The National Company Law Appellate Tribunal, or NCLAT, granted partial relief to WhatsApp on Thursday by staying the Competition Commission India’s November 2024 order relating to the controversial privacy policy update of the company in 2021. The original order had barred WhatsApp from sharing the data of the users with its parent entity Meta, which owns Facebook, Instagram, and other entities. It had penalized the company ₹213.14 crore for violation under the Competition Act for five years.
NCLAT Relieves WhatsApp on 5-Year Moratorium
NCLAT chairperson Ashok Bhushan ruled to set aside the 5-year ban on data sharing, stating that the moratorium could threaten WhatsApp’s business model. The tribunal also recognized that the service provided free services to users and that this ban could lead to significant operational challenges. However, NCLAT emphasized that WhatsApp must pay 50% of the imposed ₹213.14 crore penalty within two weeks.
Despite the relief, the tribunal did not stay with other parts of the CCI’s order, including requirements for WhatsApp to give users the option to opt out of data sharing for purposes other than providing WhatsApp services. WhatsApp will need to specify in its privacy policy what type of data is shared with Meta, and users must be given a choice to opt-out. This must be made available to all users, including those who previously accepted the 2021 update.
CCI’s Ruling and WhatsApp’s Response
In November 2024, the CCI concluded that WhatsApp is the dominant player in the Over-the-Top (OTT) messaging app market in India and that Meta holds a leading position in online display advertising. According to CCI, the mandatory acceptance of WhatsApp’s updated terms, which included data sharing with Meta, was an “unfair condition” under the Competition Act.
According to the CCI, this update compelled users into compliance since WhatsApp dominated the market, and data sharing between WhatsApp and Meta created entry barriers for rivals. Furthermore, the data sharing harmed the autonomy of the user and denied entry to rivals by violating the principle of competition law.
WhatsApp and parent company Meta pleaded their case with NCLAT as they moved against the court order. Defense in the court for WhatsApp raised its plea for its business seriously impacted by such a 5-year ban that the company runs a free-of-cost service through which it generates all revenue. At the same time, legal counsel pointed out that Privacy Protection laws, the Digital Personal Data Protection Act, et cetera should be studied within the said context.
NCLAT’s Decision and Way Forward
NCLAT recognized the current debates on privacy and data protection in India and observed that the Supreme Court has not issued any interim orders so far on WhatsApp’s 2021 privacy policy. The tribunal also surmised that the DPDP Act, in case of its enactment, may settle the questions related to data protection and sharing as this controversy is centering around.
Moreover, NCLAT allowed the CCI as well as WhatsApp to file review applications under any evolving changes of the Data Protection Act.
The Tribunal fixed the further hearing for 17th March while requesting both sides to submit pleadings within six weeks.
WhatsApp Rebuttal Over NCLAT Decision
Meta, the parent company of WhatsApp, welcomed NCLAT’s decision to partially stay the CCI order. In a statement, Meta noted that its focus is on finding a solution that supports the millions of businesses reliant on WhatsApp for growth and innovation while ensuring a high-quality user experience.
“Met with the welcome decision of partial stay by the NCLAT on the CCI order, we will analyze further steps; for now, our primary focus is finding a way ahead that should support millions of businesses that use our platform to grow and innovate as well as deliver high-quality experiences that users expect from WhatsApp,” Meta said in a statement.
WhatsApp Continues to Face Pressure
The case falls under the general scrutiny that has been faced by WhatsApp and other tech firms over user privacy, data sharing, and respect for competition laws. As this legal battle progresses against WhatsApp, its handling of users’ data becomes the focus and has potential implications regarding market strategy and future operations within India.
The case embodies an interesting crossover of data protection, privacy, and competition law, with the NCLAT order having immediate relief but a long and arduous road ahead.
