On March 30, 2021, the Central Bank of Brazil (BCB) approved the use of Whatsapp Pay in the country. It is a feature for money transfer through the app itself, and no fees or charges are applied to payments carried out through the functionality. The focus is on small payments, and users can make up to 20 transactions a day of up to BRL 1,000 per transaction, with a monthly limit of BRL 5,000. The government of the State of São Paulo even announced that subway and bus passengers could pay for public transportation via Whatsapp.¹

The functionality had already been launched in June 2020 but was suspended indefinitely a few days later, at the behest of the Central Bank of Brazil and the Administrative Council for Economic Defense (CADE). Any failure to comply with the determination would result in a fine of BRL 500,000 per day. What has changed since then?

In the second half of 2021, about 120 million people, 60% of the population, used Whatsapp as a messaging app in the country.² Whatsapp is already the only chatting app in the country that has zero-rating deals with mobile operators, that is, it can be accessed free of charge for data traffic and free of charge when using internet connection plans. This is a reason that directly contributes to this app’s market monopoly and that limits access to other messaging apps, mainly by the poorest sections of the population, who depend on access through prepaid plans and with lower data plans. Now, Brazil is the second country to test this payment service. The first was India, which has the highest number of users in the world, with over 400 million³ Whatsapp users in 2021. It is not by chance that the pilot tests are implemented in huge markets of the app located in countries far from the company’s headquarters. Apparently, in addition to coining the term “user” to designate those using a given software — denoting the desire of Silicon Valley companies to foment addiction and dependence in the use of their products, instead of treating us simply as consumers (a word that implies rights) — as citizens of countries with less law enforcement power over the practices of these companies compared to their country of origin, we are also seen as guinea pigs to help expand Facebook’s — now called Meta — monopoly, as well as the company’s megalomaniacal ambitions.

It is not the first time the company has treated people from countries located on the periphery of the world economy, outside the Global North, differently. Recent changes to the app’s privacy policy have tangibly demonstrated the power asymmetries in the geopolitics of data protection since the changes did not apply to Europe; in other countries, however, those changes aimed, among other things, at restricting the access of people who do not adhere to the new policy, including explicit consent for sharing data from the app with Facebook. In Brazil, the change in its privacy policy was questioned by the Administrative Council for Economic Defense (CADE), the Federal Prosecutor’s Office (MPF), the National Data Protection Authority (ANPD), and the National Consumer Secretariat (Senacon) which, among other recommendations, requested the postponement of the change, scheduled for March 2021, and some restrictions on the changes.

In fact, Whatsapp Pay works via Facebook Pay, that is, for the activation of this functionality it is necessary to share data; the consent for this is being questioned by the change in the privacy policy. And, with that, Whatsapp/Facebook, with all its history of violation of personal data protection, now has access to our CPF (the Brazilian individual taxpayer registry), bank account details, bank transactions associated with our contact list, in addition to the phone number. The company can cross-reference this data with our social media usage and location. Never has a bank or credit card company had so much information about us. We are providing all of this to a company whose business model is advertising.

How does this service technically work? How has this system been implemented in Brazil? What has changed from CADE’s initial decision to now? Does this new service serve as a way of countering the indication of regulatory bodies against changes in the privacy policy? What security issues emerge with the service? More than the analysis of yet another service of this company, the fundamental question is that little by little, in addition to holding a monopoly situation of digital media, Facebook, now rebranded as Meta, seems to aim to expand its domains to set up an even broader monopoly, now focused on means of payment, even confronting major banks, especially if we consider the power that the company has in terms of access to our information and habits. Are there possible answers in Competition Law that would support the protection of Human Rights in digital media? And, in addition to competition rules and regulations, what limits can we put on platform capitalism and the practices of data colonialism implemented by these large technology companies? Who is most vulnerable to these practices? Who profits from it? Who loses in this productive neoliberal and global arrangement of the Big Tech companies? Even if this service doesn’t take off as Facebook/Meta hopes, what limits have been imposed on a similar endeavor?

Methodology

These are just some of the many questions that an initiative like this raises and which this study intends to address.

To answer these questions, the methodology developed included desk research, analysis of the case records of CADE process nº 8700.002871/2020–34⁴, analysis of the terms of service and privacy policies of Facebook/Whatsapp services, analysis of the access to information request process prepared by Coding Rights to the Central Bank of Brazil, and focal interviews with key actors to understand the functioning and potential impacts of implementing this system.

