11 July, 2017
Clear skies emerge as competition authorities across jurisdictions become more sure-footed in dealing with the ever growing (new) digital economy.
The Competition Commission of India’s (CCI) confidence in dealing with apps and technologies is reflected in its relevant market[1] determination in cases concerning instant messaging apps.
On 1 June, 2017, the CCI passed an order[2] under Section 26(2) of the Competition Act, 2002 (Competition Act), holding that the case did not warrant an inquiry into alleged abuse of dominant position by WhatsApp Inc (WhatsApp).
Though closed at an initial stage, the CCI’s determination of the relevant market in this case is instructive.
The informant, Vinod Kumar Gupta, alleged that WhatsApp held a dominant position in the relevant market for ‘free messaging apps available for various smartphones globally’. It was further alleged that WhatsApp was abusing its dominant position in the said relevant market by indulging in predatory pricing and by mandating users to share their information with Facebook, its parent company.
Given the allegations concerned abuse of dominance, the CCI started its analysis by determining the appropriate relevant market. In this regard, the CCI differed with the relevant market determined by the informant.
The CCI noted that instant communication apps cannot be compared with “the traditional electronic communication services such as text messaging, voice calls etc.” provided by telecom service providers (TSPs). The key factors taken into account by CCI to justify that instant communication apps constitute a separate relevant product market as compared to “traditional modes of communication” are as follows:
Unlike traditional modes of communication, instant communication apps are internet based and provide additional functionalities to users (for example, the ability to see when their contacts are online or when they last accessed the app).
Instant communication apps can be used through smartphones only, unlike traditional electronic communication services that can be used through any mobile phone.
There is a difference in pricing conditions between instant communciation apps and traditional modes of communication.
Traditional text messaging can be exchanged between anyone even if users do not use the mobile service of the same service provider.
Additionally, although the CCI determined the relevant geographic market to be ‘India’, observations indicated that it was aware of the global nature of the digital economy, such as:
The functionality provided by consumer communication apps through smartphones is intrinsically cross-border.
The geographic scope for either demand or supply of consumer communication apps is not limited to any area in particular.
Developers distribute similar products to all of their customers regardless of their geographic location.
Functionality of consumer communication apps through smartphones “does not differ depending on the region or country concerned, either in terms of price, functionality or operating system”.
Having noted the above, the CCI added that competitive conditions, regulatory architecture and players may vary in different countries/regions. Since conditions for competition are homogenous in India, it noted that the geographic area of India may be treated as the relevant geographic market.
Accordingly, the CCI determined that the relevant product market to be ‘the market for instant messaging services using consumer communication apps through smartphones’.
Eventually, the CCI relied on publically available information and various market studies to conclude that WhatsApp holds a dominant position in the above mentioned relevant product market. However, it did not find enough merit in the allegations to order an investigation.
Key Takeaway
The determination of relevant market is central to examining the competitive impact of a conduct or practice. When dealing with technological innovation that changes everyday and is not restricted to a specific geographic area, this task becomes fraught with risks.
It will be interesting to note if the CCI follows a similar approach in cases concerning other apps or chooses to adopt a more nuanced, differing view.
The CCI’s position in this case also reinforces that, in certain areas, the CCI is keen to assert its independent view as an antitrust authority for India, uninfluenced by contrary positions that may have been taken by regulators in other jurisdictions.
[1] A function of the relevant product market and the relevant geographic market.
[2] Shri Vinod Kumar Gupta, Chartered Accountant Vs. WhatsApp Inc. [Case No. 99/2016], decided on 1 June 2017.
* The author was assisted by Anu Monga, Director – Competition Practice and Neeraj Lalwani, Associate
For further information, please contact:
Rahul Goel, Partner, Cyril Amarchand Mangaldas
rahul.goel@cyrilshroff.com
