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Victory over Facebook came at massive cost, says GovChat

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GovChat says the two-year legal battle against Facebook parent company Meta was a strenuous journey that cost the citizen engagement platform millions of rands in legal fees.

A brutal legal dispute began in 2020 between the social media giant and GovChat, when Facebook threatened to off-board GovChat from its WhatsApp platform, due to alleged violation of its terms of service.

The controversial dispute caused a public outcry when Meta-owned WhatsApp sought to terminate GovChat and #LetsTalk, a technology start-up that connects government and citizens, from the WhatsApp Business application programming interface (API).

During a webinar yesterday, titled “A modern-day David vs Goliath”, GovChat founder and CEO Eldrid Jordaan detailed the events that followed, describing the past two years as a stressful and emotionally and financially taxing period the start-up had to endure.

Being a then two-year-old toddler founded in 2018 meant the start-up had limited financial resources to take on the social media giant, which reported revenue of $117 billion in 2021, up from around $86 billion in the previous fiscal year, according to Statista.

GovChat was forced to approach its shareholder − investment firm Capital Appreciation − for financial backing that would empower it to take on the global tech giant, which is listed among the world’s valuable companies.

It then employed the services of law firm Webber Wentzel.

“It’s been almost two years since this saga started…and it’s been challenging. In terms of the amount of funds spent on the legal fees, this case came at a massive cost. I cannot give an exact amount but it’s a lot of money...we are talking about millions of rands.

“I’m grateful for the support I’ve received from our shareholder and investor Capital Appreciation, which financially backed us,” commented Jordaan.

GovChat founder and CEO Eldrid Jordaan.
GovChat founder and CEO Eldrid Jordaan.

GovChat delivers a vital service to government and over 8.8 million citizens, who actively use the platform, he noted.

The platform has, among other functions, enabled millions of South Africans to digitally apply for Social Relief in Distress grants and report municipal issues, such as potholes in their area. He emphasised GovChat’s reliance on the WhatsApp Business API to provide these services.

The start-up eventually came out victorious when the Competition Commission referred Meta Platforms (previously known as Facebook) and its subsidiaries, WhatsApp and Facebook South Africa (collectively referred to as Facebook), to the Competition Tribunal for prosecution for abuse of dominance.

The commission alleges Facebook imposed and/or selectively enforced exclusionary terms and conditions regulating access to the WhatsApp Business API − mainly restrictions on the use of data.

According to the competition watchdog, this is in contravention of the Competition Act, sections 8(1)(d)(ii), alternatively 8(1)(c) and in the further alternative 8(1)(b).

The commission has asked the tribunal to impose a maximum penalty against Meta Platforms, WhatsApp and Facebook South Africa, which is 10% of their collective turnover.

In response, Meta has vowed to defend its platforms from “abuse”, noting WhatsApp’s conduct to date has been entirely consistent with the provisions of the Competition Act, and it is simply looking to apply its terms and conditions fairly.

“That’s why we want to work with GovChat in compliance with internationally recognised regulatory standards to provide this service. However, GovChat has repeatedly refused to comply with our policies, which are designed to protect citizens and their information, preferring to prioritise its own commercial interests over the public. We will continue to defend WhatsApp from abuse and protect our users.”

Meta dominance exposed

Several trials and tribulations were experienced while reaching the current outcome. During the early stages of the matter, the start-up was forced to seek an urgent interdict, as the off-boarding of GovChat from the WhatsApp platform loomed, Jordaan explained.

In addition, GovChat felt it was important to lay a complaint and explain to the Competition Tribunal that the terms and conditions imposed by Facebook on start-ups and other businesses operating on the WhatsApp Business API were anti-competitive, he noted.

“Acquiring the intermediary relief/interdict entailed a difficult process, which is one of the most difficult things we’ve had to do. There are four requirements that one must meet in order to qualify: we had to prove a prima facie case; we had to show that we’ve addressed concerns around market dominance; show that we would suffer irreparable harm should the interim interdict not be granted; and show there is no other available remedy.”

The commission later asked the Competition Tribunal to interdict Facebook/WhatsApp from off-boarding GovChat from the WhatsApp Business API.

“The tribunal was satisfied that GovChat had succeeded in proving WhatsApp was dominant in the market for OTT [over-the-top] messaging apps. It would have caused serious harm to South African citizens if they were not able to use the service, because GovChat was assisting millions of South Africans in applying for government services during the COVID-19 pandemic.

“We were able to get the Competition Commission to halt the off-boarding of GovChat from the platform, and most importantly, we got them to investigate Meta dominance.”

GovChat believes the prosecution of Facebook in SA sets a precedent for start-up companies in the country.

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11 Aug
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