Users should have option to opt out of WhatsApp data-sharing policy: NCLAT

The National Company Law Appellate Tribunal (NCLAT) on Thursday said that WhatsApp users should have the option to opt out of its data-sharing policy of 2021, which allowed the messaging platform to share data with parent company Meta (formerly Facebook), or its products.

 

The NCLAT was hearing Meta Platforms and WhatsApp’s application challenging the Competition Commission of India (CCI) order imposing a fine of ~213.14 crore on the tech giant for alleged abuse of its dominant position related to WhatsApp's 2021 privacy policy. 

The appellate tribunal, however, stayed a part of the CCI order, which had imposed a five-year ban on the company's data-sharing practices in India.

 

The bench of Chairperson Justice Ashok Bhushan and Technical Member Arun Baroka said that the five-year ban may lead to the collapse of the business model of WhatsApp since it is a free platform. 

"The ban of five years, which was imposed in paragraph 247.1 (of CCI order) may lead to the collapse of business model which has been followed by WhatsApp LLC. It is also relevant to notice that WhatsApp is providing WhatsApp services to its user free of cost," the order said. 

At the same time, the NCLAT refused to stay the fine of ~213.14 crore imposed by CCI and told Meta, which owns WhatsApp, to deposit 50 per cent of the fine amount within two weeks for a stay to be effected. Meta, which has already paid 25 per cent of the fine amount, will be refunded the money paid if it wins the case. The case will again be heard on March 17. 

The part of the CCI order which the NCLAT has upheld (247.2 and 247.3) said WhatsApp must provide an explanation on what user data is shared with Meta and that data-sharing for purposes beyond WhatsApp services cannot be any condition for accessing WhatsApp in India. 

Furthermore, users must have an opt-out option for such data-sharing via in-app notification as well as option to review and modify their choice by going to WhatsApp settings. Future policy updates should also comply with such changes, the CCI order said. 

"We are of the prima facie view that the ban of five years imposed in paragraph 247.1 need to be stayed. We, however, are of the view that the directions issued by the CCI under paragraph 247.2 and 247.3 need not be stayed and they need to be complied with. The only limited interim order, which we are inclined to grant, is to stay the direction in paragraph 247.1 by which five years’ ban has been imposed. The direction in paragraph 247.1 are stayed," the appellate tribunal order said. 

Bharat Budholia, partner at AZB & Partners, said that a partial stay on the CCI order would be a bittersweet outcome for both parties. 

 

"Each side could consider challenging the NCLAT's stay order before the Supreme Court. Regarding the merits of the case, the NCLAT would presumably want to assess the CCI’s ruling in light of the upcoming data protection regime, which is expected to be enforced soon," he said.

 

The CCI is probing the privacy policy of the company “which appears to be neither transparent nor based on the voluntary consent of the user”. Such a policy would lead to excessive data collection and “stalking” of consumers for targeted advertising to bring in more users and is, therefore, alleged abuse of its dominant position, the anti-trust regulator had said.