CCI's Landmark Ruling on Meta's Privacy Practices

The Competition Commission of India's (CCI) recent press release announcing a substantial penalty of Rs. 213.14 crore on Meta marks a significant milestone in the regulation of digital platforms in India. This decision, centered on WhatsApp's 2021 Privacy Policy update, underscores the growing scrutiny of data practices and market dominance in the digital economy.

The CCI's action reflects a proactive approach to addressing anti-competitive behaviours in the tech sector, particularly concerning data sharing and user privacy.This policy insight examines the implications of the CCI's decision, which goes beyond mere financial penalties to impose behavioural remedies aimed at reshaping Meta's data practices in India.

The order's focus on user consent, data sharing restrictions, and transparency requirements signals a shift towards more stringent regulation of digital platforms. It also highlights the intersection of competition law with data protection concerns, setting a precedent that could influence regulatory approaches both in India and globally.

As a draft of Digital Competition Bill was proposed in March 2024, this CCI action provides valuable insights into the regulator's perspective on digital market dynamics and its readiness to enforce competition laws in the digital sphere. The decision raises important questions about the balance between fostering innovation in the digital economy and protecting user rights and market competition.

Detailed Breakdown of the CCI Press Release

Figure 1: Breakdown of the CCI Press Release on Meta

Penalty and Legal Basis

The Competition Commission of India (CCI) has imposed a substantial penalty of Rs. 213.14 crore on Meta for abusing its dominant market position. This penalty is based on violations of multiple sections of the Competition Act:

• Section 4(2)(a)(i): Imposition of unfair conditions

• Section 4(2)(c): Creation of entry barriers and denial of market access

• Section 4(2)(e): Leveraging dominant position in one market to protect position in another

Relevant Markets and Dominance

The CCI identified two key markets in its investigation:

• OTT messaging apps through smartphones in India

• Online display advertising in India

Meta, through WhatsApp, was found to be dominant in the OTT messaging app market and held a leading position in online display advertising.

Privacy Policy Update and Its Implications

The case centres on WhatsApp's 2021 Privacy Policy update, which:

• Mandated users to accept expanded data collection terms

• Required sharing of data with other Meta companies

• Removed the previous opt-out option for data sharing with Facebook

• Presented these changes on a "take-it-or-leave-it" basis

Anti-Competitive Practices Identified

The CCI concluded that Meta engaged in several anti-competitive practices:

• Imposing unfair conditions through the mandatory acceptance of expanded data collection and sharing

• Creating entry barriers for rivals in the display advertising market

• Leveraging its dominant position in OTT messaging to protect its position in online display advertising

Remedial Measures

The CCI has ordered several behavioral remedies to address these issues:

1. Data Sharing Prohibition: WhatsApp is prohibited from sharing user data with other Meta companies for advertising purposes for 5 years.

   
   

2. Transparency Requirements: WhatsApp must provide a detailed explanation of data sharing practices in its policy.

   
   

3. User Consent: Data sharing cannot be a condition for accessing WhatsApp services in India.

   
   

4. Opt-Out Options: Users must be given opt-out options for data sharing, including:

   1. An in-app notification with an opt-out option

   2. A prominent settings tab to review and modify data sharing choices

      
      

5. All future policy updates must comply with these requirements.

Significance of the Ruling

This decision by the CCI is significant for several reasons:

1. It addresses the intersection of data privacy and competition law

2. It challenges the business model of major tech companies that rely on data sharing across platforms

3. It sets a precedent for regulating "take-it-or-leave-it" privacy policies by dominant platforms

4. It demonstrates the CCI's willingness to take strong action against anti-competitive practices in the digital economy

Based on the CCI's order against Meta and WhatsApp, we can analyze its implementability, effectiveness, and implications for the Draft Digital Competition Bill's legislative perspective:

Implementability and Enforcement

• Specific and Actionable Directives: The CCI's order includes clear, implementable directives such as:

  1. Prohibiting data sharing for advertising purposes for 5 years

  2. Mandating detailed explanations of data sharing practices

  3. Requiring opt-out options for users

These specific measures demonstrate that the CCI can craft enforceable remedies for digital markets.

• Temporal Scope: The 5-year prohibition on data sharing for advertising purposes shows the CCI's willingness to impose long-term structural changes in business practices.

  
  

• User Interface Changes: Requiring WhatsApp to provide opt-out options through in-app notifications and settings demonstrates the CCI's ability to mandate specific changes to digital platforms' user interfaces.

Where the Order Shows Teeth

• Substantial Financial Penalty: The ₹213.14 crore fine is significant and sends a strong message to digital platforms operating in India.

  
  

• Behavioural Remedies: Going beyond fines, the order mandates specific changes in WhatsApp's data practices and user interface, directly impacting Meta's business model.

  
  

• Broad Market Impact: By addressing both the OTT messaging and online display advertising markets, the CCI demonstrates its ability to tackle complex, multi-sided digital markets.

  
  

• Future Compliance: The order extends to future policy updates, ensuring ongoing compliance and preventing easy workarounds.

Reflections on the Draft Digital Competition Bill's Legislative Perspective

• Ex-Ante Approach: While this action is ex-post, it signals the CCI's readiness to adopt a more proactive, ex-ante approach as proposed in the Digital Competition Bill.

  
  

• Focus on Data Practices: The order's emphasis on data sharing and user consent aligns with the bill's focus on regulating data practices of large digital platforms.

  
  

• User Choice and Transparency: The remedies ordered reflect the bill's intent to promote user choice and transparency in digital markets.

  
  

• Complementary Enforcement: This action under existing laws demonstrates how the proposed ex-ante framework could complement current ex-post enforcement, potentially addressing concerns more swiftly and effectively.

  
  

• Technical Expertise: The detailed analysis in the order suggests the CCI is developing the technical expertise needed to regulate digital markets effectively, as emphasised in the proposed bill.

Conclusion

In conclusion, the CCI's order against Meta and WhatsApp demonstrates that the regulator has the capability and willingness to implement and enforce significant measures against large digital platforms, even under the current legal framework. This action likely strengthens the case for the proposed ex-ante regulatory approach in the Digital Competition Bill, showing that the CCI is prepared to take on a more proactive role in shaping fair competition in India's digital markets.