X chief’s move to sue trade association looks more about politics than antitrust concerns
Elon Musk, the noted free speech champion, apparently believes that the biggest companies in the world must pay him. Social media company X, formerly Twitter, on Tuesday sued a trade association alleging that it conspired to keep marketers away from X after the mercurial billionaire took it over in 2022. Why the Global Alliance for Responsible Media (Garm) would engage in such an alleged conspiracy is unclear — let alone how exactly it might enforce compliance among its members.
This looks more like politics than antitrust. Musk’s lawsuit is based on a recent investigation of Garm led by the judiciary committee of the Republican-controlled US House of Representatives. It was filed in an obscure federal court branch in Texas known for a particular conservative judge. X’s lawyer is a well-known rightwing legal figure, not a big national law firm.
Most importantly, it follows a trend where people or companies aggrieved by other private sector actors, who are seemingly exercising their business judgment, face legal action from some party unhappy with those business choices. Think about Texas and Florida targeting the likes of BlackRock and Disney.
X’s business issues are real enough. According to the New York Times, X ad revenue in the US has collapsed to $114mn in a recent quarter. Total group global revenue for Twitter in 2021 was $5bn. The company has a $13bn debt pile where annual interest expense is well above $1bn.
Musk has slashed costs, largely by firing staff. As such, the ranks of workers who focus on security and brand safety — efforts to keep ads away from unappetising content — have been decimated. Users complain about bots and unsavoury content being channelled into their feeds even as Musk and X chief executive Linda Yaccarino insist that the company meets high standards.
The lawsuit merely says that X has lost out on unspecified “billions” in ad revenue from the supposed ad boycott. The lawsuit targets not just Garm but its sponsor, the World Federation of Advertisers. X is also going after Ørsted, Unilever, Mars and CVS, some of the big companies active in Garm.
Advertisers decided that, since there were only a handful of dominant social networks, they needed to band together in order to enforce standards. Garm and the companies will have to show that while they perhaps co-ordinated on some matters, there was nothing binding about their alliance when it came to economic decisions. It would be decidedly odd for any company to surrender their autonomy to a trade association. Musk’s burden is higher, explaining exactly why profit-seeking companies would irrationally avoid his product.
