TaxTMI 
TaxTMI 
2020 (8) TMI 949
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.... Payment Interface (UPI) market in India which affect participants/players in the said market, besides impacting individual customer/consumer in the long run. 3. WhatsApp (OP-1), launched in 2009, is an instant messaging application which provides a simple interface with no ads, allowing users to communicate with other WhatsApp users either in groups or individually. WhatsApp uses the Internet to send and receive text messages, images, audio or video content from one user to another. It further offers features like group chatting, voice messages and location sharing. To use this App, one simply needs a compatible smartphone/tablet/desktop with a sim card, an Internet connection and a phone number. 4. Facebook, Inc. (OP-2), a technology company based in United states of America, is a social networking platform that allows the users to connect with other Facebook users through posts, messages, likes, comments etc. Facebook is considered as one of the Big Five technology companies along with Microsoft, Amazon, Apple, and Google. In the year February 2014 Facebook, acquired WhatsApp for the purchase price of US$19 billion and is thus the parent company of WhatsApp. 5. The Info....
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....ind a way to eventually cash in. The Informant also alleged that by acquiring its competitors, Facebook has made available a product portfolio made of Instagram, Messenger, WhatsApp, and Oculus, which are called the five pillars of its revenue-generating model thereby driving out healthy competitors from the market. The Informant has further submitted that by utilising the vast amount of personal data from its billions of active users and their activities, Facebook can customise advertisements to suit user situation and attract attention. This type of targeting is extremely beneficial for advertisers, who are willing to pay a premium to ensure that their products/services are advertised to right people at the right time. According to the Informant, OP-2 monetizes the user data, generates revenue and drives out healthy competition from the market. 9. In relation to WhatsApp's revenue model, the Informant has stated that WhatsApp does not charge a direct fee for its service to its users but it shares the data it collects automatically from the users on the WhatsApp with Facebook thereby aiding it in generating huge revenues through targeted advertisements. The Informant also c....
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.... directly interact with the UPI switch. However, there is a provision for non-banking entities to participate in the UPI ecosystem. Although such non-banking entities will have to partner with a banking entity (already enabled on UPI) and develop their own PSP. Such PSP's are known as third party applications. Many technology-based companies have ventured into the UPI ecosystem through this mode and have offered Third-Party App services. Users can access UPI payment facilities through such Third-Party Apps facilitating payments through UPI. These apps use UPI libraries and utilities to facilitate user registration, creation of VPA and provide payment services to the users. Users are thus, not bound to use the app of their own bank and can instead choose the app of any bank or any Third-Party Apps facilitating payments through UPI. Google Pay, PhonePe, PayTM and BHTM are some of Third-Party Apps facilitating UPI payments. WhatsApp Pay also acts as a Third-Party App for facilitating payments between users. 13. The Informant claims that such Third-Party App (TPA) providers constantly strive to make their business more viable in the UPI ecosystem to sustain in the competing mark....
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....rmant has claimed that UPI has established itself as the most preferred mode of payments. As per the newspaper reports relied upon by the Informant, UPI is perhaps the fastest product to hit 1 billion transactions-a-month in 2019 since its inception in August 2016. The Informant has further stated that besides being the most preferred method of payment, UPI has also become a crucial tool to achieve the financial goal of "less-cash" economy in India. Thus, control of such market in the hand of any monopolistic party (sic) and that too a foreign party like the OPs can have huge impact on the market, our country and the consumers. 16. The Informant has submitted that the services provided by the Opposite Parties are amenable to scrutiny under the Act even though such services are being offered without any monetary fee/charge. The Informant has proposed the following two relevant product markets: a. Market for internet-based messaging application through smartphones; and b. Market for UPI enabled digital payment applications. 17. The Informant has claimed that services provided by the internet-based messaging Apps through smartphones form a separate and distinct....
