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14 Jan 2021

WhatsApps New Policy Changes – Engrossment or Entrapment?

Recently, there has been quite a brouhaha on WhatsApp’s policy changes that are slated to be effective from February 2021. Since WhatsApp is a household name when it comes to important and easy communication for over 200 million Indian subscribers, i.e. approx one-sixth of the Indian population, any modification in their Terms of Service and Privacy Policy would of course be intriguing and have huge ramifications across the country. Hence, policy changes affecting the users should have ideally been introduced after thorough deliberation and winning consumer credence. However, Whatsapp has preferred to impose this document on Indian consumers..

The new conditions are applicable to all WhatsApp users, for the services offered by WhatsApp LLC located in Menlo Park, California. However, services to the European region would come under WhatsApp Ireland Ltd. and European users would have to agree to separate Terms of Service and Privacy Policy. In short, for all non-European users of WhatsApp, the terms would be binding. WhatsApp has already started pushing for acceptance of the new Terms of Service and Privacy Policy when we open the application, and all Indian users are necessarily required to agree to them to get uninterrupted service.

The key element in the new Terms of Service is that WhatsApp is seeking consent to merge their services with other Facebook Group Companies.  However, Whatsapp has now moved on to become a payment intermediary that enables sending and receiving money rather than a mere voice messaging, audio and video call application that it originally was. Since WhatsApp is now a business service provider offering financial intermediation services and a channel for communicating with businesses in India, it is required to comply with the provisions relating to Consumer Protection Act and other applicable laws in India. However, strangely the Terms of Services mentions that the applicable laws would be the laws of the State of California, and the forum for all dispute resolution would be the District Courts of Northern District of California or State Court located in San-Mateo County in California. Essentially, by this clause, Whatsapp is forcing the Indian users to concede the jurisdiction of a foreign court and foreign law.

Further, a company that owns, operates, or manages digital or electronic facilities or platforms for electronic commerce becomes an e-commerce entity. A company that owns, operates or manages digital or electronic facilities or platforms for electronic commerce becomes an e-commerce entity. When WhatsApp becomes a business service provider under Facebook Group Companies, it indirectly comes under the definition of an e-commerce service provider. Due to its unity in control with Facebook Group Companies, whether the services offered by Facebook Group Companies will be considered as services from a single source emanating from WhatsApp is something which requires deeper study. However, a prima facie inspection suggests that once these businesses start, WhatsApp and its group companies together could come under the classification of either an inventory e-commerce entity or a marketplace e-commerce entity depending on how they finally merge these businesses and offer it as a single service. In any case, the Terms of Service offered should be in accordance with Consumer Protection (E-commerce) Rules, 2020. As per the Rules, e-commerce service can be offered only by an Indian Company or a foreign company duly compliant with the Indian laws. However, the Terms of Service released by WhatsApp has no mention of any other Indian entity. News reports say WhatsApp has reportedly set up an Indian company called WhatsApp Application Services Pvt Ltd. but the Terms of Service has not linked or referred to that entity in any manner.

Moreover, as per the Rules, an e-commerce entity shall have an adequate grievance redressal mechanism including a separate grievance officer. However, strangely there is no such grievance mechanism provided for Indian users and no grievance officer has been stated to have been appointed. On the contrary, it is forcing consumers to seek redressal by approaching a foreign court in California under Californian laws. It is also imperative to note that linking Facebook Group Companies with WhatsApp services, sharing user data and forcing consumers to avail Facebook Group Company Services amounts to an unfair trade practice.

In addition, linking their services and enabling WhatsApp to be integrated with Facebook Group Companies should also be looked at in the perspective of Competition law, because the same is a unilateral act on the part of WhatsApp where its users are compelled to share their data with other businesses, which is an abuse of dominance and this activity may come under “combination”.  A deeper scrutiny under the Competition Act is thus warranted to prevent the abuse of dominance. It is interesting to note that in response to the scrutiny of the European merger regulator some time back, while considering Facebook’s acquisition of Whatsapp, it was specifically assured by Facebook, that merging the subscriber data of these two services was not possible. In contrast, their new terms of services and the privacy notice are clearly against this submission and probably that is the reason that they have kept the terms for EU users intact.

The changes made in the Terms of Service also suggest that they might no longer be able to claim exemption from liability under §. 79 of the Information Technology Act or Information Technology (Intermediary Guidelines) Rules because their own affiliated entities are offering goods and services through this platform. In such case they are not mere conduit for business rather actual business provider. Hence, the changes made in the Terms of Service give a prima facie view that WhatsApp will no longer able to claim any benefits under §. 79 of Information Technology Act and will become an active business service provider.

On the privacy law perspective, if we read the modified WhatsApp Privacy Policy, it essentially takes away the entire privacy of users and enables the platform to provide all user data of every kind to Facebook Group Companies and third-party service providers. It enables them to pump advertisements and make marketing of Facebook services and third-party services, which grossly exceeds the essential purpose for which people joined WhatsApp. Even from a plain reading, the consent that they are seeking is excessive and will not come under any of the legitimate grounds for which data can be collected and shared as per globally accepted privacy principles. They have expressly stated that the data can be stored wherever they like and can be transported to wherever they desire. Such blanket permissions essentially vitiate the concept of privacy in all manners.

WhatsApp has, in recent years, become the common communication medium among the public at large and any changes in the business scheme has a widespread repercussion. It has become an essential service and yet, has made a unilateral dictation of its Terms of Service without giving its Indian users any choice and without acquiescing to Indian Courts and Indian Jurisdiction. The apparent laxity in complying with Indian laws is worrisome and require further inspection. Despite being one of the largest subscriber territories, WhatsApp LLC has made no effort to be compliant with Indian law. If this omission is intentional then Indian authorities and the public at large should force them to revisit the Terms of Service ad Privacy Policy to make it more legally compliant with the IT Act, Consumer Protection Act, Completion law, and privacy principles and with other relevant Indian laws.  Whatsapp is duty-bound to protect the interest of Indian subscribers.

Image Credits: Photo by Rachit Tank on Unsplash

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