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Facebook, WhatsApp, and CCI spar over regulator’s jurisdiction as Delhi HC reserves judgment

WhatsApp

The Delhi High Court on Tuesday reserved its judgment on the plea by WhatsApp and Facebook seeking quashing of the Competition Commission of India’s investigative order into WhatsApp’s 2021 privacy policy change. Before a single-judge bench of Justice Navin Chawla, WhatsApp, represented by senior advocate Harish Salve, declared that the competition regulator had jumped the gun by started proceedings against WhatsApp. He said that the company’s 2021 privacy policy did not change much but simply “fleshes it out”, and was an “amplification” of the existing policy.

In March, the CCI ordered an investigation to ascertain the “full extent, scope, and impact” of data sharing under WhatsApp’s new privacy policy and terms of use that is being implemented with “involuntary consent of users”. The regulator had taken suo motu cognisance of privacy policy and questioned both WhatsApp and Facebook. WhatsApp has prima facie violated provisions under the Competition Act through its “exploitative and exclusionary conduct” under the garb of a policy update, the Commission said.

WhatsApp, Facebook question CCI’s jurisdiction

Salve argued that the CCI was examining privacy related issues without jurisdiction. This is for two reasons. One, the right to privacy is a constitutional matter, while the CCI deals with competition. Two, challenges against WhatsApp’s 2016 and 2021 privacy policy changes are pending before both the Delhi High Court and the Supreme Court respectively.

Privacy-related issues should only be examined by the relevant court, Salve said. Citing a Supreme Court judgment, Salve argued that the CCI cannot come in to examine competitive concerns and come in while other matters are pending before judicial forums. 

We [WhatsApp] are giving a free service, and users can pick whatever they like. Whether WhatsApp’s privacy policy is consistent with constitutional concepts of privacy is not the CCI’s matter to look at. The primary job of protecting Article 21 lies with the State. And the matter [challenging WhatsApp’s 2021 policy] is pending before the Supreme Court. 

Personal data and privacy are constitutional virtues. To prevent me [WhatsApp] from using data available within my own system, there has to be some law. If I am acting in a manner which is anticompetitive, then they [CCI] are free to intervene.

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— Harish Salve, WhatsApp counsel 

A case against WhatsApp’s 2016 privacy policy change is pending before the Supreme Court in Karmanya Singh Sareen v. Union of India; another two case against the 2021 update are pending before the Delhi High Court, these were filed by Seema Singh (and others) and by Chaitanya Rohilla. Multiple constitutional bodies are looking at one case, Rohatgi argued, questioning whether the CCI can jump in and also take the issue up. “I’m challenging the CCI’s jurisdiction to do this,” he said. According to Rohatgi, the CCI is abusing its power by launching the investigation, it has done so without giving regard to other courts; it has not presented the facts and figures around WhatsApp’s market relevance and dominance.

WhatsApp’s 2016 privacy policy — Facebook acquired the company in 2014 — gave existing users an opt-out of data sharing with Facebook. Users who have signed up after 2016 do not get an opt-out, WhatsApp continues to honour this for users who signed up before 2016, Salve said.

Facebook should not be party to CCI probe: Rohatgi

Facebook is one step removed since it is WhatsApp’s parent company, senior advocate Mukul Rohatgi, also the former Attorney General of India, argued.

The CCI has included Facebook in their proceedings by stating that it can benefit from WhatsApp’s policy change, Facebook cannot be added as a party and go through the entire rigmarole by staking its reputation, Rohatgi said, arguing that that just because both WhatsApp and Facebook are controlled by Mark Zuckerberg, does not mean Facebook should be party to every WhatsApp-related matter.

The social media company had asked the CCI to leave it out of the proceedings, stating that it was a separate legal entity from WhatsApp. The regulator had shot this down and instead reprimanded Facebook from “feigning ignorance” about the potential impact of the policy update. The CCI had said that Facebook would be a direct beneficiary of WhatsApp’s changes. 

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Both Rohatgi and Salve, representing Facebook and WhatsApp respectively, did not fail to repeatedly mention how WhatsApp cannot see users’ communications since the platform is end-to-end-encrypted.

WhatsApp says when you send messages, is is completely encrypted, and not even WhatsApp can read it. They have started WhatsApp Business as a pilot. If you want to purchase an air ticket, I can access do it via WhatsApp Business, I can pay the company or its agent. Such information will have to be stored [somewhere]. Nobody’s privacy is being violated. I’m being slammed by CCI saying that Facebook is a direct beneficiary and that I am feigning ignorance. What ignorance? — Mukul Rohatgi, Facebook counsel 

Issue is not privacy, but access to data and resulting competition concerns: CCI

Though the matter at hand concerns a privacy policy, the main issue at hand is not privacy but access to data, which is a competition matter, the CCI argued on Tuesday before the court. And competition is solely within CCI’s domain, the Commission’s counsel, Aman Lekhi, argued. In this case, the CCI wants to deal with the metadata since details such as who made WhatsApp call and for what purpose, without having access to the actual conversation, goes into customer profiling and consumer behaviour, both of which can be monetised.

The question at hand is not of privacy, which becomes a fundamental right issue and falls under constitutional courts, but the issue is of competition. “If conversations are being overheard its a privacy concern and not our concern,” senior advocate Lekhi argued. 

The regulator said accusations of it overarching were unwarranted since the issue is exclusively of competition. Here is a paraphrased version of Lekhi’s explanation:

The outcome of the data sharing under WhatsApp new privacy policy would be understanding consumer behaviour and ascertaining their preferences. This facilitates targeted advertising, which generates revenue, leading to services. Automatic sharing of information between two integrated services — WhatsApp and Facebook. WhatsApp is not sharing the data with Signal and Telegram because they are competing apps. Facebook uses that data for targeted ads, leading to more advertisers, who offer more services, leading to more consumers. The numbers will grow on both sides, eventually reaching a critical mass. The lack of interoperability between WhatsApp, Signal and other messaging apps will increase the cost of shifting out of WhatsApp, and eventually turn into a barrier to market entry. This is precisely what the CCI is dealing with. 

Besides, the CCI has only ordered an investigation, a proceeding which is administrative and not adjudicatory and does not have a punishment. “The CCI will come into the picture only when the investigation report says that there is infact abuse of dominant position. Whether or not a positive report will be filed, is an issue still writ large,” he said. 

When Justice Chawla said that the order seems to suggest that the CCI is dealing with privacy matters, Lekhi reiterated that the while the nomenclature is around “privacy policy”, the arising issues are to do with competition.

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Traceability will require “opening up” of messages

Salve also mentioned the IT Rules 2021, which require traceability. He said WhatsApp is taking this up to the government, since traceability will require “opening up of messages”. “If you want to know who is the first originator, then I will have to read all the messages,” Salve said.

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