Meta’s relief: NCLAT upholds CCI ban, but asks platform to pay half of fine

NEW DELHI: The National Company Law Appellate Tribunal on Thursday granted relief to Meta Platforms, upholding a five-year ban imposed by India’s competition regulator on WhatsApp’s data-sharing practices.

The NCLAT bench, headed by Justice Ashok Bhushan, noted that such a ban was related to WhatsApp’s privacy policy and could disrupt WhatsApp’s business model in India.

Meta Platforms, rebranded from Facebook, challenged the November 18, 2024 ruling of the Competition Commission of India.

While the injunction was stayed, the Court of Appeal did not stay the entire order. The arbitral tribunal directed Meta to pay a penalty of 50%, equivalent to $213 crore in two weeks. Meta has already paid this amount.

NCLAT also acknowledged that India’s upcoming data protection laws could address issues related to data privacy, suggesting that future regulatory frameworks may address some of these issues. The tribunal reserved January 16 for its decision.

Detailed order from NCLAT is still awaited.

The core problem stems from an in-app notice issued by WhatsApp in January 2021, requiring users to accept its revised privacy policy before February 8, 2021, otherwise they may face the risk of service termination.

WhatsApp privacy policy 2021 sparks controversy

The order imposes the following fines $It was fined Rs 213.14 crore for allegedly abusing Meta’s dominant position in a controversial update to its WhatsApp messaging service’s privacy policy in 2021. Additionally, the CCI ruling imposes a five-year ban on Meta from sharing user data with other platforms.

During the last hearing, senior advocates Kapil Sibal and Mukul Rohatgi, representing Meta, quoted the statement of Union Electronics and Information Technology Minister Ashwini Vaishnaw. The minister recently announced that the new Digital Personal Data Protection Rules 2025 will be implemented by mid-2025. The defense argued that until new rules are in place, the CCI order cannot be enforced as its directives would override pending legislation.

They also cited a 2021 Supreme Court ruling that allowed WhatsApp to share user data with Facebook as long as users were informed and given the option to delete their accounts if they disagreed with the terms of the data sharing.

“We need to absolutely preserve that. Let the Supreme Court decide on privacy and legal rules and then, your honor, you can decide,” Sibal said.

“The balance of convenience works in my favor. I’ve been operating under this policy for years. My 2016 policy is different than my 2021 policy, just a little more transparent.”

Sibal added: “I simply don’t see why this order should be implemented, at least until the new rules come into effect. The order itself may fall apart once the rules are in place, as the minister has indicated it will be implemented by the middle of this year. “

Meta also noted that a challenge to the 2016 WhatsApp privacy policy is still pending before the Constitutional Bench of the Supreme Court. Furthermore, the company argued that the CCI’s ruling stemmed from complaints filed by users who had not formally objected to WhatsApp’s data-sharing practices.

In this regard, CCI lawyer Samar Bansal argued that while data privacy laws deal with personal data, competition laws deal with commercial data. He stressed that unlike European users, Indian users currently do not have an opt-out option.

Bansal also noted that WhatsApp already allows users to accept or reject its privacy policy in Europe without causing any service disruption. He believes a similar approach should apply to India.

In its petition to NCLAT, Meta expressed concerns about the potential impact of the data-sharing ban on its ability to serve personalized ads on Facebook and Instagram. WhatsApp shares user data with Meta, such as phone numbers, transaction details, business interactions and device information, and could be significantly affected by the ban.

Also read: Is WhatsApp’s policy change illegal?

Meta explained that it is difficult for Indian businesses such as fashion retailers to personalize ads on Facebook or Instagram based on WhatsApp interactions, such as ads related to a specific clothing line.

The company also argued that implementing the CCI’s remedies could force it to roll back or suspend multiple features and products, potentially jeopardizing the commercial viability of Meta and WhatsApp in India.

However, Meta did not specify the specific impact of the decision on the currency.

Facebook India Online Services, which manages Indian ad inventory, reported record revenue of $351 million in 2023-24, the highest level in at least five years.

The core problem stems from an in-app notice issued by WhatsApp in January 2021, requiring users to accept its revised privacy policy before February 8, 2021, otherwise they may face the risk of service termination.

In its order dated November 18, 2024, the CCI determined that the 2021 policy update allows Meta to further consolidate its dominance in the internet messaging space through WhatsApp and online display advertising.

For purposes other than advertising, the CCI claimed that WhatsApp’s policies must include a clear explanation of user data shared with Meta’s other companies, such as Facebook.

The regulator also ruled that sharing WhatsApp user data with other Meta products or companies for reasons other than providing WhatsApp services should not be a condition for users to access the messaging service in India. The decision reinforces the key principle of user consent to operate as a social media giant and is consistent with measures taken by other countries.

“Take it or leave it” policy

Following the CCI ruling, WhatsApp’s 2021 privacy policy update outlines how businesses can use Facebook-hosted services to store and manage WhatsApp chats with customers. The competition watchdog found that WhatsApp’s sharing of users’ business transaction data with Meta gave the company an unfair advantage over rival platforms.

The CCI further found that WhatsApp’s take-it-or-leave-it-based policy update imposed unfair conditions, forcing all users to accept expanded data collection terms and share data within Meta groups without any choice. go out. Regulators believe this undermines user autonomy and constitutes an abuse of Meta’s dominant position.

In December 2021, the German Data Protection Commissioner temporarily banned Facebook from processing WhatsApp user data. Additionally, the Irish Data Protection Commission fined WhatsApp over a previous privacy policy update that required users to accept the terms of the EU General Data Protection Regulation (GDPR) before it came into effect in 2018, Mint reported in October.