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

The Competition Commission of India dismissed allegations of abuse of dominant position against WhatsApp and Facebook under Section 4 of the Competition Act, 2002. The Commission held that informants need not be aggrieved parties to file complaints, rejecting challenges to locus standi and forum shopping arguments. While defining the relevant market as Over-The-Top messaging apps through smartphones, the Commission found no prima facie case of market abuse or anti-competitive practices. The information was closed under Section 26(2) of the Act, with the Commission concluding that allegations of leveraging dominance in messaging to manipulate digital payment markets were not substantiated.

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Issues Involved:
1. Locus Standi of the Informant
2. Relevant Market Definition
3. Dominance of WhatsApp
4. Allegations of Abuse of Dominance under Section 4 of the Act
5. Misuse of Data and Data Privacy Concerns

Issue-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.

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