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....App is dominant in the market for internet-based instant messaging app through smartphones in India. The Informant has primarily relied upon the following factors, as enshrined under Section 19(4) of the Act, to allege dominance: a) Market share: The Informant has relied upon various newspaper reports to contend that WhatsApp is a market leader in the relevant market, where it continues to rank as the most sought-after and downloaded app, having millions of active users across India. The Informant has also referred to the data provided by Statista, which states that the number of daily active users of WhatsApp status in quarter 1 of the year 2017 was 175 million which rose to 500 million in the first quarter of 2019. b) Size and resources of enterprise: The Informant alleged that Facebook, which is the parent company of WhatsApp, is among the big five technology companies of the world and has been known to eliminate its competition in the market by buying out the competitors. The major revenue of the Opposite Parties is claimed to come from targeted advertisements and huge user data is alleged to be the biggest driving force behind it. c) Size and importa....
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....hrough targeted advertisements and large data capitalization creating further rapid opportunities for the Opposite Parties to grow and constantly keep new entrants at bay, discourages entry. 21. Based on the aforesaid, the Informant has alleged that WhatsApp enjoys an undisputed and unperturbed dominance in the 'market for internet based instant messaging apps on smartphones in India'. Allegations under Section 4 of the Act 22. The Informant has primarily made two sets of allegations, alleging contravention of various sub-sections of Section 4 of the Act emanating therefrom. 23. Firstly, it has been alleged that the users of WhatsApp automatically get the payment app owned by WhatsApp i.e. 'WhatsApp Pay' installed on their smartphones. This automatic installation of the Payment option into the Messenger App is nothing short of 'pre-installation' which is forced upon a user of the dominant product, WhatsApp messenger. This, as per the Informant leads to contravention of Section 4(2)(a)(i) of the Act as automatic installation of WhatsApp Pay on existing WhatsApp Messenger user's device amounts to imposition of unfair condition on the users/cons....
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....tion as these companies have huge data sets of users which they can use for their commercial advantage. The Informant has also referred to an ongoing federal lawsuit against Facebook on its anti-competitive activities of acquisition and driving out competition in United States of America. The Informant also referred to EU antitrust case against Facebook alleging access to more data and revenue by acquisition and blocking of competition with the expansion in new sectors. The Informant has also highlighted the fine imposed by Federal Trade Commission (FTC) on Facebook amounting to US$5 billion for violation of consumer's privacy by breaching data security and privacy laws. Reliance has been placed on various news articles to substantiate the foregoing facts. 27. Besides the aforesaid, the Informant has also made some miscellaneous allegations e.g. serious non-compliance of critical and mandatory procedural norms pertaining to data localisation and storage by the OPs, data privacy issues etc. Further, the Informant has alleged contravention of Section 4(2)(b)(ii) and 4(2)(c) of the Act, though no conduct has been specifically mentioned with regard to these sub-sections. 28. ....
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.... as the Informant, who has not even claimed any legal injury as a consumer or as a member of any consumer or trade association as a result of WhatsApp's conduct, does not have locus standi to approach the Commission, and the information deserves to be dismissed under the Act. 32. It has been submitted that the Informant is indulging in forum shopping as she is closely associated with a petitioner who has approached the Hon'ble Supreme Court of India raising the same core issues as those raised in the Information. Further, such apparent non-disclosure of the pending litigation by the Informant has been argued to be an evidence of the Informant's mala fide intent and unclean hands with which she has approached the Commission. 33. Facebook has also submitted that WhatsApp and Facebook are separate and distinct entities and any alleged strengths of Facebook cannot be attributed to WhatsApp. Facebook has also objected to the Informant's allegations regarding Facebook's previous acquisitions stating that such legitimate and legal acquisitions cannot be equated with abuse of dominance under Section 4 of the Act, more so when Facebook obtained all necessary approv....