The study begins with a technopolitical contextualization of WhatsApp, Facebook (Meta), and the launch of WhatsApp Payment in Brazil, dominating markets and subjectivities and consolidating the Meta group as a monopoly in the messaging apps market in search of a new expansion of its frontiers: entry into the financial services sector. Then, we went on to identify the turbulent scenario of the launch of the Whatsapp payment tool in Brazil, the authorization process of Facebook Pagamentos do Brasil as a payment initiation service provider with the Central Bank of Brazil, and the way WhatsApp Payment works, its terms of service and privacy policies. From a decolonial perspective, we emphasize the use of Global South countries such as Brazil, Kenya, and India as laboratories for implementing big tech monopoly policies. Finally, from the perspective of competition law, we carried out an analysis of both the process of investigation of the concentration act initiated by CADE and the financial legislation appropriate to the payment initiation service.

What did we find?

The new business models carried out by large technology companies significantly alter the scope of analysis of competition authorities such as CADE and, in the case of big techs in the payments market, of financial system regulators, such as the Central Bank of Brazil.

While banks and fintechs are created to primarily operate financial services, these services are a small portion of what big techs offer; however, the nature of the payment initiation activity per se is that of an activity that essentially involves transmitting data and transactional information, activities that are at the core of these companies’ business model.

While the idea of big data efficiency is questionable, it is an attractive narrative for investors and consumers. And one cannot deny that the massive size of the databases held by big tech increases their competitive power in our information society and positions them in a unique place in the face of smaller initiatives. The entry of these companies into the payments market and in other elements of the financial system contributes to this repetitive cycle (loop) of data generation. If Facebook, through its various products, was already collecting data from the users’ social networks, now it also collects financial data. The possibility of cross-checking different bases belonging to companies, with the intention of expanding their consumer base and creating new business models is enormous — for example, one must ask what prevents the company from offering a credit service based on an ultra-fast scoring system that intertwines the massive database of social networks with the information flow collected in financial transactions? In China, in addition to social networks, WeChat already dominates payment markets through WeChat Pay, along with Ali Pay, the financial arm of Alibaba, the Chinese version of competitors eBay and Amazon.

In Brazil, Whatsapp Pay, for now, is limited to transactions between personal accounts, and not between personal and business accounts. Still, even if we don’t know if WhatsApp intends to become a “super app”, like the Chinese WeChat, it is possible to say that the Whatsapp Pay functionality is another step towards increasing the data monopoly that Facebook has over Brazil and India.

The entry of this big tech into financial services suggests possibilities for greater financial inclusion, as Whatsapp has enormous penetration and reaches places and audiences that traditional banks have not reached (or did not want to). Financial inclusion, among others, means access to credit and education opportunities and financial management for the conscious use of resources, for example, and contributes to social inclusion, especially in the context of extreme poverty that marks countries like Brazil, India, and Kenya, in which millions of people do not meet requirements to open a bank account (which requires several documents). However, we must ask ourselves: at what cost?

While it could facilitate inclusion in financial services, Meta/Facebook further increases its consolidation in the data market. Tapping into this enormous market power can result in abusive practices favoring its own services and products; the imposition of difficulties and barriers to the arrival of other competitors, and, based on its hegemony in the market, the decrease in the quality of its services — such as the interruptions in the provision of service, which have already been noticed in Brazil. Therefore, it becomes a data monopoly.

The sum of the collection of financial data and the massive database provided by social networks and Facebook’s gigantic user base, combined with artificial intelligence and machine learning, increase the predictive power of this company’s systems and can interfere with the modulation of user/consumer behavior — as it has already been observed in the North American elections.⁵

There is a regulatory gap regarding the entry of these companies into the National Financial System. Big techs are not banks or fintechs, whose main and almost exclusive activity lies in the financial market. They hold other ways of doing business that are based on massive data collection. The traditional focus on competition related to a single market, as we have seen, is unsatisfactory. First, it is necessary to guide actions from the perspective that the financial system is an infrastructure of public and essential interest and works to promote financial and social inclusion. Secondly, it is necessary to avoid having only one economic approach and that there be regulatory and supervisory integration between the fields of competition, financial system, privacy, and data protection and consumer protection.

Furthermore, there is no single universal solution to the issue, after all, big techs are not present in just one country and, without a doubt, national and international coordination of formulation, regulation and inspection activities related to big techs in the financial market is necessary, especially among countries outside the Silicon Valley zone.

