NCLAT Stays Ban on WhatsApp's Data-Sharing Policy; Orders Meta To Pay 50% Of ₹213 Crore Penalty

The National Company Law Appellate Tribunal (NCLAT) bench of Justice Ashok Bhushan (Chairperson) and Arun Baroka (Technical Member) has granted partial relief to WhatsApp from the Competition Commission India's (CCI) order against its 2021 privacy policy update.The CCI had banned WhatsApp from sharing user data with Meta for advertising purposes for 5 years and imposed a Rs. 213.14 crore penalty for violating sections 4(2)(c) and 4(2)(e) of the Competition Act by using its dominant position to “coerce” users into accepting the update. The NCLAT stayed the 5-year ban on WhatsApp data sharing with Meta and directed WhatsApp to pay 50% percent of the penalty within two weeks, holding that such a ban could disrupt WhatsApp's business model in India.CCI's OrderIn November 2024, the CCI had imposed a penalty on Meta for suspected unfair trading practices in relation with WhatsApp's 2021 updated privacy policy. The update required users to accept data-sharing terms with Meta entities.The CCI held that the update violated section 4(2)(a)(i) of the Competition Act as it imposed unfair terms for 530 million Indian users. It also held that data-sharing practices amongst Meta entities created entry barriers for competitors in online display advertising, which is a contravention of sections 4(2)(c) and 4(2)(e) of the Act. The CCI noted that the "take it-or-leave-it" approach of the 2021 policy imposed unfair conditions and undermined user autonomy.Apart from imposing a monetary fine, the CCI had directed WhatsApp to not share user data with other Meta-owned services for the next five years; allow WhatsApp users in India to opt out of such data sharing through an in-app notification from 2029; let users review and change their choices via a separate tab in the app's Settings; and provide detailed explanations of what data is shared with other Meta platforms and for what purposes.ArgumentsOn January 16, WhatsApp's legal team, led by Senior Advocates Kapil Sibal and Mukul Rohatgi argued against the CCI's order on four main grounds.First, they contended that the issue primarily concerns data protection and privacy, which falls under the purview of the Digital Personal Data Protection (DPDP) Act, a law that has been notified but is yet to be enacted. Second, the five year ban imposed by the CCI was arbitrary. Third, the CCI order puts WhatsApp's business model in jeopardy, rendering it unviable for a for-profit company.Fourth, WhatsApp's user data sharing to Meta entities improves user experience and helps small and medium-sized businesses. They also pointed out that similar issues are currently under review by the Supreme Court and the Delhi High Court in the Karmanya Singh Sareen case (challenging the 2016 policy update) and the Chaitanya Rohilla case (challenging the 2021 policy update). NCLAT's ObservationsThe Tribunal noted that WhatsApp offered free services to its users and that the 5-year moratorium might "lead to the collapse of the business model."The Tribunal noticed that the Digital Personal Data Protection Act has also been passed and is probably going to be enforced, which may cover all matters pertaining to data protection and data sharing, and that the Supreme Court had not issued any interim orders staying the 2021 privacy policy. The Tribunal allowed 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. Other directives of the CCI ruling such as the opt-out option, have not been stayed.Case Title: Whatsapp LLC vs. Competition Commission of India & Ors. Case Number: I.A No. 280 of 2025 IN Competition App. (AT) No. 1 of 2025 For Whatsapp LLC: Mr. Mukul Rohtagi and Mr. Arun Kathpalia Sr. Advocates with Mr. Yaman Verma, Mr. Shashank Mishra, Ms. Raveena Lalit, Ms. Aisha Khan, Mr. Shivek Endlaw, Mr. Parv Kaushik, Ms. Anandita Tayal, Ms. Bani Brar, Ms. Diksha Gupta, Ms. Devanshi Singh, Mr. Udit Dedhiya, Mr. Aditya Dhupar and Ms. Tahira Kathpalia, Advocates For CCI: Mr. Samar Bansal, Mr. Manu Chaturvedi, Mr. Vedant Kapur, Mr. Kaustubh Chaturvedi, Advocates for CCI. For Meta Platforms, INC: Mr. Kapil Sibal, Ld. Sr. Advocate with Mr. Tejas Karia, Mr. Naval Chopra, Ms. Supritha Prodaturi, Ms. Akshi Rastogi, Ms. Parinita Kare, Mr. Aatmik Jain, Ms. Ritika Bansal and Ms. Aparajita Jamwal, Advocates. For R3: Mr. Abir Roy, Mr. Vivek Pandey, Mr. Aman Shankar, Ms. Biyanka Bhatia, Mr. Sasthibrata Panda and Ms. Shreya Kapoor, Advocates. Date of Order: 23.01.2025Click Here To Read Order

NCLAT Stays Ban on WhatsApp's Data-Sharing Policy; Orders Meta To Pay 50% Of ₹213 Crore Penalty

Tazeen Ahmed

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