WhatsApp’s Privacy Terms: What Competition Commission Must Note

Does WhatsApp’s recent change in privacy terms amount to an ‘abuse of dominance’? Smriti Parsheera explains.

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At the start of this year — 2021 — WhatsApp notified a change in its privacy terms. The new terms clarified the data sharing arrangements between WhatsApp and its parent company, Facebook, particularly in respect of business users. Brought amidst a climate of growing privacy consciousness and mistrust of big tech firms like Facebook, the ‘take it or leave it’ nature of the notification did not bode well with users. Calls for migration to competing services like Signal and Telegram led WhatsApp to temporarily delay the adoption till 15 May.

Much of the discourse in the last few weeks has been centred around data protection concerns and the superior privacy features of alternative apps. However, this is as much of a competition policy issue as it is a privacy one.

The problem with WhatsApp’s new terms needs to be seen in light of the structural realities of online markets, the dominance of WhatsApp and Facebook, and gap between the bargaining powers of these firms and their users.

Why Competition Commission of India Didn’t Find WhatsApp Indulging In Abuse of Dominance

In a 2017 case challenging WhatsApp’s data sharing with Facebook, the Competition Commission of India (CCI) declared that there exists a distinct market for instant messaging services using smartphone apps.

WhatsApp was recognised to be a dominant player in this market but the CCI did not find it to be indulging in abuse of dominance. One of the reasons given was the 30 day ‘opt out’ window given to users to restrict data sharing with Facebook.

The effectiveness of this ‘opt out’ was in doubt even then and is certainly not on the table anymore.

The CCI subsequently reiterated its findings on WhatsApp’s dominance in two other cases. The regulatory position on WhatsApp’s market power, therefore, seems clear. Yet, it is a position that WhatsApp continues to deny. It may even try to use the current episode to claim that the switching behaviour of users demonstrates that it actually faces competitive constraints. Any such claim would, however, need to be weighed against the reality of WhatsApp’s direct network effects and the limitations on user choice due to the lack of interoperability between messaging apps.

As a result, there is likely to be a significant gap between claimed switching preferences and actual user behaviour.

The test, therefore, is not just the number of downloads of other apps or even their active users, several of whom may be temporarily multi-homing, but WhatsApp’s actual exit figures or a sustained dip in messaging volumes. Absent such evidence it would be fair to assume that WhatsApp continues to maintain its dominant position.

The Competition Act Does Not Define ‘Unfairness’

However, competition policy does not problematise dominance per se but rather its abuse. This leads to the question: does WhatsApp’s recent change in terms amount to an abuse of dominance?

As per Section 4(2)(a) of the Competition Act, the imposition of unfair conditions by a dominant player constitutes a type of abuse of dominance. The Competition Act does not define ‘unfairness’, hence allowing the CCI significant discretion in interpreting the term.

One may argue that a unilateral change of terms enabling the exploitative use of data with no effective choice to the user would fit the bill. This is supported by the positions adopted by competition authorities in other jurisdictions.

In a notable decision in 2019, the German competition authority (Bundeskartellamt) called out Facebook for its exploitative data practices. It held that combining user data from Facebook’s affiliates, like WhatsApp and Instagram, and other third-party sites without users’ explicit consent constituted an abuse of dominance. In doing so, the German competition body took guidance from the principles laid down under Europe’s General Data Protection Regulation. Germany has now amended its competition law to enable more proactive enforcement in the digital economy. Europe’s strong stance on data protection and competition enforcement might explain why WhatsApp has kept European users outside the purview of its new rules.

What Competition Commission of India Needs to be More Cognisant Of

The Fair Trade Commission in Japan has also issued detailed guidelines on the abuse of superior bargaining powers by tech platforms relying on personal information. Among other examples, the guidelines cover situations where consumers are compelled to accept detrimental treatment by a dominant platform on account of having no other viable alternatives. The practical difficulty of switching to an alternative service due to the network formed with other consumers is one of the identified barriers.

In India, the CCI has so far been reluctant to act outside the contours of the traditional competition policy toolkit. However, much has changed since 2017 when it last looked into the data sharing between WhatsApp and Facebook.

This includes increased privacy awareness post the Puttaswamy verdict, precedents set by other competition authorities, and the CCI’s own understanding of competition issues in the e-commerce and telecom sectors. Delays in the adoption of the data protection law and growing data brazenness of tech giants add fuel to this mix.

The linkages between data governance and competition policy are hard to miss, as is the likely tension between the CCI and the proposed Data Protection Authority (DPA).

However, that is not reason enough for dominant firms to enjoy a free pass until that law and body are put in place. The reality for now is that competition law offers one of the few available checks against the abusive data practices of dominant tech firms and CCI needs to be more proactive in recognising that responsibility.

(Smriti Parsheera is a consultant, National Institute of Public Finance & Policy. She tweets at @SmritiParsheera. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)