2020 (8) TMI 949 - Commission - Law of Competition

WhatsApp Facebook escape dominant position abuse charges under Competition Act Section 4

Harshita Chawla Versus WhatsApp Inc. and Ors.

The Competition Commission of India dismissed allegations of abuse of dominant position against WhatsApp and Facebook under Section 4 of the Competition ... Abuse of dominant position by WhatsApp and Facebook u/s Competition Act, 2002 - Locus Standi of the Informant - informant is aggrieved party of not - HELD THAT:- The Informant need not necessarily be an aggrieved party to file a case before the Commission. Neither the Act specifies any such requirement explicitly, nor the same can be implicitly read into the provisions which clearly point towards the inquisitorial system envisaged by the Parliament. Further, it is because of the inquisitorial scheme of the Act, that the Commission in appropriate cases, defends its orders in higher forums, regardless of the fact as to who brought such case before it, which is not a normal feature in adversarial proceedings. Moreover, given that there are divergent decisions of the Hon'ble Appellate forum on the question of locus of the Informant, it may not be appropriate for the Opposite Parties to challenge the maintainability of the information filed by the Informant, based on the observation in the case of SAMIR AGRAWAL VERSUS COMPETITION COMMISSION OF INDIA & ORS. [2020 (5) TMI 746 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI [LB]] alone. Next contention is that the Informant has indulged in forum shopping being closely associated with a petitioner who has approached the Hon'ble Supreme Court against WhatsApp and Facebook and this apparent nondisclosure reveals the mala fide intent and unclean hands with which the Informant has approached the Commission. The Commission notes that though on first blush this argument looks attractive, it may not be factually correct and is legally untenable, given the scheme of the Act. The Informant has alleged that WhatsApp and Facebook are abusing their dominant position under Section 4 of the Act. Specifically, the Informant has alleged contravention of Sections 4(2)(a)(i), 4(2)(d) and 4(2)(e) of the Act, by these OPs, besides a brief mention of 4(2)(b)(ii) and 4(2)(c). Primarily, the Informant has alleged that WhatsApp has abused its dominance in the 'market for internet-based messaging application through smartphones', to manipulate another market i.e. 'market for UPI enabled digital payment applications' in its favour. This, as per the Informant, has distorted fair competition in the latter market for the existing players and has foreclosed the said market to potential entrants. The Commission is of the view that the relevant product market in which WhatsApp operates is the 'market for Over-The-Top (OTT) messaging apps through smartphones'. The Commission observes that though in terms of nomenclature this relevant product market appears different from the one proposed by the Informant, it largely covers the same set of players and competition dynamics. The Commission does not find alleged contravention of the provisions of Section 4 of the Act against WhatsApp or Facebook being made out. In view of the foregoing, the Commission is of the opinion that there exists no prima facie case of contravention and the information filed is directed to be closed under Section 26(2) of the Act. Issues Involved:1. Locus Standi of the Informant2. Relevant Market Definition3. Dominance of WhatsApp4. Allegations of Abuse of Dominance under Section 4 of the Act5. Misuse of Data and Data Privacy ConcernsIssue-wise Detailed Analysis:1. Locus Standi of the Informant:The Opposite Parties (OPs) challenged the locus standi of the Informant, arguing that she is not an aggrieved party and has indulged in forum shopping. The Commission rejected this objection, stating that the Act follows an inquisitorial system where the focus is on market correction rather than the identity of the informant. The Commission cited various legislative amendments and judicial pronouncements to emphasize that any person can provide information about anti-competitive practices, and the Commission is mandated to investigate such information.2. Relevant Market Definition:The Informant proposed two relevant product markets: the market for internet-based messaging applications through smartphones and the market for UPI-enabled digital payment applications. The Commission agreed with the Informant's delineation, defining the first relevant market as the 'market for Over-The-Top (OTT) messaging apps through smartphones in India' and the second as the 'market for UPI enabled Digital Payments Apps in India.' The Commission rejected WhatsApp's broader market definition of 'market for user attention.'3. Dominance of WhatsApp:The Commission found WhatsApp to be dominant in the 'market for OTT messaging apps through smartphones in India,' based on its large user base, network effects, and lack of viable alternatives. The Commission noted that WhatsApp's dominance is bolstered by its affiliation with Facebook and other group entities. The data relied upon by the Informant, though not free from infirmities, was considered a reasonable proxy for assessing WhatsApp's market power.4. Allegations of Abuse of Dominance under Section 4 of the Act:The Informant alleged that WhatsApp abused its dominance by pre-installing WhatsApp Pay within its messaging app, thus violating Sections 4(2)(a)(i), 4(2)(d), and 4(2)(e) of the Act.Section 4(2)(a)(i): The Commission found no merit in the allegation, as users have to voluntarily register for WhatsApp Pay, and there is no imposition or coercion.Section 4(2)(d): The Commission examined the allegation of tying and found that while WhatsApp Messenger and WhatsApp Pay are distinct products, there is no compulsion for users to use WhatsApp Pay. The Commission concluded that the third and fourth conditions for tying were not met, and thus, the allegation under Section 4(2)(d) was not made out.Section 4(2)(e): The Commission found the leveraging allegation to be premature, as WhatsApp Pay is still in its beta version and has not yet manifested significant market conduct. The Commission noted that the UPI market is competitive, and it is implausible that WhatsApp Pay would automatically gain a significant market share merely due to pre-installation.5. Misuse of Data and Data Privacy Concerns:The Informant alleged misuse of data by WhatsApp and Facebook for targeted advertising. The Commission noted that while customer sensitive data is amenable to misuse, there was no concrete allegation or specific information provided to support the competition concern. The Commission also dismissed concerns related to data localization and storage as they do not raise competition issues.Conclusion:The Commission found no prima facie case of contravention of the provisions of Section 4 of the Act against WhatsApp or Facebook. The information filed was directed to be closed under Section 26(2) of the Act.