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TMI Blog2021 (3) TMI 1460X X X X Extracts X X X X X X X X Extracts X X X X ..... rivacy policies. The text of such notification, as reported in media, is as follows: WhatsApp is updating its terms and privacy policy. Key updates include more information about: * WhatsApp's service and how we process your data. * How businesses can use Facebook hosted services to store and manage their WhatsApp chats. * How we partner with Facebook to offer integrations across the Facebook Company Products By tapping AGREE, you accept the new terms and privacy policy, which take effect on February 8, 2021. After this date, you will need to accept these updates to continue using WhatsApp. You can also visit the Help Center if you would prefer to delete your account and would like more information. 3. Thus, the above notification suggests that in order to be able to use the services of WhatsApp, from 08.02.2021 onwards, users will have to mandatorily accept the new terms and policy in their entirety including the terms with respect to sharing of their data across all the information categories with other Facebook Companies. As per previous privacy policy(ies) dated 25.08.2016 and 19.12.2019, existing users had an option to choose whether they wanted to share their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sApp and Facebook responded to the said directions of the Commission vide separate e-mails dated 25.02.2021. 7. Facebook has inter alia submitted that "....While Facebook is the parent company of WhatsApp, Facebook and WhatsApp are separate and distinct legal entities. It is WhatsApp (not Facebook) that offers and operates WhatsApp's instant messaging service that is the subject of the Hon'ble Commission's Order. Specifically, the 2021 Update isin relation to the Terms of Service and Privacy Policy of the messaging service offered by WhatsApp. In light of the above, Facebook humbly submits that it should not be arrayed as a party to these proceedings, and WhatsApp is the appropriate entity to provide the Hon'ble Commission with the information sought....". The Commission has given careful consideration to the response filed by Facebook and notes that the same is not only evasive but is in clear non-compliance with the directions issued by the Commission vide its order dated 19.01.2021. As one of the avowed objectives of the key updates included more information about inter alia as to how WhatsApp partners with Facebook to offer integrations across the Facebook Company Products, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form its users about the same. 9. The Commission has gone through the response of WhatsApp also and is constrained to note that despite an opportunity having been granted by the Commission, WhatsApp has not only failed to comply with the directions of the Commission but has also taken the pleas which are ex facie untenable. In this regard, the Commission notes that the reference to the provisions of Section 35 of the Act by WhatsApp is thoroughly misplaced. This provision deals with appearance of parties before the Commission. It does not deal with signing of pleadings. In this regard, reference has already been made to the provisions of Regulation 11 of the General Regulations which inter alia provides for signing of replies which are filed pursuant to the directions of the Commission. For felicity of reference, the same is excerpted below: Signing of information or reference. - 11(1) An information or a reference or a reply to a notice or direction issued by the Commission shall be signed by- (a) the individual himself or herself, including a sole proprietor of a proprietorship firm; (b) the Karta in the case of a Hindu Undivided Family (HUF); (c) the Managing Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the matter, the Commission proceeds to consider the submissions of WhatsApp in the interest of justice with a direction to comply with the requirements of General Regulations immediately and any delay in this regard would be construed as continuing non-cooperation with attendant consequences. 11. WhatsApp has also made a preliminary objection and submitted that its current Terms of Service and Privacy Policy as well as the proposed update in the same (the, '2021 Update') fall within the purview of the information technology law framework and these issues are currently sub judice before various courts and other fora in India. It has also been averred that the examination of the 2021 Update by courts and the Government of India is not merely limited to data protection/ privacy laws but extends to assessing more broadly whether the 2021 Update is in conformity with principles of fairness, public policy and national security considerations. Furthermore, WhatsApp has averred that the questions set out in the Commission's order are sub judice and therefore, the Commission should not look into the same set of issues. WhatsApp has relied on the decision of the Hon'ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... data collection and the extent to which such collected data is subsequently put to use or otherwise shared, have anti-competitive implications, which require anti-trust scrutiny. The reliance of WhatsApp on Vinod Kumar Gupta and other cases is also misplaced as the Commission has only observed that breach of the Information Technology Act does not fall within its purview. However, in digital markets, unreasonable data collection and sharing thereof, may grant competitive advantage to the dominant players and may result in exploitative as well as exclusionary effects, which is a subject matter of examination under competition law. It is trite to mention that the provisions of the Act are in addition to and not in derogation of the provisions of any other law, as declared under Section 62 of the Act. 14. WhatsApp has averred that 2021 Update has not yet been implemented and its implementation has been postponed to 15.05.2021. It has been submitted that abuse of dominance is a post-facto analysis and the Commission in Harshita Chawla case (supra) held that since WhatsApp Pay had only been launched in the beta version, its actual conduct was yet to manifest in the market and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WhatsApp account information with Facebook Companies for ads and product experiences purposes. WhatsApp is continuing to honour the 2016 opt-out for anyone who had chosen it, and the most recent updates do not change that. If anyone who has previously opted out agrees to the 2021 Update, WhatsApp will acknowledge their agreement to the 2021 Update and also continue to honour the 2016 opt-out. 16.3 Privacy of personal messaging is integral to the growth and vision of WhatsApp. This commitment to keeping WhatsApp a safe and protected place where people can connect privately has not changed. WhatsApp cannot see users' personal conversations with friends and family because they are protected by end-to-end encryption. 16.4 2021 Update does not expand WhatsApp's ability to share data with Facebook and does not impact the privacy of personal messages of WhatsApp users with their friends and family. 16.5 The 2021 Update provides more specifics on how WhatsApp works with businesses that use Facebook or third parties to manage their communications with users on WhatsApp. Even for users who choose to interact with a business on WhatsApp, the implications of such data sharing are minimal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on multiple operating systems, e.g. WhatsApp and Facebook are available on a variety of mobile operating systems, including iOS, Android, Windows Phone etc. Furthermore, the segmentation can also be based on whether a set of consumer communications apps are available for all types of devices, or only for particular type(s) of device e.g. while Facebook is available on smartphones as well as PCs, WhatsApp essentially is a smartphone app. Having said that the Commission is cognizant of the peculiar features which these consumer communication apps possess, where for some functions they may appear substitutable while not so for others, making it all the more challenging to compartmentalize them into water-tight categories. Thus, it is important to identify the primary or most dominant feature(s) of an app to categorise it into a particular relevant market. 