Whatsapp Pay: A Dicey Neophyte In UPI Market



The long wait of WhatsApp to enter into the Unified Payment Interface (‘UPI’) enabled digital market in India has finally come to an end. In an order dated 18 August 2020 in Harshita Chawla v WhatsApp, the Competition Commission of India (‘Commission’) has allowed WhatsApp to launch its payment service termed WhatsApp Pay. Additionally, National Payment Corporation of India has also assented to WhatsApp Pay’s data localisation compliance and gave permission for it to go live. WhatsApp Pay is a UPI based payment service and will undoubtedly come out to be a massive winner in the digital payments market as WhatsApp already has the largest user base in India with 400 active million users; hence attracting users will not be a problem. However, this may lead to WhatsApp abusing its dominant position, which the post discusses further. The post also discusses why Big Data, which WhatsApp can abuse after the launch of WhatsApp Pay, should come under the Commission’s ambit. The post also lays down the ways which the Commission can consider to bring Big Data under its jurisdiction to prevent possible problems.

Issues Raised and the Judgement

In the instant case, Harshita Chawla, the informant, has alleged that WhatsApp is taking the leverage of its predominance in one market (market of OTT messaging apps through smartphones) to enter into another market (UPI enabled digital market) by authorising pre-instalment of WhatsApp Pay on WhatsApp, and bundling WhatsApp with WhatsApp Pay. Therefore, she contended that WhatsApp is abusing its dominant position under section4(2)(d), and 4(2)(e) of the Competition Act, 2002 (‘the Act’). She also pointed out that UPI enabled digital payment apps dealt with  Big Data which are essentially vast chunks of personal data which have characteristics like that of high volume, variety, value, and velocity and are available to corporations, which use it for targeted advertising.. With a given volume of such data, WhatsApp might adversely affect the integrity of personal data and national security in the future. Hence, Harshita Chawla prayed for the cease and desist order of the anti-competitive operations.

Despite the acknowledgement of WhatsApp’s dominance in the market of over-the-top  (‘OTT’) messaging Apps through smartphones in India, the Commission was of the view that pre-instalment of WhatsApp Pay did not appear to be in contravention of section 4(2)(d) and 4(2)(e). Users will still have a choice to utilise any other UPI based apps which might be already downloaded on their smartphones, and there will be no express or implied encumbrance which can take away this liberty. Further, the Commission added that UPI enabled digital market is already established with eminent players competing enthusiastically, and it appeared improbable that WhatsApp Pay will consequently claim a more vital position only on account of its pre-installation. The Commission also noticed that WhatsApp which managed Big Data was prone to abuse and it can raise a potential anti-trust concern. However, the Commission held that it could not examine the matter of misuse of sensitive due to lack of concrete evidence. Hence, the Commission ordered the closing of the case under section 26(2) of the Act as it found no prima facie case arising from the issues raised by Harshita Chawla.

Critical Analysis

Abuse of Dominant Position by WhatsApp

The Commission examined the matter of tying under section 4(2) (d) in detail. It laid down four conditions which have to be satisfied to determine a case of tying. The first two conditions were met, as WhatsApp and WhatsApp Pay were separate products, and WhatsApp was dominant in the market for tying product. However, the Commission opined that the last two conditions, namely: iii) a complete restriction to only obtain a tying product without tied product, and iv) tying capable of hampering the competition in the market, was not met by WhatsApp. On the contrary, authors opine that last two conditions were also met as WhatsApp Pay feature came embedded with the WhatsApp and thus essentially the tying product (WhatsApp) cannot be obtained without tied product (WhatsApp Pay). The last condition is also met as WhatsApp Pay is capable of hampering the competition in relevant market due to huge existing user base of WhatsApp. The Commission refuted the fourth condition on the basis of it being premature but instead the Commission could have taken Dynamic Analysis approach in which future outcomes are predicted using the real time data.

The Commission further observed that the mere existence of an app on the phone does not necessarily guarantee the usage and hence the allegation cannot be scrutinised under the purview of section 4(e) However, the Commission possibly ignored the fact that if WhatsApp introduces its own UPI app, it does have an undue advantage since the user base of WhatsApp is practically being served on a silver platter to the upcoming app. Therefore, WhatsApp can use its dominant position in one market to enter into another and thus contravening section 4(2) (d).

