(MENAFN- Live Mint) In a partial relief for Meta Platforms and its messaging arm WhatsApp, the National Company Law Appellate Tribunal (NCLAT) on Tuesday set aside the Competition Commission of India's (CCI) direction that barred WhatsApp from sharing user data with Meta group companies for advertising purposes for five years, but upheld the imposition of a ₹213 crore penalty on the company.

The tribunal also struck down the CCI's finding that Meta had abused its dominant position in the messaging market to strengthen its hold in online advertising.

However, it upheld the rest of the competition watchdog's November 2024 order, including the ₹213 crore penalty imposed on the company.

“Setting aside the findings of the Commission insofar as it holds breach of Section 4 to the extent indicated and setting aside the directions in paragraph 240(7.1). WhatsApp will not share user data collected on its platform with other media companies or for advertising purposes for a period of five years from the date of receipt of this order. After the expiry of this period, the directions in paragraph 240(7.2) will apply. In respect of such sharing of data for advertising purposes, the rest of the impugned order is upheld. The order dated 18 November 2024 is modified accordingly,” the bench ruled orally

Also Read | NCLAT admits Meta's appeal against CCI's data-sharing ban, ₹213 crore fine

The written judgment copy has not been released yet.

The NCLAT's decision came as big relief for Meta's operations in India, where it has a combined user base of nearly 850 million-about 350 million on Facebook and over 500 million on WhatsApp.

The case arose from WhatsApp's January 2021 privacy policy update, which required users to accept new terms allowing the app to share certain data, such as device information, business interactions, and usage details, with its parent company, Meta (then Facebook). WhatsApp said the update aimed to help businesses communicate with customers and improve ad services on Facebook and Instagram. However, users had to accept these terms to continue using the app, sparking global backlash over privacy concerns and allegations that WhatsApp was forcing people to share their data.

India's competition watchdog held that the policy was exploitative and exclusionary conduct, unfairly strengthening Meta's position in digital advertising by leveraging WhatsApp's dominant presence in the messaging market.

In its November 2024 order, CCI fined Meta and 213.14 crore">WhatsApp ₹213.14 crore, prohibited them from sharing user data with Meta or its affiliates for five years, and directed them to disclose the specific purpose behind each category of data collected.

Legal challenge

Meta challenged the order before NCLAT. In January, the appellate tribunal granted partial interim relief, lifting the five-year data-sharing ban but requiring Meta to deposit 50% of the fine, in addition to the 25% already paid. The refund was made subject to the final verdict.

During the hearings, Meta argued that CCI had misapplied competition law to what was essentially a data protection issue. It maintained that the 2021 update did not broaden WhatsApp's data collection beyond the 2016 policy but merely clarified existing categories. The company emphasized that no sensitive user data was shared with Meta for advertising and that features such as 'Click to WhatsApp' were optional.

Meta also cautioned that enforcing the data-sharing ban would harm small Indian businesses that rely on personalised advertising through Facebook and Instagram based on WhatsApp interactions. It stated that the ban could compel Meta to halt or withdraw key features, potentially impacting its commercial viability in India. Meta further argued that CCI overstepped its jurisdiction, lacked supporting evidence such as user complaints or surveys, and ignored the presence of rivals like Telegram, Signal, and iMessage.

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In response, CCI defended its order, arguing that Meta's vast size, integration, and resources across Facebook, Instagram, Messenger, and WhatsApp made it the dominant player in India's messaging market. The regulator stated that the 2021 update eliminated the limited opt-out option previously available, requiring users, even those who had previously declined, to accept cross-platform data sharing in order to continue using the service.

CCI's defence

CCI also pointed out that Indian users were treated differently from those in the European Union, where users enjoy stronger data rights under the General Data Protection Regulation (GDPR), such as the ability to rectify or erase information. This, it said, showed Meta's deliberate decision to deny Indian consumers the same level of transparency and control.

Rejecting Meta's claim that privacy concerns fall outside the scope of competition law, CCI argued that privacy and data control are essential to fair competition, as a lack of user consent and the misuse of data can distort markets and harm consumers' welfare.

Regulator CCI argued that WhatsApp's 2021 update, introduced on a 'take-it-or-leave-it' basis, effectively forced users to accept expanded data sharing, undermining user autonomy and enabling Meta to exploit WhatsApp's dominance to boost its advertising business.

Also Read | Seen, sent, but never read – WhatsApp's new privacy story

Under Section 27(b) of the Competition Act, 2002, the CCI can impose a maximum penalty of up to 10% of a company's average turnover for the preceding three financial years if found guilty of abusing dominance or engaging in anti-competitive practices.

Globally, Meta's data practices have faced similar scrutiny. In 2021, Germany's data protection authority temporarily banned Facebook from processing WhatsApp user data, while Ireland's Data Protection Commission fined WhatsApp €225 million in September 2021 for lack of transparency in data-sharing practices. Other countries also took action. Turkey's Competition Authority suspended the new policy in January 2021, citing abuse of dominance, while Brazil's justice ministry temporarily halted its rollout in May 2021, saying it violated consumer consent rules.

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