SUO MOTO COGNIZANCE TAKEN BY COMPETITION COMMISSION OF INDIA
The Competition Commission of India (herein after referred as CCI) took suo moto cognizance of the matter (Suo Moto case No. 1 of 2021) in its ordinary meeting held on 19th Jan., 2021. Section 19(1) of the Competition Act, 2002 empowers CCI to initiate suo moto enquiry into alleged breach of section 4(1) of the Competition Act, 2002. The coram included Mr. Ashok Kumar Gupta, Chairman and Ms. Sangeeta Verma and Mr. Bhagwant Singh Bishnoi, members. The commission stated that this decision was taken pursuant to perusal of various media reports and potential impact of policy and terms on the users. In this case, both, Facebook and Whats App were arrayed as opposite party.
DOMINANT POSITION UNDER COMPETITION ACT, 2002
Now, the main question arises. What wrong, if any, has Whats App committed under the Competition Act, 2002 that CCI took cognizance of the matter? The answer to this question given by CCI is “abuse of dominant position”. Before the law is applied to the facts of the case, it is necessary to go through section 4 of the Competition Act, 2002 which governs the issue.
Explanation to section 4 of the Competition Act, 2002 defines “dominant position”. As per it, “dominant position” is a position of strength, enjoyed by a firm in the relevant market in India, and this position enables the firm to: (i) operate independently of the market forces; or (ii) affects its competitors or consumers or the relevant market in its favor.
Now, section 4(1) of Competition Act, 2002 prohibits the abuse of the dominant position by any enterprise or group.
Section 4(2) of the Competition Act, 2002 states the conditions which result in abuse of dominant position. These are:
- 4(2)(a), if directly or indirectly, unfair or discriminatory condition or price is imposed on the consumers.
- 4(2)(b), if it restricts the providing of goods and service or restricts technical and scientific development to the prejudice of the consumers.
- 4(2)(c), if the practice of the enterprise results in denial of market access
- 4(2)(d), making conclusion of contracts subject to acceptance by parties of supplementary obligation, which have no connection with subject of these contracts.
- 4(2)(e) using dominant position in one market to enter or protect other market.
Thus, if any enterprise or group has dominant position, and it commits any of the action stated in section 4(2) of the act, it commits abuse of dominant position. This is prohibited under the Competition Act, 2002 and in case any such incident is found, then CCI can proceed with matter.
RESPONSE SOUGHT FROM FACEBOOK AND WHATS APP
Pursuant to the suo moto case, CCI, sought replies from Facebook and Whats App.
Whats App filed confidential reply which was not accepted by CCI for want of Regulation 11 and 35 of Competition Commission of India (General) Regulations, 2009 not being observed.
Subsequently, Whats App filed public version of its response which stated its preliminary objections. CCI objected to the non-observance of the regulation, but went through the submissions in interest of justice, so as not to delay the matter further, but directed that the regulations must be followed immediately.
REJECTION OF PRELIMINARY OBJECTIONS
CCI rejected the preliminary objections of Facebook as well as of Whats App.
CCI contented in its order that the judgements relied upon by Whats App have no relevance to the present case. As per CCI, Bharti Airtel Case has no applicability as in that case there was a conflict between statutory bodies, namely Telecom Regulatory Authority of India (TRAI) and Competition Commission of India (CCI). Former is the telecom sector regulator, while latter is the market regulator. Since, Whats App has failed to state the other regulator which is seized of the matter, this case cannot be applied.
In lieu of the orders of CCI referred, CCI stated that in those orders CCI had only ruled that Information Technology does not fall within its sphere and this does not bar CCI to proceed with the matter in which excessive data is being collected with relation to dominant position and unfair play in market. Also, as per section 62 of Competition Act, 2002, this act is in addition, and not derogation of other laws.
ORDER OF INVESTIGATION INTO THE MATTER
Having rejected all the preliminary objections, CCI proceeded to examine the case on merits that whether Opposite Parties have prima facie violated the provisions of section 4 of the Competition Act, 2002.