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....; whereas WhatsApp operates in a much broader market under 'market for user attention'. It has been stated that WhatsApp application competes broadly with all digital products and services that seek to capture user attention through innumerable different services or functionalities, such as social networking, messaging, gaming, content viewing and sharing, photo and video sharing, or music, amongst many others. Further, most of these services in this market are free for the users who frequently multi-home between service providers who operate to garner the user attention. Accordingly, the relevant market cannot be limited to a specific mode of engagement like instant messaging. 40. As regards dominance, WhatsApp claimed that it does not enjoy a dominant position in the market proposed by it or even in the narrow market proposed by the Informant. The assessment of the Informant, it has been argued, does not meet the test for dominance under the Act as the Informant has failed to provide any comparative analysis to demonstrate that WhatsApp acts independent of competitive constraints from other messaging applications active in India such as Google Hangouts, iMessage, Viber....
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....n submitted that even if users were to activate the payments feature, users in India, can and do multi-home between various applications, and the launch of WhatsApp Pay is pro-competitive by providing users an additional feature to make payments as all UPI-based payment features are inter-operable. 43. As regards leveraging, WhatsApp has claimed that contravention of Section 4(2)(e) of the Act, requires a dominant enterprise to have used its dominant position in one relevant market to enter into, or protect, another relevant market. Further, leveraging to constitute abuse can only be said to have occurred when an enterprise undertakes some restrictive or abusive conduct. The Informant has failed to establish the necessary elements of a leveraging claim as the users retain full discretion and optionality in choosing whether to use WhatsApp Pay; therefore, the Informant cannot demonstrate that WhatsApp has actively restricted or imposed obligations on users to do anything. Rather, WhatsApp simply offers users WhatsApp Pay as a feature, should they choose to use it. There is no restrictive or abusive conduct or any "use" of an alleged dominant position as required under Section 4(2....
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....app along with WhatsApp messaging service. 45. As regards the other miscellaneous allegations such as non-compliance with data localization norms and two factor authentication requirements etc., WhatsApp has stated that these do not raise competition concerns and ought not to be examined under the Act. Moreover, the allegation that WhatsApp automatically shares WhatsApp Pay user data with Facebook to be used in targeted advertisements are unfounded and deserve to be dismissed. 46. In view of the aforesaid submissions, WhatsApp has prayed that the information be set aside and the case be closed under Section 26(2) of the Act. Analysis of the Commission 47. At the outset, the Commission notes that besides substantive objections to the allegations made by the Informant, both the Opposite Parties have raised a preliminary obj ection to the locus of the Informant in filing the present information, placing reliance on the recent decision of the Hon'ble National Company Law Appellate Tribunal (hereinafter, 'NCLAT') in Samir Agarwal vs. Competition Commission of India [Competition Appeal (AT) No. 11 of 2019 decided on 29.05.2020] (hereinafter, 'Samir Agarwal cas....
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....ting the words "receipt of a complaint" with "receipt of any information". This amendment clearly reflected the legislative intention of emphasizing the inquisitorial nature of the proceedings of the Commission. Further, there are several other amendments, as also the other provisions of the Act, which reverberate this inquisitorial scheme. Illustratively, the nature of powers conferred upon the Commission under Section 27, on a finding of a contravention under Section 3 or 4 of the Act, demonstrates the larger perspective of correcting the market by modifying the conduct of erring entity(ies). The Competition (Amendment) Act, 2007 omitted the power of the Commission to award compensation to parties in accordance with the provisions contained in Section 34 which earlier existed under the Act. Further, Section 28 empowers the Commission to direct division of an enterprise enjoying a dominant position to ensure that such enterprise does not abuse its dominant position, even without a finding of a contravention. Also, under Section 35, the words 'complainant or defendant' were substituted by the words 'person or an enterprise' through the Competition (Amendment) Act, 2....
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.... locus of the person who provided such information. 84. The purpose of the Act is to prevent practices having an adverse effect on competition in India, to promote and sustain competition in the markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in the markets. Towards that end, the Commission is more concerned with the fair functioning of the market and the motives with which the informant has come to the Commission is subservient to that objective. [...] 54. Further, in Case No. 05 of 2018 [XYZ (Informants identities' confidential) And Indian Oil Corporation Ltd. And Ors.], decided on 04.07.2018, the Commission, while comparing the mandate given to it under the Act vis-a-vis the mandate of a sectoral regulator, observed as under: 34. On the other hand, the Commission has the power to take action, on its own or upon information provided, to identify any possible anticompetitive conduct in the market. Hence, the powers and duties of the Commission are much wider. The proceedings before the Commission are inquisitorial in nature and targeted toward overall market correction and subsequent effects wh....