The digital economy, as a whole, has brought challenges to the control of notification of concentration acts, introducing fields considered new to the law until then, especially those related to the digital market.⁶

Often, technology companies have low revenues and do not even meet the legal criteria for mandatory notification of operations to the antitrust authority. In the case of WhatsApp, it is an application that does not sell ads and is “free” for users in general (except for business accounts with the new Terms of Service) but has intangible assets with a high prospect of future cash generation and subjective pricing.

The acquisition of WhatsApp by Facebook in 2018 was a notable example of how the competition authorities’ focus on allocative efficiency of resources, strictly speaking, proves to be insufficient to deal with the challenges of the economic power held by major digital platforms today. Since WhatsApp did not reach the turnover threshold in 2017, the European Commission’s analysis almost missed the operation,⁷ had it not been for its inclusion in the mandatory notification criteria of three of its Member States.

Of the points regarding competition addressed by the European Commission, there was a special focus on the exchange of data collected between companies,⁸ which did not occur in the Brazilian case of CADE’s APAC (Administrative Proceeding to Investigate a Merger) between WhatsApp and Cielo, whose epicenter of analysis was the lack of a common enterprise for the exploration of activity economy between the parties.

It is also important to mention that much of the information requested by the CADE’s General Superintendence in the Brazilian case was confidential, such as the list of all the companies belonging to the two economic groups, their gross revenues, and the sum of the revenues of the companies belonging to the Meta/Facebook group. This significant lack of transparency regarding the reasons to avoid disclosing information of public interest is a very present trend in CADE’s analysis.

Furthermore, the mandatory notification criteria in Brazil are provided for in art. 77, §7º, of Law 12,529/2011 (Competition Defense Act), article 88, §7º of the Competition Defense Act, which allows CADE to request, exceptionally, the submission of any transaction for its analysis, even those that do not reach the turnover parameters but could, nevertheless, harm the competitive dynamics of the market.

In addition to this, art. 173, §4, of the Federal Constitution establishes that the law shall repress the abuse of economic power that aims at the domination of markets, the elimination of competition, and the arbitrary increase of profits. According to Bruno Braz de Castro,⁹ these terms indicate a concern with maintaining the structure of competition and combating exploitative abuses. The Constitution is precise in establishing that the principle of free competition coexists harmoniously — and horizontally — with other constitutional principles of the economic order, such as the reduction of social inequality, the social function of property, and preferential treatment for small enterprises. Therefore, the purpose of Brazilian competition law must be legitimized under the framework of social justice, in favor of objectives such as economic development and the reduction of social and regional inequalities.¹⁰

The defense of competition is also one of the instruments — not the only one — to ensure a dignified existence, according to the dictates of social justice,¹¹ which is why virtual platform markets need to be on the radar of authorities such as CADE and, in this case because it deals with payment markets, the Central Bank of Brazil. Mergers and acquisitions policies are frequent, especially on the part of Big Techs, with the predatory incorporation of startups that have the potential to threaten their dominant position. If today Meta/Facebook is a social media regarded as one of the giants of the technology industry, this is largely due to its stance of dominating emerging competitive threats, such as WhatsApp and other companies in the group (Instagram, for instance). Competition authorities that disregard this economic, social and political scenario undertaken by platform capitalism are true catalysts of this process.

Dominant positions in virtual platform markets demand strong antitrust attention, and competition law needs to go beyond issues related to the allocative efficiency of resources in order to address these new challenges. It must focus on the effectiveness of the competitive process as a whole because, in the context of digital platforms, successful competition for the market tends not to face substantial competition in the market.¹²

In this sense, a partnership like the one between WhatsApp and Cielo may not, at first sight, show the presence of a common enterprise of the same economic activity, or contractual exclusivity. But the concentration of economic power takes on a new dimension as we notice the exclusionary effects undertaken by Meta/Facebook in the context of its market hegemony. Is there actually any real competitor against a company like Meta/Facebook on the global stage with whom Cielo will be able to build a partnership agreement in an advantageous and truly competitive way? Is there any messaging service comparable to WhatsApp on the national scene, with the same — or even similar — reach and relevance?

CADE, as an important strategic entity for the maintenance of the Brazilian System for the Defense of Competition, needs to pay increased attention to the abuse of market power undertaken by digital platforms that, in addition to absorbing rival businesses, undertake regulatory power to squash the profitability of certain products/services as a strategy to maintain their position as leaders.¹³

The constitutional principles of the economic order not only allow but are based on the need for sober looks at the Brazilian reality. Therefore, it is essential to ponder on the data monopoly in the competitive context, and the obstacles to the contestability of this market hegemony conquered by Meta/Facebook that extends to the market of means of digital payment, through WhatsApp Pay. It is no wonder that the General Personal Data Protection Law (Law nº 13.709/2018) provides in article 2, item VI, that “free initiative, free competition and consumer protection” are the foundation of personal data protection.

