Privacy puzzle: WhatsApp diktat and competition

February 01, 2021 6:10 AM

India may become the next battleground against data monopoly of the Silicon Valley

The competition law may provide an answer, but this will require an out-of-the-box approach by the CCI.The competition law may provide an answer, but this will require an out-of-the-box approach by the CCI.

By MM Sharma

WhatsApp’s new private data policy announced globally on January 4, 2021, has faced strong opposition in India with the Centre sending detailed questionnaire. Consequently, WhatsApp has deferred implementation from February 8 to May 15. But in the absence of a data privacy law in India, can the government legally stop WhatsApp from implementing the said unilateral policy? Does it raise competition issues, and if yes, should the Competition Commission of India (CCI) step in to fill the legal vacuum to stop WhatsApp from implementing this policy in India? Let us examine.

Firstly, what are the main issues with the new policy? Unlike those in the EU with a strong General Data Protection Regulation (GDPR) regime, Indian users are not legally protected, and the new policy can take away their current choice now not to share their personal data with other Facebook-owned and third-party apps, which may have business implications for other third-party app developers. India’s dearth of a data protection law means there is no relief that a user can get from courts in case of a breach or misuse of data by social media platforms. Does it mean Indian users do not have an effective mode of redressal of their grievances? Not really. The competition law may provide an answer, but this will require an out-of-the-box approach by the CCI.

Traditionally, privacy and data protection concerns are regarded as matters falling outside the scope of competition law since in matured jurisdictions these are protected under dedicated laws, such as the GDPR. But in the absence of such a law in India and with the highest number of monthly active users (MAUs) in the world (340 million in 2019), recourse to relevant provisions of the competition law is the only remedy to safeguard consumer interest. India may present a tough challenge for WhatsApp if the competition issues likely to arise as result of implementation of the said policy are inquired into in the right earnestness by the CCI. This relates to abuse of dominant position under the Competition Act, 2002.

It is heartening to note that the CCI has already started acknowledging these emerging issues. The CCI in its market study on telecom released on January 22 has rightly recognised that “data privacy can take the form of non-price competition and abuse of dominance can lower privacy protection … and that an aspect of data in the context of competition in digital communications market is the conflict between allowing access and protecting consumer privacy.”

The AI and ML capabilities of super-platforms like WhatsApp and Facebook have generated a debate globally on more effective use of the competition law as the key tool for addressing super-platforms, its core tool being the provision of abuse of dominance against exclusionary conduct, enforcement of which concerns whether to order super-platforms to render their data accessible to their rivals. In this context, the 449-page report by the US House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law on October 6, 2020, on competition in digital markets, with a clear focus on the dominance of the GAFA (Google, Apple, Facebook and Amazon), needs to be noted by CCI. The Subcommittee concluded that the GAFA—branded as ‘dominant platforms’ by the report—possess monopoly power due to factors including their role as ‘gatekeepers’ of key distribution channels, which allows them to control access to digital markets. Additionally, the investigation found that the GAFA engaged in a series of anticompetitive conduct to maintain their market power, including ‘self-preferencing’ and the so-called ‘killer acquisitions’ of potential competitors.

WhatsApp has a large market share of over 70% in the broad market of ‘social media platforms used in India’ (after only YouTube and Facebook), and in the narrow market of ‘message exchange apps on smartphones’, it leads. Thus, the dominant position of WhatsApp is undoubted. To preserve fair competition in the relevant markets is a duty cast upon WhatsApp as per existing jurisprudence, and this includes providing a level-playing field to other platforms such as Telegram and Signal, etc. The proposed privacy policy may affect the market equilibrium considering the dominant position of WhatsApp.

The use of the platform involves constant trade-offs between the transfer of personal data and the provision of services. The use of the service is subject to the user agreeing to share his or her personal data with WhatsApp, and being the most popular app most users have no choice but to agree. The ostensibly ‘free service’ is paid for by a disproportionate extraction of personal data, which the consumer is hardly aware of (the so-called privacy myopia). Such an unregulated and unending extraction of personal data may offer a ‘data advantage’ to the dominant player against its potential competitors as it creates a barrier to their entry. In the long term, this reduces the contestability of the market and due to the market gets ‘tipped off’ in favour of the dominant player it may be eventually foreclosed. This, in view of experts, constitutes a peculiar form of non-price predatory behaviour, which, in terms of Indian competition law, may lead to a ‘denial of market access’ to other platforms besides and hence may constitute a violation of the relevant provision of the Competition Act, 2002. In the context of fairness and maintenance of effective competitive markets, such unregulated extraction of personal data from hapless and ‘locked in’ consumers leads to both exploitative and exclusionary effects.

But precedents exist. The German Federal Cartel Office held in 2018 (against Facebook) that if a dominant company makes the use of its service conditional upon the user granting the company extensive permission to use his or her personal data, this can be considered a case of ‘exploitative business terms’ and hence constitute abuse of dominant position. Japan has finalised guidelines, which state that any use of personal information, including users’ purchase history and location, without their consent would constitute an ‘abuse of a superior bargaining position’, a violation specified under Japan’s Antimonopoly Act.

So India may become the next battleground against the data monopolies of the Silicon Valley.

The author is head, Competition Law, Vaish Associates Advocates. Views are personal

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