WhatsApp’s privacy policy: Why CCI fined Meta Rs 213 cr and what it means for users

Meta has responded by saying that it disagrees with the CCI order and plans on appealing it. “…the 2021 update did not change the privacy of people’s personal messages and was offered as a choice for users at the time. We also ensured no one would have their accounts deleted or lose functionality of the WhatsApp service because of this update,” the company said in a statement.

What is the privacy policy update in question?

From January 2021 onwards, WhatsApp users in India started receiving an in-app notification asking them to agree to the platform’s revised privacy policy in one month’s time.

The main change in the privacy policy was this: “Going forward, businesses can choose to receive secure hosting services from our parent company Facebook to help manage their communications with their customers on WhatsApp.”

In simpler words, users had to agree to let businesses use Facebook-hosted services in order to store and manage their WhatsApp chats with customers. This meant that when a user texts a business on WhatsApp, Facebook could handle that message on behalf of the business.

And while Facebook said that it will not automatically use these chats to show users personalised ads, the respective businesses would be able to do so.

WhatsApp’s updated privacy policy sparked further controversy because it made users aware, for the first time, about the extent of metadata that it actually collects, including information like battery level and signal strength.

However, what has been scrutinised by the CCI in its order is the company stating that users who don’t agree to the updated privacy policy would not be able to use the platform entirely.

After considerable backlash, WhatsApp pushed the deadline for accepting its updated privacy policy to May 2021.

How did the matter come before CCI?

In March 2021, the CCI took suo moto cognisance and launched a probe into the platform’s revised privacy policy. Based on publicly available material as well as complaints filed by an individual named Prachi Kohli and Delhi-based digital rights advocacy group Internet Freedom Foundation (IFF), the CCI found that the policy change had prima facie violated Section 4 of the Competition Act, 2002.

“WhatsApp’s conduct of imposing its Privacy Policy puts unfair/discriminatory conditions upon its user base, since there was no effective consent from the users for the Privacy Policy. This conduct of WhatsApp is abusive of its dominant position, and has a direct nexus to the strong network effects enjoyed by WhatsApp,” IFF submitted to CCI.

In an attempt to quash the CCI investigation, WhatsApp and Meta filed pleas before the Delhi High Court. They argued that the regulator had been hasty in initiating the proceedings. However, the Delhi High Court dismissed the companies’ pleas.

Challenging the Delhi High Court order, WhatsApp and Meta moved the Supreme Court which also dismissed their pleas and allowed the CCI probe to continue. Furthermore, the apex court ordered the messaging app to take out newspaper advertisements informing users that they do not have to accept its 2021 privacy policy update.

On what grounds has CCI fined Meta?

Competition regulators typically need to identify the relevant market before assessing whether a company has dominance of that market. In this case, the CCI delineated two relevant markets, namely: the market for OTT messaging apps through smartphones in India; and the market for online display advertising in India.

However, it held that WhatsApp is only dominant in India’s market of OTT messaging apps.

“Considering the relative financial resources and Daily Active Users (DAUs) and Monthly Active Users (MAUs) of the OPs [WhatsApp] and the competing apps in the relevant market, direct network effects, the strong lock-in effects, absence of countervailing buying power, and control over huge data acting as barriers to market entry, the DG has found Meta group to be dominant in the market for Over-The-Top (OTT) messaging apps through smartphones in India through WhatsApp,” the CCI order reads.

In response, WhatsApp outright contested that it operates in the market for OTT messaging apps, asserting instead that it is actually part of “the broad and highly competitive market for user attention.” It further argued that rival apps such as Signal and Telegram saw an increase in user engagement during a WhatsApp outage, which demonstrated that the platform was substitutable.

However, the CCI rejected this argument and said, “Users engage with WhatsApp, Facebook, Netflix, X (formerly Twitter), etc., for distinct purposes i.e., communication, social interaction, entertainment, micro-blogging, etc. Therefore, they cannot be considered interchangeable or substitutable solely based on the user’s attention.”

Since market dominance alone is not illegal, the CCI investigated and laid out how WhatsApp had abused its dominant position.

“Meta’s vast financial resources allow it to outspend its competitors in areas such as research and development, marketing, and acquisitions. This gives Meta a competitive edge, enabling it to offer better services, enhance user experiences, and maintain its market-leading position in OTT messaging with platforms like WhatsApp and Facebook Messenger,” the CCI notes in its order.

By sharing WhatsApp users’ data with other Meta subsidiaries, the regulator also found that the tech giant created an entry barrier that prevented its rivals from showing online ads to users.

What happens now?

To address WhatsApp’s anti-competitive practices, CCI has ordered the company to not share user data with other Meta-owned services for the next five years. From 2029 onwards, WhatsApp users in India must be given a way to opt out of such data sharing through an in-app notification.

The platform has been further directed to let users review and modify their choice through a separate tab in the app’s Settings.

Going forward, WhatsApp has also been directed to provide detailed explanations specifying what data is being shared with other Meta platforms and for what reasons.