Safiya Malik

The National Company Law Appellate Tribunal (NCLAT) has issued an interim stay on an order by the Competition Commission of India (CCI) that prohibited WhatsApp from sharing user data with Meta and its affiliates for five years. The Tribunal also stayed the ₹213.14 crore penalty imposed on Meta, subject to a deposit of 50% of the amount by WhatsApp and Meta. The stay was granted while awaiting a detailed judgment.

In November 2024, the CCI had imposed a ₹213.14 crore penalty on Meta Platforms Inc. for abusing its dominant position through WhatsApp’s updated 2021 privacy policy. This update required users to consent to expanded data-sharing with Meta as a condition of continued access to WhatsApp. The 2021 update replaced WhatsApp's earlier 2016 privacy policy, which had allowed users to opt out of such data sharing.

The CCI’s investigation concluded that the 2021 privacy policy adopted a "take-it-or-leave-it" approach, which imposed unfair conditions, undermined user autonomy, and violated the Competition Act, 2002. The CCI found WhatsApp to be dominant in the markets for smartphone messaging services and online display advertising in India.

The CCI’s directives included prohibiting WhatsApp from sharing user data with Meta or its products for five years. WhatsApp was also directed to specify the purposes of data sharing in its privacy policy and ensure that data sharing was not a prerequisite for accessing its services in India. Data sharing for advertising purposes was particularly restricted. These orders led to Meta and WhatsApp filing an appeal before the NCLAT.

A Bench comprising Chairperson Justice Ashok Bhushan and Technical Member Arun Baroka noted the significant implications of the CCI's order. The Tribunal observed that a five-year restriction on data sharing could disrupt WhatsApp’s business model, especially since the platform operates on a free-to-use basis. The Bench stated: “Ban of 5 years may lead to the collapse of the business model of WhatsApp LLC since the platform is free. We are of the view that the ban of 5 years needs to be stayed.”

Additionally, the NCLAT stayed the ₹213.14 crore penalty imposed by the CCI, contingent upon WhatsApp and Meta depositing 50% of the amount.

During the hearing on January 16, Senior Advocates Kapil Sibal and Mukul Rohatgi, appearing for Meta and WhatsApp, contended that the CCI had acted beyond its jurisdiction by adjudicating on WhatsApp's privacy policy, as the issue was already under review by a Constitution Bench of the Supreme Court.

Sibal argued that the matter raised broad implications across multiple domains, asserting that the CCI’s intervention overlapped with issues of data privacy being examined by the Supreme Court. He further stated that the new data privacy law set to come into effect in mid-2025 would ultimately govern disputes related to data-sharing practices, making the CCI’s order redundant.

Rohatgi argued that WhatsApp’s 2021 policy update was a continuation of the 2016 policy and did not introduce significant changes. He stated that no adverse findings regarding the policy had been recorded by the Supreme Court, and no stay was in place against it. Rohatgi also contended that the data-sharing practices in question were routine and did not harm users.

Advocate Samar Bansal, representing the CCI, argued that its investigation addressed competition law violations distinct from the issues before the Supreme Court. He stated that data privacy laws primarily govern the protection of personal data, whereas competition laws address issues related to the misuse of market dominance and business-related data. Bansal further noted that Indian users did not have the opt-out option available to European users under WhatsApp's policy.

In its November 2024 order, the CCI found that Meta and WhatsApp had engaged in abusive practices by leveraging WhatsApp’s market dominance to expand Meta’s advertising services. The CCI imposed a ₹213.14 crore penalty and issued multiple directives, including:

1. A prohibition on sharing user data with Meta or its affiliates for five years.

2. A requirement to specify the purposes of data sharing in the privacy policy and ensure data-sharing was not a condition for accessing WhatsApp.

3. Restrictions on using data for advertising purposes.

 A detailed order from the NCLAT is awaited.

WhatsApp was represented by Advocate Tejas Karia of Shardul Amarchand Mangaldas, while the Internet Freedom Foundation (IFF) was represented by Advocates Abir Roy, Vivek Pandey, and Biyanka Bhatia of Sarvada Legal.