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....4) of the Act and direct an investigation. The Commission may also take cognizance of the reports appearing in print or electronic media or even anonymous complaint/representation suggesting violation of Sections 3 and 4 of the Act and issue direction for investigation under Section 26(1). The only limitation on the exercise of that power is that the Commission should feel prima facie satisfied that there exist a prima facie case for ordering into the allegation of violation of Sections 3(1) or 4(1) of the Act. 56. The aforesaid leads to an inevitable conclusion 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....
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....ion, continues to exist despite directions of the Commission. The Commission has to focus on the fair functioning of the market and any motive with which the Informant might have approached the Commission is subservient to that objective. However, considering that the informations in the four cases have been clubbed and investigated together and also being disposed of vide this common order, the objection of the OPs is only academic. (emphasis supplied) 61. Similar views were reflected in Case No. C-87/2009/DGIR [Vedant Biosciences And Chemists and Druggists Association of Baroda] decided on 15.01.2019, the Commission observed as under: 52. The Commission observes that the object of the Act is to prevent practices having an adverse effect on competition in India, to promote and sustain competition in the markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in the markets. Towards that end, the Commission is more concerned with the fair functioning of the market and the underlying intent of the Informant in approaching the Commission is secondary to that objective. Thus, though it may be factually correct....
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....he Act is concerned. The Commission further notes that where the Informant approaches the Commission with unclean hands or bases its case on incorrect facts or evidence, there are adequate provisions under the Act, to deal with such instances. However, to suggest that such a fact would lead to dismissal of an otherwise maintainable information, would be stretching the argument too far. 64. As regards the non-disclosure, the Commission observes that vide Competition Commission of India (General) Amendment Regulations, 2019 dated 20.11.2019, Regulation 10 of the Competition Commission of India (General) Regulations, 2009, was amended so as to require the following disclosure from the informants: "(da) Details of litigation or dispute pending between the informant and parties before any court, tribunal, statutory authority or arbitrator in respect of the subject matter of information." 65. The aforesaid amendment requires disclosure regarding pending dispute/litigation between the informant and parties. Apparently, the Informant in the present case and the petitioner in the PIL filed before the Hon'ble Supreme Court are not the same. The OPs have tried to draw some ....
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....arious forms, such as voice and multimedia messaging, video chat, group chat, voice call, sharing of location, etc., while others provide services such as communication with a wider set of people in an impersonal setting such as sharing status and posts. Further, while some consumer communications apps are proprietary in nature, i.e. available on only one operating system such as FaceTime and iMessage service available on Apple's iPhones, while others operate as over-the-top ('OTT') apps offered for download on multiple operating systems, e.g. WhatsApp and Facebook are available on a variety of mobile operating systems, including iOS, Android, Windows Phone etc. Furthermore, the segmentation can also be based on whether a set of consumer communications apps are available for all types of devices, or only for particular type(s) of device e.g. while Facebook is available on smartphones as well as PCs, WhatsApp essentially is a smartphone app. Having said that the Commission is cognizant of the peculiar features which these consumer communication apps possess, where for some functions they may appear substitutable while not so for others, making it all the more challenging....
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....rtphones'. 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. 76. As regards the geographic market, the Commission agrees with the Informant that the functionality of OTT messaging apps through smartphones does not differ depending upon the region or country concerned, either in terms of price, functionality or operating system. However, the competitive conditions, regulatory architecture and players may vary in different countries/regions. Since conditions for competition are homogenous in India, the geographic area of India has been taken as the relevant geographic market for the purposes of assessment. Accordingly, the first relevant market would be 'market for Over-The-Top (OTT) messaging apps through smartphones in India'. 77. The Informant has alleged that WhatsApp is dominant in this market and has leveraged such dominance to take advantage in another market i.e. 'market for UPI enabled digital payment applications in India'. 78. The UPI enabled Digital Payment Apps also work as third....
