Meta Merger: ‘Big Data Sets’ Evading Sphere of Privacy and Competition Law

By: Pragya Nawandar & Abhijeet Mittal


INTRODUCTION

In 2021, Mark Zuckerberg introduced a new company named Meta to bring his applications and technologies under a single umbrella, for example Facebook, Instagram, WhatsApp etc. This blog focuses on the merger of WhatsApp with Facebook, which arose many disputes before various forums: Competition Commission of India (hereinafter ‘CCI’)[1], High Court[2], Supreme Court[3] and National Company Law Appellant Tribunal[4]. The major concern was the sharing of ‘Big Data’ by WhatsApp with Facebook to further analyze user preferences to facilitate appropriate advertisement services and improve their services.

This blog will also evaluate the compromise of consumer privacy, in lieu of competition laws in India, caused due to this merger. Additionally, the article will assess the effect on privacy as a result of the acquisition of Instagram and WhatsApp by Meta Inc or Facebook. It will also discuss if such privacy evasion results in a reduction in the quality of services provided. Lastly, it will examine if the same must be considered as an anti-competition factor under the Competition Act 2002.

WORKING OF BIG DATA: POTENTIAL THREAT TO PRIVACY

“Big Data” is the collection of personal data of the users subscribing to that platform. The data scientists analyze this data to understand the preferences and inclinations of a particular individual. This data is constantly updated with every visit of the user on the internet with the help of Cookies and data footprints. The collection of this raw data is then exposed to algorithms created by Data Scientists that can identify sexual orientation, psychological state, behavioral patterns, religious beliefs, political inclination, physiological weakness, financial soundness, and every detail which makes a person unique.

This identified personal information is the result of analyzing process service provided by the Data Scientists, the innovation in the industry has encrypted self-learning algorithms which expands the quantity of personal data and resultant personal information. This resultant personal information is then used by these Big Data collectors, ex. Facebook and WhatsApp, for digital advertisement.

For example, after the Presidential Elections in the U.S.A. in 2016, the misuse of personal information by data collectors, like Facebook, came into the popular discourse. They allegedly used personal data to identify voters against Donald Trump and then psychologically motivated them to vote for him by using fake news. This history of Facebook’s involvement in manipulating its users to vote for Donald Trump proves that Facebook is a threat to privacy.

CONCENTRATION OF BIG DATA: POTENTIAL THREAT TO COMPETITIVE LAW

Competition law employs the concept of “Relevant Market[5],” which depicts the economic detrimental behavior which relates to the commercial activities of the companies based on relevant geographical markets or product markets. This blog will delve into understanding the relevant market of social media.

  • Social Media Market

After the merger of the top two social media players, WhatsApp transferred all the data collected to Facebook. This transfer gave power Facebook to function independently from the competition and affected the consumer by having access to their information. As per Section 72 A[6], any person, who has access to the personal data of another person and discloses that data without the consent of that person shall be in breach of contract and will be liable for the punishment.

The defense for such transfer, and consequent access, taken by Facebook was user consent, even though no permission was asked in policy from new users and users who opted out from such transfer in the 2016 policy. This was held to be an anti-trust practice by the court, and they further held that the unfair condition of not providing an opportunity to have control over personal data is the true meaning of “abusing dominant position” and violates Section 4(2)(a)(i) of Competition Act, 2002.

QUALITY REDUCTION AS AN ANTI-TRUST MEASURE

In the WhatsApp-Facebook merger case, the CCI stepped back from interfering in the 2016 policy, which collected consumer data without due permission, on grounds that such a breach should be dealt under Information Technology Act.

Finally in the WhatsApp LLC judgment, for the first time, the Competition Commission took notice of non-price parameters like reduction in Consumer data protection and loss of control over personalized data that can lead to a quality reduction in anti-competition law. The contentions laid down by CCI before Delhi High Court (DHC) were that WhatsApp plays a dominant position in the market and it is difficult for users to switch to other apps due to inoperability between platforms. There’s opacity, vagueness and open-endedness in the 2021 update policy and the concentration of data by WhatsApp and Facebook raises competition concerns. Therefore, the court opined that CCI was well within its jurisdiction to try the matter.

QUALITY-BASED THEORY OF HARM

The reasoning behind non-price parameters can be seen in the approval and acceptance of the ‘Quality Based Theory of Harm.’ It states that consumer welfare is reduced if the privacy structure is weak, which is a non-price anti-trust parameter. After the merger, the combined data may carry with it a significantly higher level of extraction capability of personal data through data analyst algorithms. Thus, antitrust regulators considering quality reduction as a part of their overall analysis of a merger or dominant firm behaviour shows the evolution of an interdisciplinary approach in competition law jurisprudence.