We suggest the adoption of a critical stance regarding the alleged neutrality rhetoric that surrounds the criterion of economic efficiency, widely used in competition analysis in Brazil. Decisions such as that of CADE’s APAC in the WhatsApp Pay case have an apparently scientific, objective and purely technical guise that, in fact, renders invisible the neoliberal ideological aspect that underlies, for CADE, the very concept of anti-competitive effects to be taken into account on the precautionary suspension of the operation.

Recommendations

Given the complexity of the topic, which involves a business model whose focus is the flow of information within the financial system, there is a need for a multisectoral approach to the analysis of the entry of big techs into the financial system that includes, in addition to the law of the financial system, at least competition law, consumer law, and rights related to privacy and data protection.

Among the central recommendations inferred from the information obtained in this study, some stand out. They are:

1. Reinforcement of CADE, as the Brazilian competition authority, in dealing with major digital platforms. Germany presented an interesting example in November 2021 when it proposed the German Coalition Agreement on Digital Rights. Its members expressed substantial support for the regulation of platforms by the European Union, taking a solid position in favor of restricting the use of surveillance technologies by the government. Among the specifics, there was a suggestion to reinforce the Bundeskartellamt (German competition authority) over consumer law and digital platforms. Updating competition laws to face the challenges brought by the new digital economy — especially concerning the platforming process in economic relations — is one of the main points for protecting the fundamental rights of users and consumers in the digital environment. Thus, it is important to observe the European process regarding the approval of the Digital Markets Act, which intends to regulate the performance of big techs, by imposing limits on their operation, as well as repressing anti-competitive practices.¹⁴
2. Need for cooperation between authorities, with the elaboration of cooperation terms, especially between the Central Bank of Brazil (BCB) and the National Data Protection Authority (ANPD). The technical cooperation agreement signed between CADE and ANPD in 2021 aimed at inter-institutional cooperation in cases of violations of the economic order involving the use and sharing of personal data. In the setting of the digital economy and platform capitalism, Big Techs have increasingly taken advantage of the market reserve acquired over prolonged periods without the presence of a closer look by the authorities on the need to regulate their activities. More than ever, the joint and coordinated promotion of authorities such as ANPD and BCB proves to be of imperative relevance for the effective protection of the fundamental rights of users, in the current context of Open Banking, especially regarding the criteria to be adopted for acting as means of digital payments. There are many challenges to be faced in this field, as we observe intense sturdiness on the part of BCB in regulating the economic order, while, on the other hand, we have a society that is still moving toward the construction of a data protection culture, with a newly structured National Authority to deal with countless adversities to come. Therefore, it is important to note, as in the technical cooperation agreement between ANPD and CADE, that it will be increasingly necessary to promote joint and coordinated actions among Brazilian institutions to combat harmful activities to the economic order, especially in the face of challenges posed by the digital economy.
3. Need for international cooperation between regulatory and supervisory agents, especially from Global South countries, in order to counterbalance the international monopoly. Brazilian authorities have adopted a rather reductionist conception of what, in fact, constitutes the existence of monopoly and harm to competition in the context of the digital economy. They tend to ignore considerations about platform capitalism and data colonialism as important driving and perpetuation forces of the leading position held by Big Techs in the technology market. In the context of a global, hyperconnected society, it is important to observe that the distribution of digital products and services does not occur unreasonably, as seen, for example, in the discrepancies in the changes to WhatsApp’s terms of service in Brazil/India, given the situation of EU member countries. The former had much more permissive and abusive conditions in the provision of the product/service compared to the other countries. Some conditions need to be taken into account when we think about the impacts of services provided to countries in the Global South by Big Techs, which are companies with consolidated market power on a global scale. These countries hold an inherited historic position of vulnerability and economic and technological subservience towards the countries of the Global North. Practical issues such as internet access, connectivity, inclusion, and gender asymmetries and their intersectionalities are not trivial. They take on a different dimension in the context of international monopoly — which occurs in the Economy largely due to personal data, the “raw material” for the activities of these companies. Data colonialism, therefore, lacks a careful look at the geopolitical context of countries in situations of social vulnerability such as Brazil. Bringing these discussions to the field of international cooperation can greatly strengthen the performance of regulatory and supervisory agents in Brazil and the world, as well as allow an effective agenda for the protection of human, fundamental and digital rights in this tortuous, ongoing and necessary debate on the overlaps between the offer of digital platform services and banking services.

