India’s new Information Technology (Guidelines for Intermediaries and Digital Media Ethics Code) Rules (IT rules, 2021) enforced a requirement on platforms that provide messaging services to trace the “first originator” of unlawful content. This presents fundamental difficulties for encrypted platforms. Challenging this requirement, WhatsApp filed a lawsuit against the Government of India in Delhi High Court on 26th May 2021.
In this document, we attempt to assess the likely implications of the lawsuit on the instant messaging market in India. In our assessment:
1. If the court rules in favour of WhatsApp, the status quo is likely to be maintained, with a possibility of WhatsApp further consolidating the market.
2. If the court rules against WhatsApp, WhatsApp can either choose to comply and remain in India or leave. If it complies, it is likely to remain the dominant player. Platforms that are end-to-end encrypted, meanwhile, might be blocked if they are unwilling to comply.
3. If WhatsApp leaves, at first, there would be a void in the market. Until there is a standardised platform of communication, there could be a fall in consumer surplus.
4. The traceability requirement might not serve the intended public interest benefit.