71. WhatsApp is primarily an Over-The-Top (OTT) messaging App, linked to a smartphone device and mobile number, which has features of communicating personally, both one-to-one or group. It uses the internet to send and receive text messages, images, audio or video content, sharing of location etc. from one user to another as opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Such data shows that WhatsApp messenger is the most widely used app for social messaging, followed by Facebook Messenger in the relevant market delineated by the Commission supra. Further, it is way ahead of other messaging apps like Snapchat, WeChat etc. showing its relative strength. Given that WhatsApp messenger and Facebook Messenger are owned by the same group, they do not seem to be constrained by each other, rather adding on to their combined strength as a group. Moreover, WhatsApp Messenger works on direct network effects where an increase in usage of a particular platform leads to a direct increase in the value for other users-and the value of a platform to a new user will depend on the number of existing users on that platform. Thus, given its popularity and wide usage, for one-to-one as well as group communications and its distinct and unique features, WhatsApp seems to be dominant. 85. The Commission is cognizant that the data relied upon by the Informant cannot be said to be free from infirmities and is based on global usage or users. However, in the absence of concrete data/information available in the Indian context other than the subjective information on popul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion has perused the previous privacy policies of WhatsApp dated 25.08.2016 as well as 19.12.2019 wherein the existing users were provided with an option to choose not to have their WhatsApp account information shared with Facebook. The relevant excerpt is as follows: The choices you have. If you are an existing user, you can choose not to have your WhatsApp account information shared with Facebook to improve your Facebook ads and products experiences. Existing users who accept our updated Terms and Privacy Policy will have an additional 30 days to make this choice by going to Settings > Account 22. However, it is evident from the latest policy statement published on WhatsApp website (as extracted in para 2), and as has been widely reported by media, this choice is no longer available to users under the new policy. This implies that data of users, including that of those who are not users of any other service within the Facebook family of companies, will now be shared across Facebook Companies. Simply put, it appears that consent to sharing and integration of user data with other Facebook Companies for a range of purposes including marketing and advertising, has been made a pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new policy, the Commission is of prima facie opinion that the 'take-it-or-leave-it' nature of privacy policy and terms of service of WhatsApp and the information sharing stipulations mentioned therein, merit a detailed investigation in view of the market position and market power enjoyed by WhatsApp. The Commission has also taken note of the submission of WhatsApp that 2021 Update does not expand WhatsApp's ability to share data with Facebook and the said update intends to provide users with further transparency about how WhatsApp collects, uses and shares data. The veracity of such claims would also be examined during the investigation by the DG. 26. WhatsApp is the most widely used app for instant messaging in India. A communication network/platform gets more valuable as more users join it, thereby benefiting from network effects. The OTT messaging platforms not being interoperable, communication between two users 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 Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the policy whether the historical data of users would also be shared with Facebook Companies and whether data would be shared in respect of those WhatsApp users also who are not present on other apps of Facebook i.e., Facebook, Instagram, etc. 28. Further, users are not likely to expect their personal data to be shared with third parties ordinarily except for the limited purpose of providing or improving WhatsApp's service. However, it appears from the wordings of the policy that the data sharing scheme is also intended to, inter alia, 'customise', 'personalise' and 'market' the offerings of other Facebook Companies. Under competitive market condition, users would have sovereign rights and control over decisions related to sharing of their personalised data. However, this is not the case with WhatsApp users and moreover, there appears to be no justifiable reason as to why users should not have any control 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 'o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... users who do not wish to continue with WhatsApp may have to lose their historical data as porting such data from WhatsApp to other competing apps is not only a cumbersome and time consuming process but, as already explained, network effects make it difficult for the users to switch apps. This would enhance and accentuate switching costs for the users who may want to shift to alternatives due to the policy changes. 32. Today's consumers value non-price parameters of services viz. quality, customer service, innovation, etc. as equally if not more important as price. The competitors in the market also compete on the basis of such non-price parameters. Reduction in consumer data protection and loss of control over their personalised data by the users can be taken as reduction in quality under the antitrust law. Lower data protection by a dominant firm can lead to not only exploitation of consumers but can 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. Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided on September 09, 2010 has already settled the issue by holding that "...Neither any statutory duty is cast on the Commission to issue notice or grant hearing, nor can any party claim, as a matter of right, notice and/or hearing at the stage of formation of opinion by the Commission, in terms of Section 26(1) of the Act that a prima facie case exists for issuance of a direction to the Director General to cause an investigation to be made into the matter." 37. Lastly, it is noted that WhatsApp has filed its submissions dated 03.02.2021 in two versions viz. confidential as well as non-confidential (filed on 25.02.2021). The confidential versions were kept separately during the pendency of the proceedings. The DG, however, shall be at liberty to examine the confidentiality claims as per law. Further, it is made clear that no confidentiality claim shall be available in so far as the information/ data that might have been used/referred to in this order for the purposes of the Act in terms of the provisions contained in Section 57 thereof. 38. It is also made clear that nothing stated in this order shall tantamount to a final expression of opinion on the merits of the case and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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