Whatsapp has won an antitrust case in India, filed with the Competition Commission of India (CCI) by Vinod Kumar Gupta, a Chartered Accountant representing “Fight for Transparency Society”. The CCI has ruled that while Whatsapp is dominant, it is not abusing its dominant position.

The allegations

1. Privacy Policy: Whatsapp had brought changes to its privacy policy on August 25th 2016, forcing users to share their account details with Facebook, in order to avail the services of Whatsapp. According to the complaint, Whatsapp is on 95% of Android devices in India with a user base of over 70 million users (Editors note: it’s actually over 200 million monthly active users). The manner in which the consent was taken for sharing data with Facebook was deceptive, and consumers are not equipped to understand the privacy policy. The privacy policy is in contravention of the provisions of Section 4 of the Competition Act 2002.

2. Predatory pricing: Whatsapp used to charge $0.99 as an annual subscription fee. It is now free, and this is owing to funds being sourced from its parent company Facebook.

3. Sharing of data is a violation of provisions in the IT Act. However, CCI declined to look into this aspect of the allegations, since these “do not fall within the purview of examination under the provisions of the [Competition] Act.

The Assessment

What is Whatsapp’s market, when looking at it from an anti-trust perspective in India?

  1. Whatsapp’s market is for “instant messaging services using consumer communication apps through smartphones”, and is different from text messaging.
  2. The CCI noted that Instant communication apps for smartphones cannot be compared with traditional messaging and calling services, because “unlike traditional modes of communication, instant messaging using communication apps are internet based and provide additional functionalities to the users.”
  3. Services like Whatsapp “can be used through smartphones only, whereas traditional electronic communication services can be used through any mobile phone.
  4. Text messaging can be done between people who are on different mobile providers. IM needs to be between people on the same IM service.
  5. Geographic market for consideration: India.

“The functionality provided by consumer communication apps through smartphones is inherently cross-border”, and the geographic scope is for demand and supply is global, and the functionality doesn’t differ based on location. “All consumers with access to internet are in principle free to download and install any app they want, irrespective of their geographic location anywhere in the world.” However, competitive conditions, may be different in different regions, and the allegations pertain to Whatsapp in India.

The Ruling

A. Is Whatsapp dominant in India? It is, according to the CCI

Whatsapp “is in a dominant position in the relevant market [India]”. There are other apps, including Apple’s iMessage, Blackberry’s BBM, Samsung’s ChatON, Google Hangouts and Skype, apart from Hike, Viber, WeChat and Snapchat. The CCI ruled that Whatsapp is dominant based on the following data:

  1. According to a Jana and mCent study: 97% of smartphones users in India use IM, and the most popular one is Whatsapp, installed in 96% of devices.
  2. 56% of Indian Internet users use Whatsapp, and 51% use Facebook. Among Internet users in India, Whatsapp tops the list of IM apps.

B. Is Whatsapp indulging in abusing its dominance? It isn’t, according to the CCI.

Here’s why:

  1. Opt Out: Whatsapp allows users to opt out of sharing user account info within 30 days of updating terms and conditions
  2. Data to be used for improving delivery: Whatsapp says it will use the data to improve infrastructure and delivery systems, to understand how services are used, securing systems, fighting spam, abuse or infringement activities.
  3. End-to-End encryption: “The Commission also finds force in the submission of the OP regarding its users safeguards that all types of ‘Whatsapp’ messages (including chats, group chats, images, videos, voice messages and files) and ‘Whatsapp’ calls are protected by end-to-end encryption so that third parties and ‘Whatsapp’ cannot read them and also the message can only be decrypted by the recipient.”
  4. Data not shared externally: “Nothing a user shares on ‘Whatsapp’, including his/her messages, photos, and account information, will be shared onto ‘Facebook’ or any other apps of the ‘Facebook family of companies’ for any third party to see, and nothing a user posts on those apps will be shared by ‘Whatsapp’ for any third party to see.”
  5. Not predatory pricing: Several other applications do not charge any fee from users, including Hike, Messenger and Viber. Whatsapp not charging any fee “may be due to the presence of many other service providers who are offering the services for free of cost.”
  6. Users can switch easily: Because all consumer communications apps are cheap or free, easily downloadable, can co-exist on a phone along with competing services, it’s easy for users to switch from one app to the other. Apps typically have a simple interface, so the cost of switching to a new app is minimal, and information about new apps is easily available. The CCI cites the success of Hike, with nearly 100 million users as an example of no significant barriers to entry.

Download the order here.

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Disclosure: I’m the co-founder of the Internet Freedom Foundation, which is a petitioner in a case in the Supreme Court, looking at privacy issues related to Whatsapp. IFF’s filing is available here, published by Legally India. A note from IFF about this filing is available here.