Further, the Commission held in Re Biocon Limited v Hoffmann-La Roche AG that even a partial denial of the market access, which deprives the competitors to compete effectively violates section 4 of the Act. The fact that these third-party payment apps have meagre margin and the prime factor for these apps to sustain in the market is to keep their users engaged through different tactics cannot possibly be taken out of consideration. In this manner, user-base shapes one of the major facets of driving competition among all market players.

Additionally, the Commission was of the view that in the UPI enabled digital market, the competitors compete enthusiastically, and in such a scenario, it is difficult that WhatsApp will amass a market share solely owing to its pre-installation and a dominant position. However, in the case of Shri Vinod Kumar Gupta v. WhatsApp Inc. & Ors., the Commission observed that even if an app held a dominant position in the relevant market, once a new alternative app is installed on a device, users can quickly switch to the alternative app. In the instant case, WhatsApp Pay is the new alternative and pre-existing players like Google Pay, and Phone Pe are in the dominant position, the chances of WhatsApp taking over these apps within a short period does not seem all that improbable provided its gigantic existing user base of. Hence, WhatsApp can abuse its dominant position with the launch of WhatsApp Pay.

Additionally, it is worth mentioning that South Africa Reserve Bank (‘SARB’), the Central Bank of South Africa, also suspended digital payment operations of WhatsApp shortly after it started in South Africa to “preserve an adequate competitive environment”.

Big Data Conundrum

The Commission once again got a chance to analyse the anti-trust concerns surrounding Big Data in the instant case, long after an unsuccessful stint in Vinod Kumar Gupta v WhatsApp Inc. & Ors. However, yet again, it failed to lay a definitive decision on the same. Big Data is useful to some extent; however, wrongful use of this user data can lead to wiping out of competitions in the market as the choices of the consumers remain only known to the data collecting entity and not to other competitors.

The Commission in the present case has dismissed the possibility of looking into the issues surrounding big data stating  there is no concrete evidence to support the claim by Harshita Chawla. However, it was held in the case of Registrar of Restrictive Trade Agreements v. W. H. Smith and Sons that entities which combine “will not put anything into writing nor even into words” and will only hint in the slightest way possible. This implies that finding concrete data alleging violation of anti-trust rules is difficult. In such cases, The Commission should consider extending its reaches to include any wrongful use of big data as an anti-competitive activity and include it under the realm of its jurisdiction.

To bring Big Data under its jurisdiction in cases of mergers, the Commission may treat Big Data as assets (precisely intangible assets) under section 5 of the Act. Due to this, mergers of kinds which involve Big Data transfers would be under the ambit of the Commission by virtue of section 6 of the Act. Section 6 states that combinations should not cause an appreciable adverse effect (e.g., barriers to entry) in the relevant market.

Another, route which the Commission can take is that it should assign Big Data a relevant market. Relevant market refers to the market where the competition takes place. Defining the relevant market is the initial step of any anti-trust analysis. One of the major issues why big data has not come under the radar of Competition Tribunals around the world is that Big Data could not be assigned a relevant market as online providers use data as an input in their service and not as product being sold to consumers. The European Commission review of the merger of WhatsApp/ Facebook also declined to define the relevant market for Big Data. Some scholarly work suggests that ‘Big Data Relevant Market’ (‘BDRM’) should be the relevant market for Big Data. Companies use data for gaining a competitive advantage and thereby also showing an indication of exclusionary practice. Hence, demarcating a separate market for Big Data would encourage better identification of anti-trust issues like market power, entry barriers, and abuse of dominant position in BDRM.

Concluding Remarks

Although the launch of WhatsApp Pay will be a big rejoice for the users, it comes with a resounding blow to the anti-trust regulations in the country.  In this tech-upgrade saga, the chances are high that consumers would be at a losing end as the market will not have any competitor to provide them with different and innovative services other than WhatsApp. This may also lead to the problems of Big Data usage by WhatsApp as there is no law in India to govern big data and the Commission is yet to acknowledge the misuse of big data as a competition concern.. Also, incidents like that of Pegasus spyware in 2019 adds onto the vulnerabilities of privacy and data security in hands of WhatsApp. Therefore, to prevent such issues, the Commission must include Big Data under its jurisdiction, so that a check can be put on digital mammoths like that of WhatsApp.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s