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.