• Prince Kumar Singh

Role of Technology in Competition Law: Critical Analysis of CCI’s WhatsApp Privacy Update Order,2021


Introduction

In the recent case concerning WhatsApp policy update 2021 which claims to collect data from consumers and share it on Facebook and its companies for business and marketing purposes. After making the update and terms of service public, many experts criticize the policy and mentioned that this act of the big-tech is not appropriate for privacy laws as well as for the digital market. Thereafter, the Competition Commission of India (CCI) took suo moto cognizance of the case undersection 26 (1) of the Competition Act, 2002 which talks about the procedure for inquiry under section 19 of the said act.


WhatsApp in its statement relied on the previous decisions of the Commission[1] and contended that issues related to data localization and data sharing need not be looked under the Competition law. They also place reliance on the ‘Vinod Gupta Case’ where it was held by the court that privacy and terms of use are a matter under the IT Act and does not come under the purview of CCI. Contradicting WhatsApp’s argument, CCI mentioned that they are viewing this policy in the aspect of Competition law and looking, whether this policy violates Section 4 of the act.


In this article, analysis is based on technological aspects of anti-competitive practices prevalent in the market where CCI’sorder will be examined and its implications on competition law in today’s data-driven economy will be evaluated.

The Issue with WhatsApp’s Update

WhatsApp’s new privacy policy was supposed to be updated till Feb 8 but the date was shifted after uproar over its mandatory approval of guidelines. Notification suggests that, the user should approve the terms of use and privacy in their entirety and if non-compiled, their account will be terminated and they can no longer use the communication app.

WhatsApp’s updated policy is drafted in a unilateral way where the consumer does not have an option to opt-out from sharing their data or not updating to the new policy. Also, it can be inferred that consent to sharing of user data with other Facebook companies for various purposes of advertising and marketing, has been made a prerequisite in the recent update. There are reasons to believe that the processing of data collected from WhatsApp will increase consumer profiling which may lead to check the behaviour of the consumer to gain an unfavourable advantage in competition.


CCI’s observations

  • The Commission is of opinion that the ‘take-it-or-leave-it’ nature of privacy policy and terms of service of WhatsApp need a thorough investigation where this OTT communication app is already in a dominant position.

  • Delving into a new arena, Commission mentioned that the owners of their personalised data are entitled to information about the precise purpose of sharing such data by WhatsApp with other Facebook entities.

  • Relating to the abovementioned point, Commission also took note that the concentration of such data may itself raise competition concerns in the relevant market and will perceive as an advantage.

  • Commission also took note that data and data analytics have immense relevance for the competitive performance of digital enterprises in today’s market.

  • They are of the view that in a data-driven competitive ecosystem, the relevance of data is needed to be considered in respect to anti-competitive practices and thus liable to anti-trust scrutiny.

  • The Commission is of opinion that WhatsApp has prima facie contravened the provisions of Section 4 of the Act through its exploitative and exclusionary conduct, in the garb of the policy update.

Key takeaways from CCI’s decision

  • Role of Information technology in Competition Law

CCI referred to the relevance of data in today’s competitive environment, where data-driven organisations that have a huge concentration of data with themselves can create entry barriers for others by analysing the consumer preference and mould their business model in accordance with the choices and needs of consumers.


For Instance; Google, Microsoft, Amazon, Facebook, and Uber are big corporations that have been accused of using unfair practices to retain their size and influence and are closely watched and investigated for alleged anti-competitive practices by antitrust authorities. In all these incorporations, one thing is common i.e. their businesses are based on consumer’s data.


  • Take it or Leave it policies by dominant players

The negotiator in this strategy rather than enlarging the pie for creating value assumes that there is a fixed pie and they will get a bigger piece of it. Facebook through WhatsApp was being a competitive negotiator in this case and can be considered as positional bargaining because they are trying to hold their position high by being inflexible in dealing with other parties. It is pertinent to note that information plays a vital role in getting the desired outcome when it comes to the formation of these kinds of policies, where the dominant party already have sufficient information regarding the consumers. Many data-driven organisations use such kind of information for their benefit and they negotiate in a way where they have some information that the other party does not have and this situation can be termed as “Information Asymmetry”.


