Elon Musk is asking a US District Court to put an end to the FTC privacy settlement the company has been subject to since May of last year, claiming biased investigations and misconduct by the agency in its interactions with the independent firm brought in to investigate Twitter’s privacy and security programs.
Musk contends that the FTC has been “bullying” outside firm Ernst & Young (EY) to reach a preconceived conclusion and to “dig up dirt” on Twitter. The prospect of deposing Musk has come up in recent months as the FTC investigation has intensified, and a recent filing indicates that the agency is seeking for him to appear for a hearing on July 25.
Twitter takes up against “onerous” 2022 privacy settlement terms
The May 2022 privacy settlement is separate from but related to the 2011 agreement that remains ongoing, but both originate from before Musk took over as CEO. The 2022 settlement resulted in a $150 million fine for failure to disclose that personal information ostensibly collected for account security was also being put toward targeted advertising.
The data collection practice that Twitter was taken to task for took place between 2013 and 2019, under the term of prior CEO Jack Dorsey and a set of executives that Musk pointedly removed from the company upon taking over. Musk now contends that the FTC is using the ongoing compliance order, which grants it fairly broad investigative powers, as a means to a personal and political crusade against him.
To that end, Musk has now filed a motion in Northern California to terminate the ongoing consent order and to “rein in” the FTC’s investigation. The motion alleges that the FTC “radically” altered its investigative approach and its ongoing monitoring once Musk stepped in as CEO, ordering EY to implement new procedures that were designed to cast his management of Twitter in a negative light. Musk also claims that the FTC stepped up its demands for information once he took over, issuing 16 letters in less than a year (as compared to a total of 28 over the prior decade the original consent order was in place).
Musk’s claims trace back to the perception that Twitter has become a central battleground in political and culture wars, viewed as an outlet of very high value for the dissemination of information and influence. Musk has joined numerous right-wing figures in claiming that Twitter’s prior management essentially opened the platform up to being a propaganda outlet for Democrat party interests and tilting elections, using political preference as a basis to promote certain stories and accounts and either suppress others or ban dissenting accounts entirely for spurious reasons.
Musk’s essential belief is that the FTC’s privacy settlement investigation has become politically motivated and focused on finding a means to oust him from ownership of Twitter. He has backup in Congress, where Republican senators have subpoenaed FTC chair Lina Khan over alleged harassment of the company and issued statements criticizing the agency’s handling of the investigation. Some prominent Democrats in Congress have likewise come out in support of the other side of the argument, that the FTC is merely doing what is necessary to conduct the investigation properly.
Twitter besieged by multiple issues as company struggles to establish sustainable revenue
“Embattled” is perhaps an understatement in describing the current state of Twitter, which is contending with a combination of regulatory issues, internal problems, public relations and seeming self-inflicted business wounds in addition to the privacy settlement.
Some of the animosity centered on EY’s role in the privacy settlement investigation might have something to do with unpaid bills. A Congressional hearing last week revealed that Twitter owed the firm some $500,000, which it has apparently been making weekly contact about. However, EY has also previously expressed concern about the “unusual” direction it has received from the FTC in the investigation.
Twitter’s cash flow has been in the news quite a bit as of late. The early July decision to “rate limit” users and block anonymous web browser traffic was speculatively linked to Twitter’s failure to pay its Google Cloud hosting bill, something that has apparently been smoothed over. But the company still faces multiple lawsuits from other companies over alleged unpaid tabs, including a private jet service and the landlord for its downtown San Francisco headquarters.
A New York Times report from early June indicated that Twitter ad revenue was down by 56%, even before Musk roiled some paying clients by suddenly cutting off non-logged-in web browser traffic and limiting user views. Brands that have been sticking with the platform are reducing spending based on concerns about unpredictable moves such as these, and also concerns about proliferation of toxic content as moderation appears to be less of a priority.
The privacy settlement is also far from the only regulatory obstacle Twitter is currently facing. The company has been in a long-running battle with EU regulator’s over the bloc’s tough disinformation laws, seeming to finally acquiesce to these requirements in June. It was also recently fined over a 2019 data breach, and faces an ongoing investigation into a much larger 2022 breach.
