WHATSAPP NEW PRIVACY POLICY
The new global update in the privacy policy of WhatsApp had stirred controversy across countries and sectors. The latest update can have an adverse impact on the privacy of the users. The most controversial change in the privacy policy is that under the new privacy policy, the users will have to mandatorily share their data with WhatsApp’s parent company Facebook. However, under the older privacy policy dated 25.08.2016 and 19.12.2019, the users were not compelled to share their personal data with Facebook.
This update raises very valid concerns relating to user’s privacy and their personal data. Apart from the privacy concerns, there are certain antitrust concerns associated with the updated policy as it has the potential to affect the conditions of competition in the market and skew the market in WhatsApp’s favour. In absence of a dedicated data protection law, the competition law is an efficient way to deal with such an issue.[SR1]
Interestingly, the Competition Commission of India (CCI) has acted proactively and has passed a suo moto order dated 24 March 2021 directing a DG investigation against WhatsApp regarding the updated privacy policy under Section 26(1) of the Competition Act. The Commission held that the updated privacy policy prima facie contravened Section 6(2)(a)(i), 6(2)(c), and 6(2)(e).
In this article, we shall argue that the new privacy policy of WhatsApp amounts to abuse of dominant position under Section 6 of the Competition Act. We shall substantiate this claim by proving that, through its policy update, WhatsApp is imposing unfair price upon the users, denying market access to its competitors, and is using its dominance in one market to enter into other markets.
Abuse of Dominant Position under the Competition Act:
The Competition Act prohibits abuse of dominant position under Section 6(1). However, in order to establish abuse of dominance by WhatsApp, it is necessary to establish that it enjoys a dominant position in the relevant market.
The CCI in the case of Vinod Gupta v WhatsApp had ruled that WhatsApp is a dominant entity in “the market for instant messaging services using consumer communication apps through smartphones in India.” (¶ 13 and 14) The Competition Act casts a duty upon the dominant players to not abuse their dominance in the market, and not screw the competition in the market. This negative duty is cast upon dominant entities by competition law regimes across a number of jurisdictions. Therefore, it is a duty incumbent upon WhatsApp to not formulate its privacy policy in a manner that hampers the competition in the relevant market or disadvantages other competitors.[SR3]
Section 6(2) of the Competition Act lays down a number of activities, which, if undertaken by a dominant entity amounts to abuse of dominance. In the next part, we will show that the updated privacy policy falls under Section 6(2).
Unfair Price:
The Commission , in its suo moto order, has observed that the privacy policy prima facie violates Section 6(2)(i)(a), (¶ 30) and has limited itself to a non-price analysis. This analysis is supported by its recent market study of the Healthcare sector, in which the CCI has observed that data privacy may take the form of non-price competition issues. However, we argue that the updated privacy policy, in addition to imposing non-price unfair condition also impose an unfair price on the users. The Commission should also engage in price analysis of personal data in exchange for services.
Section 6(2)(a)(ii) provides that the imposition of unfair price in the purchase of goods or services is an abuse of dominance. It should be noted that although services of WhatsApp appears to be free, it cannot be considered to be free. The users pay for the apparently free service in terms of personal data access to WhatsApp. A user cannot use WhatsApp without providing it with access to its personal data. If the services of WhatsApp were free in true sense, the users would have had the option to not share their personal data.
Further, Section 2(o) of the act defines price as “every valuable consideration, whether direct or indirect” which relates to the performance of services. The Commission in the case of Bharat Matrimony v Facebook had recognized the importance of big data for tech companies and held that personal data of users form indirect consideration for tech companies. (¶ 82) In this case, the personal data of users is a valuable consideration for WhatsApp as big data is one of the most important factors in the development of tech giants like GAFAM in recent times.
The updated privacy policy of WhatsApp has increased the amount of personal data to be collected. Further, it can be shared with third parties like Facebook and Instagram without the permission of the users. The users are forced to accept these terms as they cannot move out of the platform because of the network effect. The CCI in its study on the telecom market has observed that the competition law analysis must focus on the “extent to which a consumer can ‘freely consent’ to action by a dominant player”. (¶ 70) Therefore, this situation can be considered as an imposition of unfair price (in terms of personal data) by WhatsApp for the sale of its services. Thus abuse of dominant position is established under Section 6(2)(a)(ii).
Denial of Market Access:
Section 4(2)(c) of the Competition Act states that a practice that results in denial of market access to the competitors is an abuse of dominance. The latest privacy policy update contravenes this provision as it permits to tip the market in its favour through the collection of small amounts of data.
Due to their ability to collect a vast amount of personal data of the users, large tech companies such as WhatsApp enjoy a significant competitive advantage. Due to access to a vast repository of personal data of users, such firms are capable of delivering services which their competitors may not be able to. Even before the latest privacy policy update, WhatsApp used to collect large volumes of the personal data of users. The updated privacy policy increases the scope and volume of personal data to be collected even further and is expansive and disproportionate. WhatsApp is forcing users to share data related to “transaction, payment, battery, signal, network operator, ISP, language, time zone, identifiers, location,” etc. (WhatsApp Suo Moto Order, ¶ 24) Such expansive data collection by WhatsApp will expand its repository of users’ personal data and increase the competitive advantage enjoyed by it. Further, WhatsApp can share such personal data with Facebook, which already has a huge database. This will result in increasing the competitive advantage enjoyed by Facebook in its relevant market.
The market for digital services such as social media, messaging, e-commerce, etc. are data-driven, and a competitive advantage in terms of data tips the market in favour of the firm enjoying such advantage. The growth of platform services such as WhatsApp is heavily dependent on its network effect. Due to the cyclical relationship between the data advantage enjoyed by such firms and the network effect, the market gets foreclosed for the competitors.
It should be noted that Section 4(2)(c) uses the phrase “in any manner” in respect to the denial of the market. This means that Section 4(2)(c) is broad enough to cover denial of the market through data advantage. Therefore, it is established WhatsApp may abuse its dominant position by denying market access to its competitors through data advantage.
Entering New Market:
Section 4(2)(e) of the Act states that the use of a dominant position in one relevant market to enter or protect another relevant market is an abuse [SR6] of dominance. In the case of WhatsApp, we have seen WhatsApp foraying into new markets such as the market for UPI payments, and, the market for e-commerce. It should be noted that these tools have not been built by WhatsApp from scratch, as they are provided within the existing framework of WhatsApp as a messaging platform. Thus, it can be said that WhatsApp has used its dominance in “the market for instant messaging services using consumer communication apps through smartphones in India” to enter into the UPI payments market and e-commerce market. Therefore it is established that WhatsApp has abused its dominance under Section 4(2)(e).
Concluding Remarks
The Commission has acted proactively and adopted an ex-post approach in this case. The data advantage being enjoyed by WhatsApp will further be increased by the new privacy policy just by riding on the back of big data. This situation solicits an out-of-box approach from the CCA, especially in absence of a dedicated data protection law. Therefore, we believe that CCA missed an opportunity to consider personal data as the price paid to the service provider.[SR7]
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