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....be WhatsApp, Facebook Messenger, Hike, WeChat, SnapChat etc. The Informant has primarily relied on absolute number of users to submit that WhatsApp had a high market share in the relevant market. 82. The data provided by the Informant on market shares has been primarily taken from 'Digital 2020' reports published by 'We are Social' in partnership with 'Hootsuite', a social media management system, and the said report claims to have taken data from various sources, including GlobalWeblndex, Statista, GSMA Intelligence, App Annie, SimilarWeb and Locowise. 83. While it may not be easy to ascertain the denominator or the market size to calculate precise market shares in this particular market as most consumers are using multiple apps for messaging at the same time, the data relied upon by the Informant gives some indication of the most used Apps and most used messaging OTT Apps based on the percentage of internet users aged between 16 and 64 in January 2020. 84. Such data shows that WhatsApp messenger is the most widely used app for social messaging, followed by Facebook Messenger in the relevant market delineated by the Commission supra. Further, it is....
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.... smartphones in India'. 89. With regard to abusive conduct, the Informant's main allegations stem from the pre-installation of WhatsApp's payment app namely 'WhatsApp Pay' on its users' smartphones embedded within the WhatsApp messenger app. This automatic installation of the Payment option into the Messenger App is alleged to have resulted in the contravention of following provisions: i. Section 4(2)(a)(i), as such pre-installation amounts to imposition of unfair term/condition on the user by a dominant entity i.e. WhatsApp messenger; ii. Section 4(2)(d), as the conduct of WhatsApp amounts to bundling of its messaging services with the UPI enabled Digital Payments Apps; and iii. Section 4(2)(e), as such pre-installation also amounts to leveraging of dominance by WhatsApp in first relevant market to favour and protect another relevant market. 90. The Commission observes that the aforesaid allegations of the Informant are in the nature of both exploitative as well as exclusionary abuses flowing from the same conduct. On the exploitative side, the Informant is aggrieved that the users of WhatsApp Messenger have been imposed wit....
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.... the allegation of the Informant; 'bundling' typically means that the two products are sold by the seller in a fixed proportion as a bundled package at a particular price. 93. The economic literature, as well as the decisions by other competition authorities, has laid down certain conditions which need to be fulfilled to conclude a case of tying. Such conditions are (i) the tying and tied products are two separate products; (ii) the entity concerned is dominant in the market for the tying product; (iii) the customers or consumer does not have a choice to only obtain the tying product without the tied product; and (iv) the tying is capable of restricting/foreclosing competition in the market. 94. WhatsApp, in its submissions dated 11.06.2020, has submitted that none of these conditions are met. It has been stated that WhatsApp Pay is not a separate product, but only a value-added feature to the WhatsApp messenger service; thus, first condition is not met. Also, WhatsApp is not dominant and since there is no compulsion on the users to necessarily use WhatsApp Pay in order to use WhatsApp messenger service, the second and third conditions are also not met. Lastly, it has....
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....lausible. Besides, the Commission also observes that WhatsApp Pay had got approvals to act as a payment app in India in February 2020 in beta version, and only recently, it seems to have complied with the data localisation norms stipulated by NPCI to operate fully. Thus, its actual conduct is yet to manifest in the market. Also, as stated by WhatsApp, the number of users being served under the beta version is limited to less than 1% of its users in India. To that extent, the Commission tends to agree with WhatsApp that this allegation is premature. Accordingly, the fourth condition also does not seem to have been met. 98. For the foregoing reasons, the Commission is of the view that the allegation of the Informant under Section 4(2)(d) of the Act is not made out. 99. As regards the allegation of leveraging, the Commission does not agree with the Informant for reasons cited supra while dealing with the allegation under Section 4(2)(d) of the Act. The Informant has contended that WhatsApp will leverage its dominance in the upstream market to have a competitive edge over the existing competitors. The Informant also seems to be distressed by the fact that while the other existing....