The CCI’s order in the Whatsapp Privacy Policy matter lacks doctrinal coherence. Its reasoning creates an arbitrary distinction between legitimate competition and anti-competitive conduct in digital markets. The incoherence is because the regulator is influenced by emerging antitrust doctrines that are experimental and unproven. These doctrines diverge from established first-principles, focusing on the conduct of large firms, instead of dominant ones, and dealing with the potential for harm, rather than demonstrable proof of it. The author argues that the CCI must resist untested theories. Failure to do so will result in regulatory inconsistency, which can have far-reaching consequences for India’s digital market.
On 18 November, 2024 the Competition Commission of India (CCI) issued an order against Meta (formerly Facebook), imposing a fine of INR 213.4 crores, along with certain behavioral prescriptions. The matter began in 2021, when WhatsApp updated its privacy policy requiring users to consent to its sharing data with other companies owned by its parent, Meta. Users were given a ’take it or leave it’ option – either they consent to such sharing or discontinue using the service. Several suits were filed, and the CCI also took the matter up suo moto. In the preliminary order, the regulator concluded that WhatsApp’s conduct was indeed unfair, because it was forcing users to acquiesce to the sharing of their data with other Meta-owned entities. It also suggested that the sharing of data across Meta platforms, between WhatsApp, Facebook, and Instagram, presented potential competition concerns.
The CCI concludes that WhatsApp’s take it or leave it privacy policy disregards the “legitimate expectation” of its users on how their data would be shared or collected. Moreover, it suggests that the intra-company data sharing WhatsApp’s policy facilitated raised entry barriers for competitors; potentially excluding them from the market for display advertising. It therefore prohibits WhatsApp from sharing any data with other Meta group companies for the purpose of advertising for five years.
While privacy experts are lauding the CCI’s decision, competition wonks must lament it. Three examples from the order suggest a glaring lack of doctrinal coherence.
First, the CCI seemingly strays from the scheme of the Competition Act, 2002 by scrutinizing conduct where an entity is dominant, but then proceeding to proscribe conduct in a market where it is not. The regulator concludes that WhatsApp holds a dominant position in the ‘OTT messaging market’; but argues that the updated privacy policy constitutes an abuse of this dominance by Meta (WhatsApp's parent company) as it enables the accumulation of data and effectively denies competitors access to the 'display ads market’, where Meta is not dominant.
Section 4 of the Act prohibits dominant entities from abusing their position in a relevant market. The Act provides that such abuse unfair or exclusionary conduct includes indulging in practices that deny market access to competitors, or using one’s dominant position in one market to enter into, or protect another market. In cases of abuse of dominance, the regulator has to establish that the entity in question is dominant in the relevant market. But, the regulator’s juxtaposition of markets strays from this doctrine.
Second, by concluding that Meta’s data aggregation excludes rivals, the CCI seems to suggest that it is hoarding data. That is, Meta’s access to data through its products precludes potential competitors from accessing it, and that such data is somehow finite or scarce.
However, data is non-rivalrous, meaning it can be used by multiple people at the same time without reducing its supply. The accumulation of data does not assure success in digital markets or the government, the largest data holder in the country, would run the best apps! App owners must invest in research and development to derive value from big data. Moreover, data-driven firms often face diminishing returns on data accumulation, meaning as they collect more data, the incremental value of additional data often decreases.
Consider, for instance, the fact that TikTok emerged out of China to become a globally competitive social media platform, despite the fact that Meta had multiple leading platforms in the space. In 2022, TikTok was the most downloaded app in the world, despite being banned in India, the world’s second largest digital market, in 2020. If the CCI’s reasoning was self-evident, it would be impossible for TikTok to challenge Meta platforms as it is doing today.
Third, how the CCI distinguishes between what qualifies as legitimate competition and anti-competitive conduct in digital markets is unclear The Order suggests that data accumulation is anti-competitive only when undertaken by a firm dominant in any digital market. Conversely, data accumulation by non-dominant firms is not anti-competitive, because it helps enhance competitiveness. It is difficult to reconcile this reasoning with the conclusion that Meta’s use of data in a market where it is not dominant is not viewed as a competitive strategy or a means to innovate, but rather as a mechanism to exclude rivals.
According to this doctrine, Meta’s integration of Whatsapp datasets cannot be deemed innovative or competitive. But then, how does the CCI also conclude that the personalisation of ads afforded by Meta’s data accumulation is so advanced that no one can compete with it? And further, if no one can compete with Meta, why is it not dominant in the display ads market?
The Meta order marks the CCI’s espousal of experimental digital antitrust doctrines emerging from the European Union and other jurisdictions. These unproven theories depart from the first principles enshrined in the Competition Act, 2002, which, among other things, focus on scrutinising the conduct of dominant firms. Instead, these experimental doctrines focus on large firms, even though they may not be dominant, and classify certain practices by such firms, such as data accumulation, as inherently anti-competitive. As a result, they often contradict conventional notions of antitrust.
A reduced emphasis on concrete evidence of harm to competition is another leaf borrowed from emerging or experimental antitrust. These doctrines rely considerably on presuppositions, focusing on the potential for harm rather than demonstrable evidence of it. The rationale for this shift is that the dynamism of digital markets necessitates expedient adjudication, and that it is not always feasible to find definitive evidence of harm in such fast-evolving markets.
In the immediate case, it remains unclear which firms may have been unable to enter the market due to the integration of data from WhatsApp by Meta. However, the converse is also true. There is no evidence that Meta integrated data from WhatsApp specifically to exclude rivals, and it is not unequivocal that its actions were not innovative or competitive.
If regulators are going to deal in hypotheticals, as the CCI has, their theories and reasoning must be watertight, meaning there must be no counterfactuals or exceptions. The CCI’s reasoning is currently riddled with inconsistencies because it is relying on experimental, rather than established theories. It must take care to operate within the statutory scheme of the Competition Act, and resist becoming a test-bed for unproven antitrust concepts.
The consequences of inconsistency can be far-reaching economically. As a regulator of multiple markets, the CCI’s decisions impact the different commercial paradigms it oversees. Markets, particularly digital ones, thrive on regulatory certainty, and typically do poorly when they are subject to arbitrary decision-making, however well-intentioned.