The Competition Commission of India has treated data protection as a non-price competition parameter and found a compromise on this parameter by the dominant social media app, both exploitative and exclusionary.
In January 2021, WhatsApp brought some changes to its privacy policy. The new policy makes the use of WhatsApp subject to a user agreeing to share her data with other Facebook companies. Previously, a user had an option to disagree with this condition and still continue with WhatsApp.
The new policy has been challenged in the Delhi High Court for being violative of user privacy .<1> Ideally, a data protection law, which still languishes with a Joint Parliamentary Committee, would have prohibited an action such as this ex-ante. Thus, while the court would have a tough time pronouncing upon the legality of WhatsApp’s action, the Competition Commission of India (CCI) has quickly stepped in through a suo moto action against WhatsApp. The CCI has treated data protection as a non-price competition parameter and found a compromise on this parameter by the dominant social media app, both exploitative and exclusionary.
One cannot deny that unfair harvesting of user data can be anti-competitive at times. The theory of harm, for instance, in the CCI’s case against WhatsApp builds on the fact that forced clubbing of WhatsApp user data with their Facebook data will give vast insights into user behaviour for targeted advertisements. As competitors of Facebook do not have this clubbing advantage, they will lose out on online advertisement revenue. Additionally, forced clubbing of data is unfair and exploitative.
In principle, such putative anti-competitive actions can be checked by a data protection authority. Section 5 of the draft Personal Data Protection Bill, 2019, calls for data processing which the data principal would reasonably expect. Arguably, clubbing of WhatsApp data with Facebook data is beyond users’ reasonable expectation and thus, illegal.
Even though the task of a competition regulator is to protect and promote competition in markets, sectoral regulators too are tasked with promoting competition among other objectives. While the competition scrutiny is ex-post, sectoral regulations are ex-ante and thus move swiftly. In case of overlapping jurisdiction, the Supreme Court of India in the Bharti Airtel case has accorded primacy to sectoral regulators to avoid turf wars.
Aside from a clear overlap in the specific mandate of protecting competition, there can be a peculiar scenario where the violation of a separate law also has a chilling effect on competition. For instance, a dominant firm bribes a public authority to win a bid. Or, a dominant firm does not comply with environmental regulations, that its competitors follow, to offer cheaper products. In both these cases, sectoral laws/regulations already exist. Even in such cases, sectoral regulators should call the first shot. The case for a specialised body to take the first cognisance is even stronger if the remedies imposed also fix competition problems even when the trigger happens to be other concerns such as ensuring the right to privacy.
The case-by-case approach of competition bodies is time consuming too. In young network markets, exclusionary tactics akin to what WhatsApp seeks to follow will see the market ‘tip’ before the delinquent firm becomes big enough (dominant) to trigger competition law. Thus, the optimal approach is to fix such problems through data protection tools.
The international precedents that give priority to competition law over data protection law to address competition concerns are not very encouraging either. The German competition authority in 2019 had found Facebook’s conduct of clubbing a user’s data with the data collected from third-party websites as abuse of dominance after a three-year investigation. This was the first instance of a competition authority treating data protection as a competition concern. Subsequently, even though the German Supreme Court upheld this order in an interim ruling in 2020, it tweaked the theory of harm and based it on the exploitation of users, independent of data protection violation, and exclusion of competitors in the market for advertisements. More recently, a regional court has referred the question of Facebook’s legality of data collection to the Court of Justice of the European Union (ECJ). Thus, a clear verdict on the interface between data protection and competition law is far from sight.
An intuitively anti-competitive action by a market player almost always has efficiency justifications. For instance, a vertical agreement that restricts intra-brand rivalry in the short run, may improve the distribution of a product in the long run. Thus, in sum, this vertical restraint is pro-competitive. Likewise, in principle, all competition cases are fine balancing exercise between pro- and anti-competitive effects. The Indian Competition Act, 2002 is no exception and provides both positive and negative factors in Section 19 (3), that the CCI must consider in decisionmaking.
It is hard to imagine how data harvesting or processing practices of a dominant firm, where they may compromise user privacy, could be redeemed through any amount of positive effects. Unlike any other adverse effect on consumer welfare, the right to privacy in India has been accorded the status of a fundamental right after Justice K.S. Puttaswamy vs. Union of India judgment. When a fundamental right is pitted against an economic welfare-enhancing restriction, an unbiased regulatory balancing is impossible.
The action of the CCI in the WhatsApp case represents the trend where antitrust regulators are attempting to make up for the absence of or deficiency in other laws/regulations. A more optimal way to deal with data harvesting practices of WhatsApp could have been a personal data protection law, which is still with a parliamentary committee.
There is one more instance of this trend. Recently, the CCI issued an interim order against MakeMyTrip (MMT)-Go and directed it to allow FabHotels and Treebo to be listed on its online portals, which were previously delisted following the exclusivity agreement between MMT-Go and OYO. While a swift action to remedy prima facie abusive conduct is worthy of appreciation, the occasion for the CCI to step in would not have arisen if the Indian legislature had enacted ex-ante regulation for Platform-to-Business (P2B) conduct.
Owing to the market power that these platforms wield and the non-transparent nature of their business model, the European Union (EU) adopted regulations to ensure transparency and trust in P2B conduct in June 2019. One of the provisions mandates platforms to provide reasons if they restrict or suspend their services to a particular business user. Although there is no explicit prohibition on delisting, it certainly preempts such unfair behaviour.
India should, therefore, adopt specific legal tools to ensure that digital markets operate efficiently and enforcement falls to the share of the best-placed regulator.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Vikas Kathuria was Fellow at ORF. He researches and writes on tech policy and competition law.
Read More +
PREV