NCLAT Orders Meta to Pay Penalty; Stays Ban on WhatsApp's Data-Sharing Policy [Read Order]

The National Company Law Appellate Tribunal (NCLAT) stayed the 5-year ban on WhatsApp data sharing with Meta and directed to pay 50% percent of the penalty within two weeks, holding that such a ban could disrupt WhatsApp's business model in India. The Competition Commission India (CCI) ruling against WhatsApp's 2021 privacy policy change has been partially lifted by the bench of Justice Ashok Bhushan (Chairperson) and Arun Baroka (Technical Member).

WhatsApp was fined Rs. 213.14 crore for violating sections 4(2)(c) and 4(2)(e) of the Competition Act by leveraging its dominant position to "coerce" users into adopting the upgrade, and the CCI restricted the app from sharing user data with Meta for advertising purposes for five years.

The CCI penalized Meta in November 2024 for alleged unfair business activities related to WhatsApp's amended privacy policy from 2021. Users had to agree to data-sharing conditions with Meta entities in order to receive the update. The CCI ruled that because the upgrade placed unfair terms on 530 million Indian customers, it breached section 4(2)(a)(i) of the Competition Act. Additionally, it determined that rivals in online display advertising faced obstacles to entry due to data-sharing practices among Meta companies, which violates sections 4(2)(c) and 4(2)(e) of the Act. According to the CCI, the 2021 policy's "take it-or-leave-it" strategy weakened consumer autonomy and imposed discriminatory requirements.

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Along with the financial penalty, the CCI ordered WhatsApp to refrain from sharing user data with other Meta-owned services for the next five years, give Indian WhatsApp users the option to opt out of data sharing starting in 2029 through an in-app notification, allow users to review and modify their preferences through a separate tab in the app's Settings, and give thorough explanations of what information is shared with other Meta platforms and why.

The legal team for WhatsApp, headed by Senior Advocates Kapil Sibal and Mukul Rohatgi, contested the CCI's ruling on four key points on January 16. According to the argument, the main issues are privacy and data protection, which are covered by the Digital Personal Data Protection (DPDP) Act, a statute that has been notified but has not yet been put into effect. The CCI arbitrarily imposed a five-year suspension. Additionally, WhatsApp's business model is in peril due to the CCI decision, making it unviable for a for-profit corporation.

The Tribunal viewed that WhatsApp offered free services to its users and that the 5-year moratorium might "lead to the collapse of the business model." The Digital Personal Data Protection Act has also been passed and is probably going to be enforced, which may cover all matteAccording to the Tribunal, WhatsApp provided its customers with free services, and the five-year embargo could "lead to the collapse of the business model." Additionally, the Supreme Court has not issued any interim rulings halting the 2021 privacy policy, and the Digital Personal Data Protection Act has been passed and is likely to be enforced. This law may cover all issues related to data protection and sharing.

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rs pertaining to data protection and data sharing, and that the Supreme Court had not issued any interim orders staying the 2021 privacy policy.

While allowing  WhatsApp and the CCI to seek modifications to the order in the event that the DPDP Act or any other data protection and sharing legislation is put into effect, the Tribunal stayed the five year ban on data sharing and directed WhatsApp to pay the 50% of the penalty within two weeks.

To Read the full text of the Order CLICK HERE

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