Highlights
SUMMARY
The Competition Commission of India (CCI) has issued a ruling preventing WhatsApp from sharing user data with Facebook and Instagram for a period of five years, regardless of user consent. This decision is based on concerns of misuse of market dominance and the imposition of unfair conditions on users.
This ruling may limit competition by restricting Meta’s capabilities, without necessarily providing advantages to smaller competitors or enhancing their data collection practices.
Moreover, the restriction on data sharing could adversely affect small businesses that depend on targeted digital advertising to reach their customers, making their marketing efforts more challenging.
Impact of WhatsApp on India’s Digital Landscape
Meta’s WhatsApp has played a crucial role in shaping the digital ecosystem in India by transforming communication for both individuals and businesses. The development of WhatsApp Business and WhatsApp API has revolutionised business-customer interactions, facilitating seamless communication, integration, and automation.
Businesses of various sizes are increasingly embracing WhatsApp to enhance customer engagement and utilise targeted advertisements on Facebook and Instagram to attract new clients. This landscape could see significant shifts in the near future.
On 16th January, the National Company Law Appellate Tribunal is set to determine whether to suspend the CCI’s order that prohibits WhatsApp from sharing user data with other Meta products for advertising purposes, including Instagram and Facebook, for five years.
The CCI’s blanket prohibition applies irrespective of user consent, disregarding the consent-based framework established by the Digital Personal Data Protection Act, 2023.
Concluding a nearly four-year investigation, on 18th November 2024, the CCI determined that WhatsApp’s January 2021 update to its terms of service and privacy policy constituted an abuse of dominance.
Privacy Policy and Data Sharing Concerns
The CCI highlights that implementing the 2021 privacy policy on a “take-it-or-leave-it” basis imposes “unfair conditions” on users. This policy forces users to accept expanded terms for data collection and sharing within the Meta Group without an option to opt out. The update undermines user autonomy due to network effects and a lack of viable alternatives.
The CCI has also expressed concerns regarding Meta’s integration of data across Facebook, Instagram, and WhatsApp, which enables the company to refine its algorithms and enhance its understanding of user preferences and behaviours. This, in turn, optimises algorithms and boosts the effectiveness of its display advertising.
The CCI remarks that “without similar access to such data, competitors cannot provide comparable levels of precision in targeted advertising, personalisation, or consumer insights, which are vital for attracting advertisers.”
Steps Taken to Address the Concerns
To address the identified issues, the CCI has instructed WhatsApp to empower users to make informed choices regarding their data consent. Furthermore, it has entirely prohibited WhatsApp from sharing user data with Facebook and Instagram for advertising purposes for five years, even if users provide their consent.
This requirement for user consent seeks to promote transparency and user autonomy. However, the comprehensive ban on data sharing even with user consent appears contradictory. While aiming to promote competition in online display advertising, the CCI overlooks the significance of respecting user choices.
These remedies may inadvertently stifle competition rather than encourage it.
Firstly, the CCI’s directive affects conglomerates that operate across different business verticals yet share a common economic interest and decision-making processes. Many Indian brick-and-mortar businesses are strengthening their digital offerings, and integrating data collected across their various operations is critical for their growth.
These businesses will need to carefully evaluate their strengths within each segment and exercise greater caution when combining and utilising data. A small misstep could result in substantial penalties and jeopardise their business models built on data cross-usage.
Secondly, the likelihood that the CCI’s directive will support smaller social networks and digital advertising platforms in becoming more competitive seems unlikely. The CCI acknowledges that access to “comparable data” is essential, yet restricting Facebook and Instagram from utilising data collected by WhatsApp, even with user consent, will not naturally enhance the quality or quantity of data gathered by competitors.
This measure may restrain Meta while unduly benefiting other large technology firms, thus reinforcing their positions in the online display advertising sector.
Thirdly, and most significantly for the Indian economy, the CCI’s directive could adversely affect smaller businesses the most. Micro, Small and Medium Enterprises (MSMEs) increasingly depend on digital advertising to connect with and reach their customers. The cost per thousand impressions for digital advertising can be 70-80% lower than traditional advertising costs.
Consequently, MSMEs represent 30-35% of digital advertising expenditure, while only accounting for 4-6% of traditional advertising spend. The necessity for affordable and effective access to digital advertising for MSMEs’ success in e-commerce is apparent.
Restricting Facebook and Instagram from leveraging data collected by WhatsApp inhibits MSMEs from effectively using a valuable platform for identifying, targeting, and connecting with customers.