FACTORS DETERMINING “QUALITY-BASED HARM THEORY”

In the Search Engine market, a similar merger of Microsoft and Yahoo was objected by the search engine leader Google, on a non-price parameter of quality degradation. The factors for determining Quality-Based Harm Theory considered by the CCI were: 1) data transfer in merged company and concentration of data, 2) pre-installed applications, 3) sponsored irrelevant information and 4) removing rival competitors. These factors can help us in drawing a comparison in the present case. The reason for data transfer between Microsoft and Yahoo was to improve their Search Engine market services, where more data helps in giving relevant results. It was considered a healthy merger for competition against the monopoly of Google in this market, on the contrary, the merger of Facebook and WhatsApp is creating a monopoly in OTT messaging market. Apart from the monopoly in OTT messaging market, the hidden intent to create a monopoly in a market of online advertising should also be considered as a reduction in quality. The abovementioned factors are explained in detail below:

  1. Data transfer in merged companies

The concept of data transfer and concentration can be understood from Google’s model. It provides services of a search engine, official communication of e-mail, data storage and mapping, which leads to data concentration with Google. This concentrated data is processed with self-learning algorithms with exponential data extraction possibility, which remains unregulated and un-interfered by state authorities, which makes it vulnerable to breach of privacy.  Along the same lines, the Facebook and WhatsApp merger, and the consequent transfer of already concentrated data would threaten the data privacy of the users. This would directly form ease of access in the online advertisement market.

  1. Pre-Installed Applications:

Some instances of pre-installation are Google’s pre-installation on Android phones, Safari web browser on Apple and Get Apps which cannot be uninstalled on Xiaomi phones. Similarly, WhatsApp and Facebook pre-installation on any phone might give an advantage but does not ensure that the user will not switch to other options. Still, in present scenario of WhatsApp, Facebook and Instagram acquisition by Meta Inc., pre-installation shall be considered as a factor causing harm to the competition, as it creates a monopoly in the relevant market of online OTT platforms. The consumer sharing data on either of the three platforms would ultimately result in granting the data in the hands of Meta Inc in the name of providing a personalised experience.

  1. Sponsored Irrelevant Information

Information can be divided into organic and sponsored, where the organic is what the user asked for while the sponsored information is being forced upon the screens of the user, which is used to divert the users. The same can be either relevant or irrelevant. The data shown on the screen is meant to keep users engaged in a particular application and is generally a mixture of organic and sponsored information so that revenue can be generated on click or display of sponsored information. When the application, through organic and sponsored information, displays irrelevant information to the users, it reduces quality as consumer interest is abandoned. Further, in this display, the company website owner prioritizes its vertical and horizontal businesses (Ex. For Vertical Business would be Apple, which manages all aspects of its production end to end, whereas Horizontal Business would be Facebook and Instagram). This practice removes competition in the relevant market and helps in creating a monopoly in those vertical and horizontal businesses.

  1. Removing Rival Competitors

This factor can be understood from the case of Digital News Publisher Association v. Alphabet Inc and others, where Google violated section 4(2)(e) of the Competition Act 2002, as it misused the power to determine what first appears from a search of the user. Resultantly, the other digital news providers had to shift to Accelerated Mobile Page AMP (Google) articles, because the news that appeared on top search results belonged to Google or AMP. Most of the revenue earned from these advertisements went to Alphabet Inc. This represents the fifth factor to remove competitors with quality degradation.

CONCLUSION

Big Data Collectors have caused breach of Privacy to dominate the competition in the relevant market of OTT Messaging Market. The Merger between WhatsApp and Facebook has allowed them to share a huge chunk of personal data of users among their organizations, meanwhile dragging out the other competitors from the competition, and therefore creating a monopoly in OTT messaging market.

However, now with changes brought through, Competition Act, judicial precedence, and natural justice, India is headed towards secure and safe cyberspace where consumers can ensure that Facebook complies with the above quote stated by the founding father of the company because privacy is non-negotiable, it is right of every global citizen.

[1] Vinod Kumar Gupta v WhatsApp Inc 2017 SCC OnLine CCI 32; In re Harshita Chawla 2020 SCC OnLine CCI 32; In re WhatsApp LLC 2021 SCC OnLine CCI 19.

[2] Whatsapp LLC v CCI 2022 SCC OnLine Del 2582; Whatsapp LLC v Competition Commission of India (2021) 2 HCC (Del) 212; Karmanya Singh Sareen v Union of India, 2016 SCC OnLine Del 5334.

[3] Karmanya Singh Sareen v Union of India (2017) 10 SCC 638.

[4] Harshita Chawla v Whatsapp Inc & Facebook Inc 2021 SCC OnLine NCLAT 1336.

[5] Competition Act 2002, s 2(r).

[6] Information Technology Act 2000, s 72A.


(Pragya Nawandar & Abhijeet Mittal are law undergraduates at Maharashtra National Law University, Aurangabad. The authors may be contacted via email at abhijeetmittal2000@gmail.com)

Cite as: Pragya Nawandar & Abhijeet Mittal, ‘Meta Merger: ‘Big Data Sets’ Evading Sphere of Privacy and Competition Law’ (The RMLNLU Law Review Blog, 18 November 2022) <https://rmlnlulawreview.com/2022/11/18/meta-merger-big-data-sets/> date of access.

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