CCI Vs Meta: Who Gains From The Data Sharing Ban?

CCI Vs Meta: Who Gains From The Data Sharing Ban?

SUMMARY

The Competition Commission of India (CCI) prohibits WhatsApp from sharing user data with Facebook and Instagram for five years, even with user consent, citing abuse of dominance and unfair conditions imposed on users

The directive may hinder competition by limiting Meta's capabilities without necessarily benefiting smaller rivals or fostering better data collection practices for them

Restricting data sharing could harm small businesses that rely on targeted digital advertising for customer reach, increasing their marketing challenges

Meta’s WhatsApp has significantly impacted India’s digital landscape by revolutionising communication for individuals and businesses. WhatsApp Business and WhatsApp API have transformed business-customer interactions, enabling streamlined communication, integration, and automation.

Businesses of all sizes are increasingly using WhatsApp to connect with their customers and are using targeted ads on Facebook and Instagram to attract new customers. This could substantially change in the near future.

Come 16th January, the National Company Law Appellate Tribunal will decide whether to stay the Competition Commission of India’s directive restraining WhatsApp from sharing user data collected on its platform with other Meta company products for ads purposes, including Instagram and Facebook, for the next 5 years.

The Commission’s blanket ban applies regardless of user consent, ignoring the consent-based framework for the use of personal data introduced by the Digital Personal Data Protection Act, 2023.

Concluding a nearly 4-year long inquiry, on 18 November 2024, the Commission holds that WhatsApp’s January 2021 update to its terms of service and privacy policy is abuse of dominance.

Privacy Policy And Data Sharing Concerns

First, the Commission concludes that implementing the 2021 privacy policy on a “take-it-or-leave-it” basis imposes “unfair conditions” on users. This policy compels users to accept expanded data collection terms and share data within the Meta Group without the option to opt out. Due to network effects and a lack of effective alternatives, the 2021 update undermines user autonomy.

The Commission also finds fault with Meta’s integration of data across Facebook, Instagram, and WhatsApp because this helps Meta “refine its algorithms and make increasingly accurate predictions about user preferences and behaviours,” allowing it to optimize algorithms and improve the effectiveness of its display advertising.

The Commission observes that “without comparable access to such data, rivals cannot offer similar levels of precision in targeted advertising, personalisation or consumer insights, which are now crucial for attracting advertisers.”

Steps Taken To Resolve The Concerns

To remedy the harms, the Commission directs WhatsApp to allow users to make informed decisions while consenting to the use of their data. Additionally, it entirely forbids WhatsApp from sharing user data with Facebook and Instagram for advertising purposes for 5 years, even if users give their consent.

The remedy mandating consent fosters user transparency and autonomy, but the complete prohibition of data sharing from WhatsApp to Facebook and Instagram, even with user consent, is ironic. While attempting to enhance competition in online display advertising, the Commission disregards the importance of respecting user choice.

The Commission’s remedies might stifle, rather than stimulate, competition.

First, the Commission’s directive strikes at the root of conglomerates that are organised under different business verticals but share a unity of economic interests and decision-making. Several Indian brick-and-mortar businesses are ramping up their digital offerings, and combining data collected across their various limbs is key to their growth.

They will all need to assess their relative strengths in each business segment and take greater caution while combining and cross-using data. A small misstep can cost crores in penalties and derail their business models being built around the cross-usage of data.

Second, the likelihood of the Commission’s directive helping smaller social networks and digital advertising platforms become more competitive appears remote. As the Commission itself notes, access to “comparable data” is critical. But restricting Facebook and Instagram from using data collected by WhatsApp, even if users have consented, will not automatically improve the quality and quantity of data collected by rivals.

If anything, this measure will restrain Meta but unduly help its closest rivals—other large technology firms—in strengthening their positions in the online display advertising market.

Third, and most importantly for the Indian economy, the Commission’s directive may actually hurt smaller businesses the most. MSMEs increasingly rely on digital advertising to be discovered by and reach customers. The cost per thousand impressions for digital advertising can be 70-80% cheaper than traditional advertising.

Not surprisingly, MSMEs constitute 30-35% of digital advertising spending, while only representing 4-6% of traditional advertising spend. The importance of affordable and effective access to digital advertising for MSMEs’ success in e-commerce is obvious.

Denying Facebook and Instagram the ability to use data collected by WhatsApp prevents MSMEs from harnessing a valuable platform for identifying, targeting, and reaching customers.

In Conclusion

The Commission’s directive prohibiting WhatsApp from sharing data with Facebook and Instagram, even with user consent, could hinder competition and innovation within India’s digital commerce sector. This is unless the Appellate Tribunal reexamines the directive and the potential repercussions of this comprehensive ban.

It seems that the costs of this measure exceed any potential benefits, harming Indian businesses and consumers—the very entities it aims to protect.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

You have reached your limit of free stories
Become A Startup Insider With Inc42 Plus

Join our exclusive community of 10,000+ founders, investors & operators and stay ahead in india's startup & business economy.

2 YEAR PLAN
₹19999
₹7999
₹333/Month
UNLOCK 60% OFF
Cancel Anytime
1 YEAR PLAN
₹9999
₹4999
₹416/Month
UNLOCK 50% OFF
Cancel Anytime
Already A Member?
Discover Startups & Business Models

Unleash your potential by exploring unlimited articles, trackers, and playbooks. Identify the hottest startup deals, supercharge your innovation projects, and stay updated with expert curation.

CCI Vs Meta: Who Gains From The Data Sharing Ban?-Inc42 Media
How-To’s on Starting & Scaling Up

Empower yourself with comprehensive playbooks, expert analysis, and invaluable insights. Learn to validate ideas, acquire customers, secure funding, and navigate the journey to startup success.

CCI Vs Meta: Who Gains From The Data Sharing Ban?-Inc42 Media
Identify Trends & New Markets

Access 75+ in-depth reports on frontier industries. Gain exclusive market intelligence, understand market landscapes, and decode emerging trends to make informed decisions.

CCI Vs Meta: Who Gains From The Data Sharing Ban?-Inc42 Media
Track & Decode the Investment Landscape

Stay ahead with startup and funding trackers. Analyse investment strategies, profile successful investors, and keep track of upcoming funds, accelerators, and more.

CCI Vs Meta: Who Gains From The Data Sharing Ban?-Inc42 Media
CCI Vs Meta: Who Gains From The Data Sharing Ban?-Inc42 Media
You’re in Good company