The National Company Law Appellate Tribunal (NCLAT) stayed the ban imposed for five years on the sharing of WhatsApp data collected with other Meta Companies or Meta Company Products for advertising purposes.
The bench of Justice Ashok Bhushan, (Chairperson) and Arun Baroka, Member (Technical) directed Meta to deposit 50% of the penalty, after taking into consideration 25% already deposited.
“By this order, the NCLAT has granted a limited relief to WhatsApp. NCLAT has stayed the CCI order after forming their prima facie view that such a stay may lead to the collapse of the business model of WhatsApp. Further, the penalty has also been stayed by the NCLAT upon deposition of 50% of the penalty so imposed,” said Shashank Agarwal, Advocate, Delhi High Court
The matter was related to the implementation of WhatsApp’s 2021 Privacy Policy, and the sharing of the data collected with other Meta companies.
On November 18, CCI penalized Meta with a monetary penalty of 213.14 crore for anti-competitive practices regarding the 2021 Privacy Policy Update.
The competition regulator directed that the text messaging application, WhatsApp will not share user data collected with other Meta Companies or Meta Company Products for advertising purposes for five years.
The NCLAT admitted the matter, after hearing the preliminary submission from both parties on January 16.
Five-year ban
“The ban of five years which was imposed in paragraph 247.1 may lead to the collapse of the business model which has been followed by WhatsApp LL,” said NCLAT while allowing the stay on the five-year ban imposed.
The Competition Commission imposed a ban of 5 (five) years on WhatsApp for sharing user data collected on its platform with other Meta Companies or Meta Company Products for advertising purposes. “The National Company Law Appellate Tribunal’s decision to stay the Competition Commission of India’s five-year ban on WhatsApp sharing user data with Meta Companies underscores a significant juncture in the regulatory landscape of data privacy and competition law,” said Sonal Alagh, Partner, Alagh & Kapoor Law Offices.
Meta before the Appellate Tribunal submitted that the advertisement is one of the major sources of revenue and with five years ban will affect the business model, resulting in the likelihood of a collapse considering the business model under which free services are provided by WhatsApp to its users.
“By staying the CCI’s five-year restriction on data sharing for advertising, the NCLAT has not only provided interim relief but also indicated its focus on examining the need for a measured approach to address anti- competitive practices without dismantling established business models,” said Anuj Shah, Counsel, DMD Advocates.
The five-year ban was likely to cause irreparable harm to the company considering its business model. “The WhatsApp provides free services to WhatsApp users. It may be obvious to understand that advertising is one of the major sources of revenue for WhatsApp, and imposing a five-year ban shall have a prejudicial effect and shall collapse the business model under which free services are providing by WhatsApp to its users, as rightly pointed out by NCLAT,” said Anshuman Singh is an Arguing Counsel practising at the Patna High Court, and is regularly engaged for matters at NCLT, NCLAT & the Supreme Court of India.
The stay is significant considering innovation, and efficient functioning of the business operations for the Meta unless the matter is adjudicated before the Appellate Tribunal. “The NCLAT’s decision to stay the five- year ban on WhatsApp’s data sharing with Meta is a pivotal moment for competition law and data privacy in India,” said Alay Razvi, Managing Partner, Accord Juris.
Saswati Soumya Sahu, Expert Counsel on Data Protection and Al, ANB Legal highlights that the lift of the ban on WhatsApp restricting it from sharing data collected on its platform with other Meta companies or Meta company products for advertising purposes serves dual roles.
First, this decision aligns with the principle of purpose limitation, imposing necessary guardrails on repurposing the data for non- advertising purposes. Secondly, this also leaves room for identifying the secondary purpose of the primary data collected, that is compatible with the original purpose.
“This should be in sync with ring-fencing the usage of data for different purposes in the interest of data protection,” she added.
Crossing of Data Protection and Competition
The Appellate Tribunal allowed the parties to pray for modification of this order in the event the Digital Personal Data Protection Act 2023 is enforced or any other statutory provisions are enforced regulating to data protection and sharing of the data. “From a jurisdictional perspective, the NCLAT’s acknowledgment of the Digital Personal Data Protection Act, 2023 and its potential to address overlapping data- sharing concerns highlights a need for coherence between competition law and data protection regulations,” said Shivani Gupta, Advocate, Delhi & Gujarat High Court.
Meta contended before the Appellate Tribunal that the remedies for privacy and data protection are without the jurisdiction and expertise of CCI. The Commission does not appropriate authority to impose privacy and data protection requirements.
Further submitting that the Commission findings and remedies on privacy and data protection are beyond jurisdiction and competence. The remedy imposed by the Commission does not address any demonstrable harm to users’ competitors any market. “This decision is a reminder of the evolving legal landscape in the digital world, where data sharing, user privacy, and competition laws must be carefully navigated to ensure fair practices while fostering innovation. The final judgment will likely have long-term implications for both businesses and consumers,” said Ankur Pastor, Managing Partner, Innovis Law Partners LLP.
The stay on CCI’s order is a welcome step. “Without this challenge, the CCI’s order could have impacted global perceptions of India’s regulatory environment, making it seem unpredictable and discouraging investments. A balanced regulatory approach is critical to ensuring fairness, consistency, and trust, both domestically and globally,” said Rahul Hingmire, Managing Partner, Vis Legis Law Practice
The NCLAT’s stay on the CCI order balances regulation with business needs. This approach aligns with competition law’s goal of fair market competition. In the digital world, relying on directives and behavioral remedies is crucial. These measures address anti-competitive practices while supporting business operations. “The NCLAT’s decision to grant a stay on the CCI’s Order strikes a pragmatic balance between regulatory oversight and business sustainability,” said Shivani Gupta, Advocate, Delhi & Gujarat High Court.
The CCI’s condition on business operations seems fair. However, there is a need to understand in the context of the services Meta provides as banning the sharing of data collected with other Meta companies for the purpose of advertisement. “While this condition seems fair, however, it can have widespread ramifications on the business model of WhatsApp which primarily earns money through business advertisements that are customised based on the user data. It needs to be seen if CCI challenges the NCLAT decision in the Hon’ble Supreme Court,” said Dr. Chinmay Bhosale, Advocate, Bombay High Court,