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The Delhi High Court has held that WhatsApp's 2021 privacy policy places its users in a take it or leave it situation, virtually forcing them into an agreement by providing a mirage of choices and then sharing their sensitive data with its parent company Facebook.
The high court's verdict came while dismissing the appeals of WhatsApp and Facebook against an order rejecting their challenge to a probe ordered by the Competition Commission of India (CCI) into the instant messaging platform's updated privacy policy of 2021.
A bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad said the single judge's April 22, 2021 order was well-reasoned and the appeals are devoid of merit and substance that would warrant the interference of this court.
While the judgement was pronounced by the division bench on Thursday, it was uploaded on the court's website on Friday.
In April last year, a single judge of the high court had refused to interdict the investigation directed by the CCI on the petitions moved by WhatsApp LLC and Facebook Inc. -- now Meta platforms.
In January last year, the CCI on its own had decided to look into WhatsApp's updated privacy policy based on news reports regarding the same.
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The division bench, in its 49-page judgment, said it was evident that the CCI has arrived at its decision that a prima facie case of violation of provisions of the Competition Act, 2002, has been made out against WhatsApp and Facebook, that would require an investigation by the Director General of CCI.
It also said that the single judge has also taken into consideration the relevant factors before observing that concentration of data in the hands of WhatsApp may raise competition concerns, thereby resulting in the violation of provisions of the Act.
The division bench said the 2016 privacy policy provided WhatsApp users the option to opt-out of sharing user account information with Facebook within 30 days of agreeing to the updated Terms of Service and Privacy Policy.
The 2021 Policy, however, places its users in a 'take-it-or-leave-it' situation, virtually forcing its users into agreement by providing a mirage of choice, and then sharing their sensitive data with Facebook Companies envisaged in the policy, it said.
The bench added that it is the opt-out option that primarily led to CCI rendering its conclusion that the 2016 policy did not violate the Competition Act.
However, in the face of changed circumstances, considering the dominant position occupied by WhatsApp, the investigation proposed to be conducted by CCI does not warrant interference, and res judicata would, thus, not be applicable in the instant case, it said.
Facebook contended that it is a separate and distinct legal entity from WhatsApp and therefore, it should not be subjected to an intensive and intrusive investigation by the DG in pursuance of the CCI's findings.
The court said it found merit in the submission of the Additional Solicitor Generals, representing the CCI, that one of the key issues with the 2021 policy is its propensity to share the data of its users with Facebook Inc., the parent company of WhatsApp.
Solely for the reason that the policies itself do not emanate out of Facebook Inc., the appellant (Facebook) cannot hide behind the fact that it is the direct and immediate beneficiary of the data sharing mechanism envisaged by the policies. These circumstances necessitate the presence of the appellant as a proper party in the investigation pertaining to the 2021 policy and the alleged anti-competitive practices they trigger, the bench said.
It refused to accept the contention of WhatsApp and Facebook that since the underlying issues arising before the Supreme Court and the high court and the investigation that is sought to be conducted by the CCI are common, this can potentially lead to conflicting opinions.
The bench said the sphere of operation of both are vastly different and neither the high court nor the Supreme Court are analysing the 2021 policy through the prism of competition law.
It said the investigation conducted by the CCI will not be affected by the outcome of the proceedings pending before the apex court and the high court.
The bench said it was not in dispute that WhatsApp occupies a dominant position in the relevant product market and that there exists a strong lock-in effect which renders its users incapable of shifting to another platform despite dissatisfaction with the product as is exemplified by how, despite an increase in the downloads of Telegram and Signal when the 2021 Policy was announced, the number of users of WhatsApp have remained unchanged.
By and large, to ensure retention of its user base and to prevent any other disruptive technology from entering the market, data is utilised by tech companies to customise and personalise their own platforms so that its user base remains hooked. When data concentration is seen through this prism, it does give meaning to the new adage that 'data is the new oil', and, as noted in the CCI order dated March 24, 2021, it raises competition concerns because it prima facie amounts to imposition of unfair terms and conditions upon its users, it said.
The bench dismissed the impleadment application of Facebook India in the appeals, saying it is not contemplated in law that a party should be impleaded at the stage of an appeal when it has not been a party to the matter at the stage when the initial decision was passed.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
