EU says Musk's X is in breach of Digital Services Act and on hook for a fine

The EU has charged that Elon Musk's social media platform X is in breach of the Digital Services Act, claiming certain services lack transparency and make the company eligible for a fine.

An investigation found that the technology company formerly known as Twitter has questionable practices related to its advertising, access to public data and its blue checkmark that indicates a verified account, preliminary findings from the European Commission showed on Friday.

If confirmed, California-based X will face a fine of up to 6 per cent of its annual revenue, as laid out by the DSA's guidelines, the commission said.

That would mean a penalty of as much as $287.4 million, if based on eMarketer's forecast that X's revenue will hit $4.79 billion in 2024.

“In our view, X does not comply with the DSA in key transparency areas, by using dark patterns and thus misleading users, by failing to provide an adequate ad repository, and by blocking access to data for researchers,” Margrethe Vestager, an executive vice president at the commission and its senior competition official, wrote in the report.

“The DSA has transparency at its very core and we are determined to ensure that all platforms, including X, comply with EU legislation.”

Mr Musk, the world's wealthiest person, responded on X, saying that “the DSA is misinformation” and alleged – without evidence – that the commission offered a deal that would spare companies from fines.

“The European Commission offered X an illegal secret deal: if we quietly censored speech without telling anyone, they would not fine us. The other platforms accepted that deal. X did not,” he said.

That triggered a back-and-forth with Thierry Breton, the EU's commissioner for internal market, throwing the ball back in Mr Musk's court.

“There has never been – and will never be – any 'secret deal'. With anyone. The DSA provides X [and any large platform] with the possibility to offer commitments to settle a case. To be extra clear: it’s *YOUR* team who asked the commission to explain the process for settlement and to clarify our concerns,” Mr Breton said.

“We did it in line with established regulatory procedures. Up to you to decide whether to offer commitments or not. That is how rule of law procedures work. See you (in court or not).”

Mr Musk said X would “look forward to a very public battle in court, so that the people of Europe can know the truth”.

The EU approved the milestone DSA in April 2022 and was enforced last February 17, aimed at regulating online content on platforms owned by big technology companies, which face billions of dollars in fines if they do not comply with requirements.

This year, the commission has already opened formal proceedings against TikTok in February and April, AliExpress in March, and Facebook parent Meta Platforms in April and May.

“Transparency and accountability in relation to content moderation and advertising are at the heart of the DSA,” the commission said.

The commission claims that X's verified accounts with the blue checkmark deceives users because anyone can now obtain it by signing up for a premium subscription, compared to the pre-Musk era when it was only reserved for global leaders, journalists and companies, while also being subject to approval.

The change to the blue badge was among the sweeping changes Mr Musk made after he completed his $44 billion purchase of the company in 2022.

“Back in the day, blue checks used to mean trustworthy sources of information. Now with X, our preliminary view is that they deceive users and infringe the DSA,” Mr Breton wrote in the report.

“We also consider that X’s ads repository and conditions for data access by researchers are not in line with the DSA transparency requirements. X has now the right of defence – but if our view is confirmed we will impose fines and require significant changes.”

In addition, the commission said X does not comply with the required transparency on advertising and the way it is designed does not allow the “required supervision and research into emerging risks brought about by the distribution of advertising online”, and that it does not grant researchers access to its public data.

“We also consider that X’s ads repository and conditions for data access by researchers are not in line with the DSA transparency requirements,” Mr Breton said.

The commission does not have a timeline on when their findings will be confirmed, which would come with any corresponding fine it would decide upon.

“X has now the right of defence – but if our view is confirmed we will impose fines and require significant changes,” Mr Breton said.