The European Commission’s Fine On Meta For Tying Allegations And Why India Needs To Do More

BY ANUSHKA GUHA, THIRD-YEAR STUDENT AT NLU, ODISHA

INTRODUCTION

The European Commission (‘EC’) fined Meta for tying Facebook Marketplace (‘FM’) to its social media platform, Facebook, in November 2024. FM is Meta’s online classified advertisement service which was introduced in 2016 and can be used to sell and buy products. Tying is a practice in which the availability of a product or a service is made conditional upon the availability of another. The EC found that Facebook had used its dominant position in the market for social networks and in the market for displaying classified ads to tie both services. What this essentially does is, expose all users of Facebook to FM, regardless of whether they want to see those ads or not. Such practices pose a competitive disadvantage for other online classified ads services, as they do not have access to the enormous database of social media users like Facebook does. Meta has also been accused of imposing unfair trade conditions through its terms of service that authorizes it to use ad-related data of competing classified ads service providers, who advertise on Facebook and Instagram, for the benefit of FM.

GLOBAL SCRUTINY ON META

This comes at a time when Meta is also under the scrutiny of the United States Federal Trade Commission for its acquisition of WhatsApp and Instagram resulting in the elimination of competition among social media platforms. The EC has previously fined Meta for providing misleading information during the WhatsApp-Facebook merger in 2014. In India, the Competition Commission of India (‘CCI’) has penalised Meta for abuse of its dominant position over WhatsApp’s contentious privacy policy introduced in 2021, which authorized the messaging platform to share user data with its parent company Meta and its subsidiaries. 

This is not the first time Meta has been accused of tying its services. The launch of Threads in 2023 raised concerns about tying, as it requires one to have an account on Instagram. Meta, formerly known as Facebook, acquired Instagram, a photo-sharing app, in 2012. Although marketed as a competitor of microblogging platform X, the prerequisite of an Instagram account to operate the application makes it vulnerable to antitrust scrutiny, because the functioning of Threads and Instagram is fundamentally different. The Turkish Competition Authority, Rekabet Kurumu (‘RK’), has been investigating Meta’s anti-competitive practices since last year. In December 2023, the RK launched an investigation into the alleged tying of Threads and Instagram. 

Subsequently, in January 2024, Meta was fined $160,000 per day for failure to adequately address competition concerns arising from its dominance in social networking, consumer communication, and online advertising. Most recently, the RK fined Meta $37.20 million over data-sharing practices between Facebook, WhatsApp, Instagram, and Threads.

TYING : THE INDIAN PERSPECTIVE

Tying is prohibited under section 4(2)(e)  of the Competition Act, 2002, in the context of abuse of dominance. The CCI’s interpretation of tying has been a bit more restrictive than its European counterpart. This is especially demonstrated by the element of ‘coercion’ which is very narrowly considered by the CCI. We will try to understand this through two cases: Harshita Chawla v. WhatsApp and Facebook (‘Harshita Chawla’) and the Baglekar Akash Kumar v. Google LLC (‘Google Meet case’). 

In Harshita Chawla, WhatsApp was accused of tying its Unified Payments Interface, WhatsApp Pay (‘WPay’) services with its messaging platform. The CCI dismissed the allegations on two grounds: first, that the element of ‘coercion’ in using the two products was absent; and second, that it did not cause foreclosure of competition in the market for payments services. It is prima facie amply clear that WhatsApp’s messaging platform and WPay operate in different relevant markets, which is a consideration that was taken into account by the CCI as well. However, its rationale for reaching the conclusion stands on shaky ground. The CCI has failed to consider here that WPay is not independent of the messaging platform, and users need to have a WhatsApp account in order to use it. While the implementation of WPay did not foreclose competition in the market of payment services by itself because it is a heterogeneous market, WhatsApp’s conduct is in clear violation of Section 4(2)(e) for two reasons: first, that users need to use the messaging platform in order to use WPay; and second, that WhatsApp leveraged its dominance in the smartphone-based OTT messaging service market to enter into the payments services market.