CCI started with its order in Harshita Chawla Case, where CCI had studied the angle of relevant market in which Whats App falls. In this case CCI accepted the fact that there are numerous applications which are distinct from each other in terms of the services they offer. While inter alia some offer messaging, some offer video calls or just calls, some offer voice note facility and some provide a combination of these services. Also, there is difference in availability of these Applications, like Whats App and Facebook are available on variety of mobile operating system like Android, iOS, windows phone etc., while apps such as FaceTime and iMessage are available only on iOS. Thus, it is difficult to compartmentalize all these apps in water tight compartments. Hence, what has to be seen is the primary or the most dominant feature(s) of the app so as to categorize it in a particular relevant market. Thus, CCI ruled that Whats App operated in the “market for Over-The-Top (OTT) messaging apps through smartphones in India”.
This case also dealt with the existence of dominant position of Whats App. CCI had noted in this case that Whats App is the second most used messaging platform followed by Facebook Messenger, both of them owned by same group. Whats App is way ahead of its competitors and since it has a broad consumer base, being on Whats App added to the value of the consumer or business being available on it as by means of it, they could approach all the other people who are already using the platform, and vice versa. This network effect worked for Whats App as a consumer cannot shift to some other messaging platform unless all his all other contacts also do the same and his all other contacts will shift only when their contacts shift to some other platform. Thus, the net effect of these factors gave a dominant position to Whats App in the relevant market.
Thus, ex facie Whats App was imposing unfair conditions on users, making a condition that would deny market access to others and there existed the possibility that the collected data might be used to enter or protect any other market. This made a prima facie violation of sections 4(2)(a)(1), 4(2)(c), and 4(2)(e) of the Competition Act, 2002.
Hence, CCI in order dated 24.03.2021, has directed an investigation in the case by the Director General under section 26(1) of the Competition Act, 2002. It has also directed the investigation to be completed within span of 60 days.
The opportunity for oral submissions, sought by the Opposite Parties was denied by CCI by citing the judgement of Hon’ble Supreme Court in Competition Commission of India v. Steel Authority of India Ltd., where the court had held that there exists no statutory obligation on CCI, nor there is any right of the parties for oral submissions at this stage when CCI is merely forming an opinion for directing an investigation.
WRIT PETITION IN DELHI HIGH COURT
In this petition, CCI submitted before the Hon’ble High Court that CCI has merely ordered investigation and its role will come into play only if the report of Director General finds an abuse of dominant position. CCI also justified its order on the ground that being the sectoral regulator, it is its statutory duty to save the interest of the consumers and prevent abuse of dominant position by any enterprise.
The Hon’ble High Court rejected the petition of Whats App and Facebook and refused to set aside the order of CCI directing investigation into the matter.
THE ROAD AHEAD
At this stage, what CCI has done is merely ordering a probe into the matter. If the report of Director General does not find any violation, the case will be closed. In case, the report of Director General finds violation of the dominant position, then CCI will share the report with Opposite Parties and their objections will be invited. After the objections will be filed by the Opposite Parties, CCI will conduct oral hearing to give an opportunity to the Opposite Parties to support their case. Once, this procedure is followed, then CCI will pass its order in the case.
The matter is sub judice and, thus, no one can be condemned for any action at present. But, in a country like India which does not have any data protection or privacy law, it will be a boon that any other statute can take the responsibility, though limited to its ambit, but yet something is better than nothing. Though, it is not for nothing, that in the modern era, driven by technology and data, it is essential for every country to have its laws which regulate data protection and preserve privacy of an individual. Now what happens in the present case, is of course a matter of time and outcome of proceedings, which will come out soon.
Author: Parth Mahjan.
 https://www.whatsapp.cpm/legal/updates/privacy-policy/?lang=en (last visited on 20th Apr., 2021).
 (2019) 2 SCC 521.
 Case No. 99 of 2016.
 Case No. 15 of 2020.
 Case No. 07 of 2020.
 (2010) 10 SCC 744.