NCLAT Stays CCI’s Five-Year Ban on WhatsApp–Meta Data Use for Ads, Orders Partial Penalty Deposit [Read Order]

The Principal Bench of the National Company Law Appellate Tribunal (NCLAT), New Delhi, has granted partial interim relief to WhatsApp LLC and its parent company, Meta Platforms Inc., against a Competition Commission of India (CCI) order that penalised them and restricted user data sharing for advertising purposes.

The CCI’s impugned order had directed WhatsApp not to share user data collected on its platform with Meta or its associated products for advertising for five years. It also mandated new user consent mechanisms for data sharing “for purposes other than advertising” and imposed a monetary penalty on Meta.

The Commission’s findings stemmed from a suo motu investigation initiated in 2021 against WhatsApp’s revised privacy policy, which was alleged to force users to share data with Meta companies as a condition for continued access to services.

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Appearing for WhatsApp and Meta, counsels argued that the CCI’s order was beyond its jurisdiction and unsupported by evidence of actual anti-competitive harm. The appellants submitted that the CCI’s conclusions were based merely on “potential and likely effects,” rather than demonstrable abuse of dominance.

They contended that the CCI, by delving into privacy and data protection matters, encroached upon the domain of data protection law, particularly given that the Digital Personal Data Protection Act, 2023 had already been passed by Parliament though not yet brought into force.

The appellants further emphasized that the Supreme Court had, in February 2023, refused to stay WhatsApp’s 2021 privacy policy in related proceedings, recording the company’s undertaking to maintain functionality for users who had not accepted the updated terms. In light of this, they argued, the CCI had no authority to penalize or prohibit WhatsApp’s ongoing business practices.

Read More: CCI may Penalise WhatsApp for Controversial PrivacyPolicy Changes: Reports

The CCI, represented by counsel, maintained that its actions were within statutory jurisdiction, as the proceedings were aimed at curbing anti-competitive conduct, not enforcing privacy standards. The Commission relied on the Supreme Court’s earlier decision of October 2022, which upheld its power to investigate WhatsApp’s practices under the Competition Act.

After hearing both sides, the two-member bench comprising Justice Ashok Bhushan and Arun Baroka (Technical Member)held that while CCI had the authority to examine competition issues, the five-year blanket ban on data sharing for advertising could disrupt WhatsApp’s business model, which offers free services supported by advertising.

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Read More: Meta Challenges CCI’s ₹213 Crore Fine on WhatsAppPrivacy Policy, Plans to Appeal

Observing that such restrictions could cause irreparable harm, the Tribunal stayed the operation of paragraph 247.1 of the CCI order, which imposed the five-year ban, but directed compliance with other directions concerning user choice, transparency, and policy updates under paragraphs 247.2 and 247.3.

On the monetary aspect, the Tribunal ordered WhatsApp and Meta to deposit 50% of the ₹213.14 crore penalty, noting that 25% had already been paid. The remaining directions of the CCI, including those relating to user opt-out options and disclosure of data-sharing purposes, remain enforceable.

The Tribunal granted both parties liberty to seek modification of the interim order once the Digital Personal Data Protection Act, 2023, comes into effect.

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