data with Facebook, in terms of an 'opt-out' provision available for 30 days in the previous policy updates. However, the same has not been made available to users this time. Thus, users are required to accept the unilaterally dictated 'take-it-or-leave-it' terms by a dominant messaging platform in their entirety, including the data sharing provisions therein, if they wish to avail their service. Such "consent" cannot signify voluntary agreement to all the specific processing or use of personalised data, as provided in the present policy. Users have not been provided with appropriate granular choice, neither upfront nor in the fine prints, to object to or opt-out of specific data sharing terms, which prima facie appear to be unfair and unreasonable for the WhatsApp users. 30. On a careful and thoughtful consideration of the matter, the conduct of WhatsApp in sharing of users' personalised data with other Facebook Companies, in a manner that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also have exclusionary effects as WhatsApp/Facebook would be able to further entrench/reinforce their position and leverage themselves in neighbouring or even in unrelated markets such as display advertising market, resulting in insurmountable entry barriers for new entrants. 33. Data and data analytics have immense relevance for competitive performance of digital enterprises. Cross-linking and integration of user data can further strengthen data advantage besides safeguarding and reinforcing market power of dominant firms. For Facebook, the processing of data collected from WhatsApp can be a means to supplement the consumer profiling that it does through direct data collection on its platform, by allowing it to track users and their communication behaviour across a vast number of locations and devices outside Facebook platform. Therefore, the impugned data sharing provision may have exclusionary effects also in the display advertising market which has the potential to undermine the competitive process and creates further barriers to market entry besides leveraging, in violation of the provisions of Section 4(2)(c) and (e) of the Act. As per the 2021 update to the privacy polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perators. The Supreme Court explained the jurisdiction to the two Regulators as under:- "85. It is for the aforesaid reason that CCI is entrusted with duties, powers and functions to deal with three kinds of anticompetitive practices mentioned above. The purpose is to eliminate such practices which are having adverse effect on the competition, to promote and sustain competition and to protect the interest of the consumers and ensure freedom of trade, carried on by the other participants, in India. For the purpose of conducting such an inquiry, CCI is empowered to call any person for rendering assistance and/or produce the records/material for arriving at even the prima facie opinion. The regulations also empower CCI to hold conferences with the persons/parties concerned, including their advocates/authorised persons. xxxxxx 99. TRAI is, thus, constituted for orderly and healthy growth of telecommunication infrastructure apart from protection of consumer interest. It is assigned the duty to achieve the universal service which should be of world standard quality on the one hand and also to ensure that it is provided to the customers at a reasonable price, on the other hand. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quences for breach of such obligations are mentioned. 104. We, therefore, are of the opinion that the High Court is right in concluding that till the jurisdictional issues are straightened and answered by TRAI which would bring on record findings on the aforesaid aspects, CCI is ill-equipped to proceed in the matter. Having regard to the aforesaid nature of jurisdiction conferred upon an expert regulator pertaining to this specific sector, the High Court is right in concluding that the concepts of "subscriber", "test period'', "reasonable demand", "test phase and commercial phase rights and obligations", "reciprocal obligations of service providers" or "breaches of any contract and/or practice", arising out of the TRAI Act and the policy so declared, are the matters within the jurisdiction of the Authority/TDSAT under the TRAI Act only. Only when the jurisdictional facts in the present matter as mentioned in this judgment particularly in paras 72 and 102 above are determined by TRAI against the IDOs, the next question would arise as to whether it was a result of any concerted agreement between the IDOs and COAI supported the IDOs in that endeavour. It would be at that st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these are: (a) where agreements are entered into by certain persons with a view to cause an appreciable adverse effect on competition; (b) where any enterprise or group of enterprises, which enjoys dominant position, abuses the said dominant position; and (c) regulating the combination of enterprises by means of mergers or amalgamations to ensure that such mergers or amalgamations do not become anti-competitive or abuse the dominant position which they can attain. 109. CCI is specifically entrusted with duties and functions, and in the process empower as well, to deal with the aforesaid three kinds of anti-competitive practices. The purpose is to eliminate such practices which are having adverse effect on the competition, to promote and sustain competition and to protect the interest of the consumers and ensure freedom of trade, carried on by other participants, in India. To this extent, the function that is assigned to CCI is distinct from the function of TRAI under the TRAI Act. The learned counsel for the appellants are right in their submission that CCI is supposed to find out as to whether the IDOs were acting in concert and colluding, thereby forming a cartel, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulated by the TRAI Act, balance is maintained by permitting TRAI in the first instance to deal with and decide the jurisdictional aspects which can be more competently handled by it. Once that exercise is done and there are findings returned by TRAI which lead to the prima facie conclusion that the IDOs have indulged in anti-competitive practices, CCI can be activated to investigate the matter going by the criteria laid down in the relevant provisions of the Competition Act and take it to its logical conclusion. This balanced approach in construing the two Acts would take care of Section 60 of the Competition Act as well. 114. We, thus, do not agree with the appellants that CCI could have dealt with this matter at this stage itself without availing the inquiry by TRAI. We also do not agree with the respondents that insofar as the telecom sector is concerned, jurisdiction of CCI under the Competition Act is totally ousted. In a nutshell, that leads to the conclusion that the view taken by the High Court is perfectly justified. Even the argument of the learned ASG is that the exercise of jurisdiction by CCI to investigate an alleged cartel does not impinge upon TRAI's juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the respondent no. 1, but rather one of prudence and discretion. 29. It must be remembered that any finding by the respondent no. 1 on any of the issues would always be subject to the findings of the Supreme Court or of this Court in the above-mentioned petitions and would be binding on the respondent no. 1. Such is the case in every proceeding before the respondent no. 1. Nevertheless, while such issues are being determined by the Supreme Court or by the High Court, it cannot be stated that the respondent no.1 has to necessarily await the outcome of such proceedings before acting further under its own jurisdiction. The respondent no.1 has to proceed within its own jurisdiction, applying the law as it stands presently. In this regard, I may only note the submission of the learned ASG appearing for the respondent no. 1 that the scope of inquiry before the respondent no. 1 is not confined only to the issues raised before the Supreme Court or before this Court, but is much vaster in nature. 30. In State of Maharashtra and Anr. vs. Sarva Shramik Sangh, Sangli and Ors.; (2013) 16 SCC 16, the Supreme Court in relation to the Industrial Disputes Act, 1947, has observed as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould continue to decide the cases and applying the law as it then prevails. This is so, as mere pendency of a reference before the larger bench does not denude the other courts of their jurisdiction to decide on the lis before them. Similarly, merely because of the pendency of the above proceedings before the Supreme Court and before this Court, the respondent no. 1 cannot be said to be bound to necessarily hold its hands and not exercise the jurisdiction otherwise vested in it under the statute. Maybe, it would have been prudent for the respondent no.1 to have awaited the outcome of the above-referred petitions before the Supreme Court and before this Court, however, merely for its decision not to wait, the Impugned Order cannot be said to be without jurisdiction or so perverse so as to warrant to be quashed by this Court in exercise of its extra-ordinary jurisdiction. 34. I may also note that the challenge to the WhatsApp 2021 Update has been raised before the Supreme Court only in form of applications being filed by the petitioner and intervener therein. It is not stated by the petitioner(s) herein if the Supreme Court has taken cognizance of these applications or passed any or ..... 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