The complete publication (only in Portuguese) is available at: https://codingrights.org/docs/ZapPay_monopolio_dados.pdf

Watch the research launch event here:

What about online payment architecture and Big Tech? Data protection and competition

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Footnotes

¹ Vai de Pix! Usuários de SP e Salvador já podem pagar o transporte público digitalmente (Pay with Pix! SP and Salvador users can now pay for public transportation digitally). Available at: https://www.tudocelular.com/tech/noticias/n175288/transporte-publico-comprar-passagens-via-whatsapp.html. Accessed on 20.12.21.

² Current WhatsApp numbers in Brazil and the potential of the app for business https://www.messengerpeople.com/pt-br/whatsapp-no-brasil/#:~:text=Com%20quase%20120%20milh%C3%B5es%20de,meio%20predileto%20para%20mandar%20mensagens. Accessed on 20.03.22.

³ WhatsApp may soon touch 500 million users in India despite new privacy policy, claims report. Available at: https://www.indiatoday.in/technology/news/story/whatsapp-may-soon-touch-500-million-users-in-india-despite-new-privacy-policy-claims-report-1758344-2021-01-12 Accessed on 20.12.21.

⁴ CADE process no. 8700.002871/2020–34. Available at: http://antigo.cade.gov.br/noticias/cade-suspende-operacao-entre-facebook-e-cielo-que-pretende-viabilizar-pagamentos-por-whatsapp; and https://sei.cade.gov.br/sei/modulos/pesquisa/md_pesq_processo_exibir.php?0c62g277GvPsZDAxAO1tMiVcL9FcFMR5UuJ6rLqPEJuTUu08mg6wxLt0JzWxCor9mNcMYP8UAjTVP9dxRfPBcd6juAcG4lOuo5l7Q6DB__lNwxVag-pmGL_BqLKh0XV7. Accessed on 14 Jan 2022.

⁵ OLIVEIRA, Rafael and RUDNITZKI, Ethel. Como o Facebook está patenteando as suas emoções (How Facebook is patenting your emotions). Galileu Magazine. 10/06/2019. Available at: https://revistagalileu.globo.com/Tecnologia/noticia/2019/07/como-o-facebook-esta-patenteando-suas-emocoes.html . Accessed on 20 Dec. 2021.

⁶ ARRUDA, Vivian Anne Fraga do Nascimento; PINEDO, Paula; MONDECK, Luisa Pereira. Direito antitruste & inovação: mercados digitais envolvendo tecnologia disruptiva e análise antitruste. In: Mulheres no Antitruste. MACEDO, Agnes et. al (Org.). São Paulo: Ed. Singular, 2018, p. 37.

⁷ European Commission Decision in Case No. Comp/M.7217 — Facebook/WhatsApp. Available at: https://ec.europa.eu/competition/mergers/cases/decisions/m7217_20141003_20310_3962132_EN.pdf. Accessed on Dec 21, 2021.

⁸ ARRUDA, Vivian Anne Fraga do Nascimento et al. Op. cit. p. 38.

⁹ CASTRO, Bruno Braz de. A que(m) serve o antitruste? Eficiência e rivalidade na política concorrencial de países em desenvolvimento. Editora Singular. São Paulo, 2019. Available at: https://editorasingular.com.br/Uploads/Indice/Sumario_A_%20quem_serve_o_Antitruste_site.pdf. Accessed on Dec 21, 2021.

¹⁰ CASTRO, Bruno Braz de. A que(m) serve o antitruste? Op. cit. p. 169.

¹¹ FORGIONI, Paula. Os fundamentos do antitruste. 5a ed. São Paulo: Revista dos Tribunais, 2012, p. 186.

¹² CASTRO, Bruno Braz de. A que(m) serve o antitruste? Op. cit. p. 132.

¹³ HUBBARD, Sally. The case for why Big Tech is violating antitrust laws. CNN Business perspective. 02/01/2019. Available at: https://edition.cnn.com/2019/01/02/perspectives/big-tech-facebook-google-amazon-microsoft-antitrust/index.html. Accessed on Dec 22, 2021.

¹⁴ ​​ARONSSOHN, Daniel. UE fecha acordo para regulação ambiciosa de big tech (EU strikes deal on ambitious big tech regulation). O Estado de São Paulo. 24/03/2022. Available at: https://www1.folha.uol.com.br/tec/2022/03/ue-fecha-acordo-para-regulacao-ambiciosa-de-big-techs.shtml. Accessed on May 20, 2022.