Meta Appeals CCI’s Rs 213 Crore Penalty on WhatsApp at NCLAT

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Meta Platforms Inc., the parent company of Facebook and WhatsApp, has filed an appeal with the National Company Law Appellate Tribunal (NCLAT) challenging the Competition Commission of India’s (CCI) penalty of Rs 213.14 crore. The CCI imposed the penalty in November 2022, accusing WhatsApp of abusing its dominant position through the 2021 privacy policy update. The CCI found that the privacy update violated antitrust norms by mandating data-sharing with Meta’s other businesses without offering an opt-out. Senior counsels Kapil Sibal and Mukul Rohatgi argued for an urgent hearing due to the industry-wide implications, with NCLAT scheduling the matter for January 16.

The CCI’s investigation determined that the ‘take-it-or-leave-it’ policy harmed user choice and market competition, leading to behavioral restrictions on Meta. The company must not share WhatsApp user data for advertising purposes for five years and must provide a robust justification for any future data-sharing practices. This legal clash emphasizes the growing scrutiny of tech giants over data privacy and competitive practices.

Introduction to Meta and WhatsApp

Meta, formerly Facebook Inc., NCLAT is a global tech conglomerate founded in 2004 by Mark Zuckerberg and co-founders Eduardo Saverin, Andrew McCollum, and Dustin Moskovitz The company transitioned to Meta in 2021, emphasizing its focus on the metaverse. Meta’s product portfolio includes Facebook, Instagram, WhatsApp, Oculus VR, and AI-based tools.

WhatsApp, acquired by Meta in 2014 for $19 billion, is a messaging platform that serves over 500 million active users NCLAT in India alone. The app offers free messaging, voice, and video calling services, positioning itself as a leader in Over-The-Top (OTT) communication. WhatsApp’s revenue model primarily focuses on B2B services, including its WhatsApp Business API, enabling companies to interact with customers efficiently. Meta monetizes WhatsApp indirectly through its integration into broader advertising ecosystems.

Background of the Case

In January 2021, WhatsApp rolled out a privacy policy update requiring users to accept terms that expanded data-sharing with Meta’s other services. The update faced backlash globally, including in India, as it was perceived as coercive and undermining user privacy. In March 2021, the Competition Commission of India (CCI) launched a probe to investigate if the policy violated Section 4 of the Competition Act, 2002..

The CCI’s investigation concluded that:

• The policy was presented on a ‘take-it-or-leave-it’ basis, forcing users to accept expanded data-sharing.
• This approach hindered competition in the OTT messaging and online advertising markets.
• The lack of opt-out options violated fair competition norms and consumer rights.

In November 2022, the CCI imposed a penalty of Rs 213.14 crore and directed Meta and WhatsApp to halt data-sharing practices for advertising purposes for five years.

Meta’s Response and Legal Challenge

On January 6, 2025, Meta filed an appeal with the NCLAT, challenging the CCI’s decision. Senior advocates Kapil Sibal and Mukul Rohatgi noted the order’s impact on the tech industry and requested an expedited hearing. The appellate tribunal, led by Justice Ashok Bhushan, set the hearing for January 16.

Meta’s defense includes:

• Asserting that the 2021 privacy update did not compromise the privacy of personal messages.
• Arguing that the update aimed to introduce optional business features and enhance transparency about data usage.
• Highlighting that users were not compelled to use the service or face account deactivation.

Despite these arguments, the CCI’s directive remains a landmark in regulating the practices of dominant tech players.

Implications of the CCI Order

1. Behavioral Restrictions: WhatsApp cannot share user data with Meta’s other services for five years. Post this period, Meta must provide a robust justification for any data-sharing practices.
2. Consumer Rights: All Indian users must have the option to opt out of data-sharing via an in-app notification.
3. Market Impact: The decision sets a precedent for holding tech giants accountable for competitive and privacy practices.
4. Regulatory Overlap: The case highlights the intersection of competition law and data protection norms, necessitating alignment with India’s Digital Personal Data Protection Act, 2023.

Industry Reactions and Trends

The penalty and subsequent appeal have ignited discussions on:

• The balance between innovation and regulation in the tech sector.
• The role of competition authorities in addressing data privacy concerns.
• The need for global tech giants to adapt to localized regulatory frameworks.

Policy experts have also pointed to the proposed Digital Competition Bill as a critical step in ensuring fair competition and protecting consumer interests.

Learning for Startups and Entrepreneurs

1. Transparency in Policy Updates: Ensure that any changes in terms of service or privacy policies are communicated transparently and offer user-friendly opt-out mechanisms.
2. Regulatory Compliance: Proactively align business practices with local regulations to avoid legal challenges.
3. User-Centric Approach: Prioritize user rights and trust to maintain a loyal customer base.
4. Adaptability: Stay informed about evolving regulatory landscapes and incorporate compliance measures into business strategies.
5. Market Ethics: Avoid leveraging dominant positions in ways that could stifle competition or harm consumer interests.

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