  • Data Concentration leads to data Analytics

In an infamous case of Cambridge Analytica, where employees of the organisation were caught selling psychological profiles of American voters to gather support in political campaigns and meanwhile acquired the private Facebook data of millions of users. The object of this example is to include the effects of psychological warfare in competition law where the tools of technology can be used to gain unfair advantages in the market.

When it came to the term “concentration of data”, the decision of the European commission became relevant which examines the impact of the merger of Facebook and WhatsApp and companies alike that possess a large amount of relevant data which may cause entry barriers for new entrants.


  • Lock-in-effect

“The lock-in effect refers to a situation in which consumers are dependent on a single manufacturer or supplier for a specific service, and cannot move to another vendor without substantial costs or inconvenience.” Herein our cases, WhatsApp is dominant OTT messaging app and with this major update creating a “lock-in-effect” which will negatively affect the market and at the same time defeat the whole purpose of the competition which is consumer welfare and consumer benefit.


  • Role of Artificial Intelligence

Algorithms can have certain anti-competitive effects in the market-leading to collusion and eventually higher prices if left unchecked. There are several cases of big-tech companies who are involved in algorithmic collusion which led to price dynamism.


Self-learning algorithms can predict the advances in machine learning and are capable of unilaterally determine the price maximizing profit.[2]


Suggestions and Reference to foreign laws

  1. Federal Trade Commission (“FTC”) issued guidelines that showed that collusive pricing algorithms will fall under this category unless there is a voice of reason.

  2. The German Monopolkommmission stated in their report (Algorithm and Collusion), asserting that there is a need to regulate algorithmic pricing. They recommend that the current engineering of the algorithm should be in such a way that the liability directs itself Internet Service Provider and not the learning algorithm.

  3. In India, CCI mentioned the “hub and spoke method” and said that there must be a specific exchange or communication amongst the ‘spokes’ i.e. the drivers through the ‘hub’, the Cab Aggregators.

  4. In that case, it was recognized that there was no communication regarding the determination of prices and it was based on the same algorithm used by both the apps which is based on the same external factors and cannot be held to be collusive.

  5. In another case of Matrimony.com Limited vs Google LLC, The CCI ruled that Google’s search results were manipulated by their design and algorithm, thus leading the consumers to believe that the results shown were in order of relevance. The CCI found Google’s algorithms to be discriminatory and favouring its services by manipulating search results and consequently found its conduct to be unfair and abusive.

  6. For the first time, the government has recognized the relevance of technology in the field of competition law concerning e-commerce portals in their draft policy.

  7. They stressed the fact that e-commerce companies should not use technology to gather unfair advantages.

  8. "E-commerce operators shall ensure that algorithms used are not biased and that no discrimination due to digitally induced biases is prevalent," the draft said.

  9. The European Union (‘EU’) has been working on tools for defining, developing and regulating e-commerce platforms deals with regulation of the Digital Service Act which would facilitate positive competition.

Conclusion

Data and data analytics have vast significance for the competitive performance of digital enterprises. Cross-linking and amalgamation of user’s data can strengthen data advantage besides safeguarding and reinforcing the market power of dominant entities. The collection and use of personal data fall within the ambit of data protection laws but the need of an hour is to relate it with competition laws to know the relevance of anti-competitive practices prevalent in the current market scenario.


Referring to CCI’s wording, “The emergence of new business models, technologies and even markets creates dynamic challenges for antitrust enforcers. Tried and tested antitrust theories and practices may no longer withstand scrutiny in fast-moving digital markets. Antitrust agencies may be tempted to develop novel theories of harm or seek additional powers to address real or perceived enforcement gaps.”


References:

[1] Competition Commission of India v. Bharti Airtel Limited and others, (2019) 2 SCC 521 [2] Bathaee, Y., The Artifcial Intelligence Black Box and the Failure of Intent and Causation, Harvard Journal of Law & Technology, vol. 31, no. 2, 2018, pp. 890-938, p. 891.


The Author's views are personal.

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