On August 25, 2022, the Delhi High Court (‘DHC’) dismissed appeals raised by Whatsapp LLC (‘Whatsapp’) and Facebook Inc. (‘Facebook’) (collectively, ‘Appellants’) challenging the jurisdiction of the CCI to direct investigation into the 2021 Terms of Service and Privacy Policy of the Whatsapp on the ground that it violates the provisions of the Competition Act. ^[1]

By way of background, Whatsapp was originally governed by its own Terms and Privacy Policy of 2012. However, after Facebook acquired Whatsapp in 2014, the policy was updated in 2016 (‘2016 Policy’). The 2016 Policy informed Whatsapp users about: (i) the acquisition; (ii) how Facebook would now use Whatsapp’s information for its advertisement and products giving a one-time opportunity to Whatsapp users to opt out of Facebook using their information that was shared over Whatsapp. However, users who joined Whatsapp after the 2016 Policy, were not offered this option.  The 2016 Policy was challenged in the case of Karmanya Singh Sareen & Anr. v. Union of India & Ors.,^[2] where the DHC had upheld the 2016 Policy by holding that the users of Whatsapp, having voluntarily opted to avail services of the said application, were bound by the terms of service offered by Whatsapp, and it is always open to users of Whatsapp who do not want their information to be shared with Facebook to opt for deletion of their accounts. The case is currently pending before the Supreme Court.

The policy was updated again in the year 2021 (‘2021 Policy’) and the 2021 Policy was also challenged and is pending before DHC and Supreme Court. CCI, thus taking suo motu cognizance under Section 26(1) of Competition Act, directed the Director General (‘DG’) to conduct an investigation to examine the potential abuse of dominance exercised by both the Appellants under Section 4 of Competition Act. Assailing this, a petition was filed by the Appellants which was rejected by the Single Judge of the DHC.

In light of the above, the primary issues for consideration before the Division Bench of the DHC were:

1. Whether CCI should abstain from exercising its jurisdiction to maintain comity between decisions of different authorities on the same issues?
2. Whether the CCI failed to discern a prima facie case that would entail a direction to the DG to investigate the alleged anti-competitive practices?

The DHC in its analysis for the first issue, placed reliance on Competition Commission of India v. Bharti Airtel^[3], the DHC noted that while the Supreme Court is examining whether the 2021 Policy is violative of the right to privacy under Article 21 or not, the investigation by CCI is confined to whether the 2021 Policy is in furtherance of the dominant position occupied by Whatsapp and institutes anti-competitive practices.

Therefore, the spheres of operation of both are vastly different and neither the DHC nor the Supreme Court are analysing the 2021 Policy through the prism of competition law. Further, while looking at the ambit of Section 26(1) of the Competition Act, the DHC placed reliance on Competition Commission of India v. Steel Authority of India^[4], and noted that the jurisdiction of the CCI under Section 26(1) does not contemplate an adjudicatory function, but merely an administrative one. Thus, the function performed by the CCI under Section 26(1) Competition Act would not be affected by the adjudication by the Supreme Court or the present Court while analysing the potential violation of fundamental rights instigated by the 2021 Policy. Lastly, while talking about the principle of res judicata the DHC noted that the 2021 Policy is a substantially modified version of the 2016 Policy since the 2016 Policy had an “opt-out” option, which is absent from the 2021 Policy that places its users in a “take-it-or-leave-it” situation. 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.

With regards to the second issue, the DHC placed reliance on Management of the Bangalore Woollen Cotton and Silk Mills Co. Ltd. v. B. Dasappa^[5], and observed that a “prima facie case need not be a case proved to the hilt, but a case which can be said to be established if the evidence which is led in support of the same were to be believed.” To reach a conclusion, the DHC first considered whether Whatsapp and Facebook occupy a dominant position in the relevant geographical market and the relevant product market. Placing reliance on Harshita Chawla v. Whatsapp Inc.^[6], the DHC concluded that given its popularity and wide usage, Whatsapp appears to be dominant. The DHC noted from the decision above, that “accumulation and processing of personal data from Whatsapp, in addition to its own direct data collection, can be done by Facebook for the purposes of consumer profiling that allows for targeted ads details which are in stark violation of Section 4(2)(c) and (e) of the Competition Act”. Thus, a prima facie case of violation of provisions of the Competition Act has been made out against the Appellants that would require an investigation to be initiated by the CCI.

Lastly, as an ancillary issue, the DHC considered the contention put forth by Facebook, regarding its impleadment to the present suit. In this regard, the DHC found merit in the submission of CCI that one of the key issues with the 2021 Policy is its propensity to share the data of its users with Facebook, which is the parent company of Whatsapp. Solely because the policies itself do not emanate out of Facebook, Facebook cannot hide behind the fact that it is the direct and immediate beneficiary of the data sharing mechanism envisaged by the policies. Thus, the DHC concluded that Facebook is the entity from which the policy under challenge emanates thus making it proper to be a party to the proceedings.

Accordingly, the DHC dismissed the appeals.

[1] LPA 163/2021 & CM APPLs. 15908/2021, 16893/2021, 18800/2021, 18910/2021, 46058/2021, 46059/2021, 46655/2021.

[2] W.P.(C) 7663/2016.

[3] (2019) 2 SCC 521.

[4] (2010) 10 SCC 744.

[5] AIR 1960 SC 1352.

[6] 2020 SCC OnLine CCI 32.