NCLAT rules on WhatsApp data: Key advertising ban overturned, Rs 213 Crore fine maintained
New Delhi: In partial relief to WhatsApp, the National Company Law Appellate Tribunal (NCLAT) struck down a section of a Competition Commission of India (CCI) order that had prohibited the messaging platform from sharing user data with Meta Platforms for advertising purposes for five years, on Tuesday. However, the tribunal upheld a penalty of ₹213 crore imposed on the social media major.
Modifying the CCI’s November 18, 2024, order, the NCLAT set aside directions contained in paragraph 247.1 of the 158-page ruling. The two-member bench, however, upheld findings that WhatsApp had breached Sections 4(2)(a)(i) and 4(2)(c) of the Competition Act, stating that the company’s 2021 privacy policy “constituted abuse of dominance” and led to market denial.
The tribunal observed that by imposing unfair and discriminatory conditions through a “take it or leave it” policy, WhatsApp had compelled users to accept extensive data sharing as a prerequisite for using the service, without offering a genuine opt-out option.
“We find that mandatory acceptance of broad and vague data sharing terms amounted to coercion and unfair conditions on users,” the NCLAT said, terming it a violation of Section 4(2)(a)(i) of the Act.
Commenting on the ruling, a Meta spokesperson said: “We welcome the NCLAT's decision. While we await the written order, we continue to reiterate that WhatsApp's 2021 privacy policy update did not change the privacy of people's personal messages, which remain end-to-end encrypted. WhatsApp's optional business features make people's lives more convenient with services like bill payments, ticket booking, and shopping, while supporting local businesses and furthering India's digital economy.”
In its 184-page judgment, the NCLAT noted that cross-platform data sharing between WhatsApp and Meta had strengthened Meta’s position in the digital advertising market, creating entry barriers for competitors lacking similar access to WhatsApp data.
“We note that Meta is not dominant in the Market but a leading business entity and by its conduct has created a situation of market denial and thus Meta has violated Section 4(2)(c). It needs to be noted that section 4(2)(c) gets attracted herein due to special circumstances existing in this case,” the tribunal said. However, it held that the CCI’s finding of a breach under Section 4(2)(e) was unsustainable, as it could not be established that Meta leveraged dominance in one market (OTT messaging) to extend dominance in another (online display advertising).
The bench, comprising Chairperson Justice Ashok Bhushan and Member Arun Baroka, observed that WhatsApp and Meta are distinct legal entities. It therefore set aside the CCI’s directive in paragraph 247.1, which had restrained WhatsApp from sharing user data with Meta or its products for advertising purposes for five years.
“The remainder of the impugned order is upheld,” the NCLAT said, confirming the ₹213.14 crore penalty on Meta imposed by the CCI. The tribunal also found no fault with the CCI’s methodology for calculating the fine.
While noting that Meta is not dominant in India’s online display advertising market, the tribunal said the company’s actions had created anticompetitive effects and justified the penalty.
“We have determined earlier that it is WhatsApp alone, which is dominant in the relevant market of OTT messaging apps through smartphones in India and is also found to have abused its dominant position and violated Section 4(2)(a)(i) of the Act. Thus, imposition of penalty on WhatsApp is wholly justified,” the order stated.
The NCLAT also pointed out that Meta exercises full control over WhatsApp’s operations, noting the lack of standalone financial statements and shared leadership between the two entities.
“Due to excessive data sharing between WhatsApp and Meta, a situation of market denial has been created. Therefore, there is a justification in imposing a penalty on both in a combined manner as has been worked out by the Commission,” it said.
The tribunal had earlier, in September, reserved its order after hearing Meta Platforms and WhatsApp’s appeals against the CCI’s November 2024 decision. The regulator had penalised both firms for unfair business practices linked to WhatsApp’s 2021 privacy policy update.
In January this year, the NCLAT granted interim relief by staying the CCI’s five-year ban on WhatsApp-Meta data sharing, offering temporary respite to the tech companies.
PTI inputs