NCLAT grants WhatsApp a reprieve from CCI's data-sharing ban order

The regulator called for implementing various remedial measures, including barring WhatsApp from sharing data collected on its platform with other Meta companies or Meta company products for advertising purposes for five years.

The National Company Law Appellate Tribunal (NCLAT) on January 23 provided partial relief to Facebook parent Meta by staying the Competition Commission of India (CCI)'s directive that barred WhatsApp from sharing user data with other Meta companies for five years for advertising purposes.

The tribunal also stayed CCI's penalty of Rs 213.14 crore on Meta, which owns WhatsApp, provided it deposits 50 percent of the amount within two weeks. Meta's lawyers submitted in the court that the company has already deposited 25 percent of the penalty.

NCLAT, however, upheld other parts of the CCI's antitrust order against WhatsApp's 2021 privacy policy update, issued in November 2024.

These directives include requiring WhatsApp to provide users with a detailed explanation of their data shared with other Meta products or companies for non-advertising purposes. Additionally, WhatsApp must also offer users a prominent opt-out option and a way to review and modify their choices within three months. The case will next come up for hearing on March 17.

In its order, NCLAT stated that the ban of five years may lead to the "collapse of the business model" of WhatsApp which offers its services to users free of cost.

"We have also noticed that the Hon’ble Supreme Court has not granted interim order staying 2021 privacy policy and Digital Personal Data Protection Act (DPDP) 2023 has also been passed and is likely to be enforced which may cover all issues pertaining to data protection and data sharing. We are of the prima facie view that the ban of five years need to be stayed" NCLAT stated.

The tribunal also allowed both the CCI and WhatsApp to seek modifications to the order in the event the DPDP Act, or any statutory provisions are enforced regulating to data protection and sharing of the data.

Relief for Meta

NCLAT's ruling is expected to provide major relief to the parent company of Facebook and WhatsApp in its largest user market with a combined user base of over a billion people. WhatsApp alone has more than 500 million monthly active users in India.

The country is also becoming increasingly important for the social networking giant's business messaging ambitions, a key focus area in recent years as it diversifies beyond traditional digital advertising.

"We welcome the NCLAT’s decision to grant a partial stay on the CCI order. While we will evaluate next steps, our focus remains on finding a path forward that supports millions of businesses that depend on our platform for growth and innovation as well as providing high-quality experiences that people expect from WhatsApp” a Meta spokesperson said in a statement.

CCI started an investigation in March 2021 into WhatsApp's revised privacy policy, which enabled mandatory data sharing with Facebook (now Meta) and its companies, along with an expanded scope of data collection.

Prior to this, users had the option to decide whether to share their data with the company since 2016.

The policy, which started rolling out from January 2021, was to take effect from February 2021. WhatsApp required users to accept the new terms to continue using the service. However, the rollout was put off following widespread backlash.

WhatsApp also issued clarifications saying the policy update would not affect the privacy of users' personal messages with their friends or family and claimed the changes were related to optional business features offered by the application.

After an investigation that spanned three and a half years, CCI stated that it found WhatsApp's “take-it-or-leave-it” policy update unfair since it compelled all users to accept expanded data collection terms and sharing of data within Meta Group without any opt-out.

The antitrust watchdog also stated that Meta has leveraged its dominant position in the over-the-top (OTT) messaging apps on smartphones to protect its position in the online display advertising market.

Furthermore, the sharing of WhatsApp users' data between Meta companies for purposes other than providing WhatsApp service creates an entry barrier for Meta's rivals, making it more difficult for them to compete in the display advertising market.

Read: Meta India's net profit jumps 43% to Rs 505 crore in FY24; Gross ad revenue up 24%

On November 18, CCI had fined Meta Rs 213.14 crore for allegedly abusing its dominant position in relation to WhatsApp's 2021 privacy policy update, in addition to issuing cease-and-desist directions and a series of remedial measures.

Meta, however, disagreed with the CCI's antitrust order and announced plans to challenge it in November. Earlier this month, Meta approached the NCLAT seeking interim relief from the ruling.

Matrimony founder Murugavel Janakiraman stated that NCLAT's decision underscores the "limitations of the existing ex-post nature of the competition law and highlights the need for ex-ante regulations"

"Ex-ante rules restricting ‘data usage’ as proposed in the draft Digital Competition Bill can go a long way in preventing large digital platforms/gatekeepers from abusing their dominant position sometimes even to the disadvantage of the end-users" he said.