COMPETITION COMMISSION CLEARS WHATSAPP INC. FROM ABUSE OF DOMINANCE ALLEGATIONS

The Competition Commission of India (C.C.I.) in the recent Information filed by Harshita Chawla against WhatsApp Inc and Facebook Inc[1] has vide its decision dated August 18, 2020 dismissed the case which alleged that the messaging platform was abusing its market dominance to launch WhatsApp Pay in India.

Background

The Information was filed under Section 19(1)(a) of the Competition Act, 2002 (‘the Act’) alleging contravention of the provisions of Section 4 of the Act. It was alleged that WhatsApp, by using its dominance in the internet based instant messaging App, is bundling its messaging App with the payment option of WhatsApp Pay, thereby using such dominance to penetrate into the United Payments Interface (‘UPI’) enabled Digital Payments App Market. Moreover, by enabling automatic installation of WhatsApp Payments App in the WhatsApp Messaging App, the company is alleged to be taking advantage of its vast user-base to popularize its newly launched WhatsApp Pay App.

Allegations & Analysis by the Commission

The Informant has alleged that Facebook Inc and WhatsApp Inc (‘Opposite Parties’) are abusing their dominant position under Section 4 of the Act contravening Sections 4(2)(a)(i), 4(2)(d) and 4(2)(e) of the Act. Along with this, certain preliminary objections were raised by the Opposite Parties as well.

I. Preliminary Objections to locus standi

The Opposite Parties have questioned the locus of the Informant by stating that firstly, the Informant is not an aggrieved party as she has not claimed any injury nor has suffered invasion of her legal rights as a consumer or beneficiary of healthy competitive practice to have a locus standi to file the said Information. Secondly, the Informant has indulged in forum shopping which proves her mala fide intent and unclean hands with which she has approached the Commission.

The Commission observed that in the first issue the ground is misconceived on the basis of the principles of the Preamble of the Act and pronouncements by the apex court[2] earlier. Thus, the Informant need not necessarily be an aggrieved party to file a case before the Commission.

On the second allegation, the Commission stated that though on first blush this argument looks attractive, it may not be factually correct and is legally untenable with regard to the scheme of the Act. Therefore, the assertion that the Commission should not consider the present Information on the ground of the Informant’s unclean hands alone is not tenable.

Thus, in light of the statements above, the Commission rejected the preliminary objection with regards to the locus of the Informant.

II. Abuse of Dominant Position

The Commission observes that Facebook and WhatsApp are group entities and though they may operate in separate relevant markets, their strengths can be attributed to each-others’ positioning in the respective markets in which they operate. Thus, as per the scheme of Section 4 of the Act, WhatsApp’s market position is assessed keeping in consideration its affiliation to Facebook and other entities (e.g. Instagram) which are part of the same group. Hence, prima facie WhatsApp is found to be dominant in the market for Over-The-Top (‘OTT’) messaging apps through smartphones in India.

With regard to Section 4(2)(a)(i), the Commission does not find much merit in the allegation as mere existence of an App on the smartphone does not necessarily convert into transaction/usage. As to enable WhatsApp payment, the user has to separately register for it which necessarily requires the users to accept terms of the service agreement and privacy policy. Such registration requires providing additional information and undertaking additional steps to link their bank account, as per the National Payment Corporation of India (‘NPCI’) laid down framework for UPI digital payment apps. No transaction can be completed without the user taking these necessary voluntary steps. Thus, in the absence of any explicit or implicit imposition which takes away this discretion, the mere integration does not seem to contravene Section 4(2)(a)(i).

III. Tying

The Commission observed that though the Informant had used the word ‘bundling’, the nature of such allegation is more akin to ‘tying’. Tying refers to a practice whereby the seller of a product or service requires the buyers to also purchase a separate product or service which essentially is the allegation of the Informant. Certain conditions which need to be fulfilled to conclude a case of tying. These are:

a) The tying and tied products are two separate products;

b) The entity concerned is dominant in the market for the tying product;

c) The customers or consumer does not have a choice to only obtain the tying product without the tied product; and

d) The tying is capable of restricting/foreclosing competition in the market.

Commission –

a) & b) WhatsApp Messenger and WhatsApp Pay are two distinct products with different functionalities, they are in fact in two separate relevant markets. It has also been prima facie held that WhatsApp is the dominant player in the relevant market, i.e. ‘market for OTT messaging apps through smartphones in India’. Thus, the first two conditions seem to have been met in the present case.

c) On the third condition, while WhatsApp Pay is embedded in WhatsApp Messenger app when it is downloaded by users, the consumers are at freewill to use WhatsApp Pay or any other UPI enabled digital payments app in India to make instant interbank transfers. Installation of the WhatsApp messenger does not appear to explicitly coerce the user to use WhatsApp Pay exclusively or to influence their choice implicitly in any manner. Thus, the third condition does not seem to have been established.

d) Lastly, as regards the fourth condition, the Commission observed that at present, the UPI digital payments market consists of various established players e.g. Google Pay, PayTM, Phone Pe, Amazon Pay etc. which are backed by big companies/investors. In such a market, to assume that WhatsApp Pay will automatically get a considerable market share only on the basis of its pre-installation seems far-fetched. Besides, the Commission also observed that WhatsApp Pay had got approvals to act as a payment app in India in February 2020 in beta version, and only recently, it seems to have complied with the data localisation norms stipulated by NPCI to operate fully. Thus, its actual conduct is yet to manifest in the market. Accordingly, the fourth condition also does not seem to have been met.

Thus, the Commission decided that the allegation under Section 2(4)(d) of the Act is not made out.

IV. Leveraging

As regards leveraging, WhatsApp has claimed that contravention of Section 4(2)(e) of the Act, requires a dominant enterprise to have used its dominant position in one relevant market to enter into, or protect, another relevant market. Further, leveraging to constitute abuse can only be said to have occurred when an enterprise undertakes some restrictive or abusive conduct. WhatsApp simply offers users WhatsApp Pay as a feature, should they choose to use it. There is no restrictive or abusive conduct or any “use” of an alleged dominant position as required under Section 4(2)(e) of the Competition Act. Accordingly, dominance has nothing to do with entry into the alleged market for UPI-enabled digital payment applications in India. Hence, allegation under Section 4(2)(e) was also dismissed.

Conclusion and Key Takeaways

The Commission noted that the mere fact that a case has been filed by an aggrieved party under the Competition Act, does not take away its character of being a case in rem involving a larger question of fair and competitive markets. Finally, the Commission did not find alleged contravention of the provisions of Section 4 of the Act against WhatsApp or Facebook being made out. Thus, it is of the opinion that there exists no prima facie case of contravention.

The Order is a relief for WhatsApp Inc as well as Facebook Inc as the former is looking to fully launch its payments service in the market. The Commission has dealt with each allegation and even corrected a few of those in order to do justice to the competitive spirit in the country. This paves the way for healthy competition and is a reassurance to the role that the competition watchdog plays.

[1] Access the Order here. [2] Samir Agarwal v. Competition Commission of India (Competition Appeal (AT) No. 11 of 2019).