NCLAT Stays CCI Order - Gives a ‘Blue Tick’ to Messaging Major to Continue Sharing User Data

The National Company Law Tribunal (“NCLAT”), on 23 January 2025, has stayed the direction issued by the Competition Commission of India (“CCI”) to WhatsApp LLC (“WhatsApp”) which prohibited it from sharing user data collected on its Over-the-Top messaging app on the smartphone (the WhatsApp application) with other Meta companies for advertising purposes (“Stay Order”)[1]. Meta operates a multi-sided ecosystem encompassing platforms like Facebook, Instagram, WhatsApp, and Messenger, connecting billions of users with advertisers, businesses and developers.

CCI, on 18 November 2024, had found WhatsApp (a wholly owned subsidiary of Meta) to be abusing its dominant position by introducing a Privacy Policy Update in 2021 (“Policy Update”) which coerced users to accept its terms or leave the messaging app. The data sharing clause in the Policy Update was found to be (i) ambiguous, not giving any clarity on what kind and what quantity of user data will be collected by WhatsApp and (ii) allowed WhatsApp to share this collected data with other Meta companies. Sharing of WhatsApp users’ data between Meta companies, for purposes other than providing WhatsApp Services, was found to be an entry barrier for the rivals of Meta in the display advertisement market thereby consolidating its leading position. The CCI, based on these findings, had imposed a monetary penalty of INR 213.14 crores (USD 25 million) on Meta and directed course correction by WhatsApp. Inter alia, WhatsApp was directed to not share any user data collected on its platform with other Meta companies or Meta company products for advertising purposes for a period of 5 years.[2]

The NCLAT on 16 January 2025 admitted Meta’s appeal[3] and within a week stayed the remedial direction issued by the CCI. NCLAT observed that the ban of 5 years may lead to the collapse of business model followed by WhatsApp which provides services to its users free of cost. A pertinent observation of the NCLAT was that the Digital Personal Data Protection Act, 2023 (“DPDP Act”) has been passed which is likely to be enforced within 6 months which may cover all issues pertaining to data protection and data sharing. Pertinently, the NCLAT observed that the directions of the CCI are twofold: (i) directions with respect to sharing of user data for advertising purposes; and (ii) directions with respect to sharing of user data for purposes other than advertising. Further, it was noted that the 5-year ban has been imposed only with respect to sharing of user data for advertising purposes. It is important to note that NCLAT has only partially stayed the order passed by the CCI.

Interestingly, Meta had challenged CCI’s jurisdiction to assess WhatsApp’s data collection and sharing policies arguing that the subject matter of the proceedings viz.  nature of consent of users and extent of data collection is covered by data protection and privacy laws. Dismissing the challenge, CCI held that data related practices can trigger concerns that require simultaneous intervention from multiple branches of law and the existence of parallel proceedings or involvement of other authorities does not strip the CCI of its jurisdiction. It was specifically noted that data protection and competition law have distinct intervention tools to address data related concerns and that active oversight by the CCI is necessary to ensure that data does not become a tool for perpetuating anti-competitive behaviour. The CCI noted that reduction in data protection results in diminished quality of service for consumers and creates insurmountable entry barriers for potential competitors which is a competition concern removed and independent of privacy concerns which may be assess by the data protection authority.

However, NCLAT has given primacy to Meta’s argument on the commercial viability of the direction and stayed the CCI’s direction on data sharing for advertising purposes until further orders.

The implication of the Stay Order is that the data sharing between WhatsApp and other Meta companies will continue to give Meta companies an advantage in the market for digital advertising enabling it to improve user experiences by making suggestions, personalizing features and content, assisting with completing purchases and transactions, and displaying relevant offers and advertisements across Meta’s platforms. Moreover, the Stay Order although on a prima facie basis, raises questions regarding jurisdiction of the CCI with respect to data related conduct and overlaps with a regulator that is yet to come into existence.

Both CCI and Meta have been granted leave to pray for modification of the Stay Order in the event the DPDP Act is enforced, or any other statutory provisions are enforced relating to data protection and sharing of data.

[The authors are Executive Partner and Partner, respectively, in Competition and Antitrust law practice at Lakshmikumaran & Sridharan Attorneys, New Delhi]

[1] NCLAT order dated 23 January 2025 in I.A No. 280 of 2025 in Competition Appeal (AT) No. 1 of 2025 [WhatsApp LLC v Competition Commission of India & Ors.] and Competition Appeal (AT) No. 02 of 2025 [Meta Platforms INC v Competition Commission of India & Ors.]. https://nclat.nic.in/display-board/view_order

[2] CCI order dated 18 November 2024 in Suo Motu Case No. 01 of 2021 [Re: Updated Terms of Service and Privacy Policy for WhatsApp users], Case No. 05 of 2021 [Prachi Kohli v WhatsApp LLC] and Case No. 30 of 2021 [Internet Freedom Foundation v WhatsApp LLC & Anr.]   

https://www.cci.gov.in/antitrust/orders/details/1158/0

[3] NCLAT order dated 16 January 2025 in Competition Appeal (AT) No. 1 of 2025 [WhatsApp LLC v Competition Commission of India & Ors.] and Competition Appeal (AT) No. 02 of 2025 [Meta Platforms INC v Competition Commission of India & Ors.]. https://nclat.nic.in/display-board/view_order