A similar reasoning was used in the Google Meet case. In 2020, Google was accused of anti-competitive tying following the integration of its video-conferencing service Google Meet (‘Meet’) with its client mail service, Gmail. This meant that Meet came pre-installed with Gmail and the latter could not be used without the former. CCI dismissed the allegations on Google on two grounds. Firstly, users were free to use Meet without having a Gmail account. They just needed a Google account, not Gmail. Additionally, they were not under an obligation to necessarily use the video-conferencing service while using Gmail. Secondly, it did not restrict users from using other video conferencing apps with their Google account, thus reaching the conclusion that users are not being ‘coerced’ to use Meet and Gmail together. This approach again overlooks the fact that a dominant enterprise (here, Google) leveraged its position in one relevant market (here, client mail service) to enter into another relevant market (here, video-conferencing service). 

A PROBLEMATIC APPROACH

The CCI’s narrow interpretation and mandatory requirement of ‘coercion’ in order to constitute tying is arguably not a favorable one. As demonstrated by both the cases above, it clearly neglects the presence of leveraging. Even if we consider that WPay did not cause foreclosure of market competition in Harshita Chawla, it does not weaken the fact that if a user wishes to use WPay, they would necessarily have to pass through WhatsApp, thereby increasing the market power of the messaging platform and giving it a competitive edge over its counterparts in that relevant market. Additionally, the CCI completely ignores the aspect of consumer inertia or status quo bias with its disproportionate focus on coercion. The concept of status quo bias assumes that consumers refrain from making active choices to change the status quo regardless of economic irrationality. In comparison, it has been due importance by the EC on more than one instance, a notable one being the Google Search (Shopping) decision, where it was observed that of the total consumers, only 1% looked at the second page of Google search results. Similarly, a user with a Gmail account is more likely to tilt towards using Meet over other video-conferencing apps, simply out of convenience, or one may say, irrationality. 

If we apply the Indian approach to the present case of Meta tying FM with Facebook, chances are that Meta will probably escape CCI’s scrutiny, specifically with respect to tying, because it does not ‘coerce’ Facebook users to necessarily use FM. Users can use the social media platform without using the classified ads services and are also free to use other classified ads services while using Facebook. This approach ignores the aspect that FM is a service that cannot be used in isolation without having a pre-existing Facebook account. Consumer inertia is a significant factor in this case, considering the enormous user base of Facebook. Additionally, as compared to any other online classified ads services, Meta obviously has access to a variety of personal data of millions of users across the world (‘Big Data’), which gives it a significant competitive advantage. Something that has been consistently also ignored is the annoyance caused to the users who do not want to use the additional services but are unable to disable them. These are factors that must be taken into account by CCI while adjudicating upon tying allegations in the digital market. 

CONCLUSION AND THE WAY FORWARD

In evolving digital markets, Big Data raises competitive concerns, when dominant undertakings use it to the detriment of other competitors, by indulging in tying and leveraging. Being a non-price parameter for competition, possession of Big Data by technological giants (‘Big Tech’) puts non-dominant enterprises at a disadvantage. This is where competition regulators are expected to step in. As Big Tech is under stringent scrutiny around the world, remarkably in jurisdictions other than the European Union, it calls for stronger compliance strategies. For more market-friendly effects of antitrust regimes, it is essential to go beyond the imposition of fines. A monetary penalty, no matter how hefty it is, does not act as an effective deterrent for Big Tech as compared to the money that they make every minute of the day. Antitrust watchdogs should go further than that, and ensure the termination of the services or modification of anti-competitive features of such services, in order to protect and promote competition in the market. Considering liberal jurisdictions like the United States are becoming more active in scrutinising the distortion of competition by Big Tech, it is essential for developing economies like India to catch up as well, and not shy away from imposing stringent measures in the interest of consumer welfare. As we anticipate India’s ex-ante framework, one can hope that CCI will take its lessons and adopt a more dynamic approach in the future.