EU sets sight on Musk’s empire over X acquisition by xAI

Elon Musk could be facing billions in fines from EU regulators following the acquisition of X by his AI startup, xAI. Musk’s companies merged following a $33B acquisition of the social media platform, X, by the billionaire’s AI startup, xAI.

The move has drawn new regulatory scrutiny from the European Union, and it could have potential consequences that change the relationship between large tech companies and EU law.

xAI buys out X

The European Commission has reportedly sent a fresh wave of inquiries to X concerning the implications of the March buyout. The deal raised xAI’s value to $80B and effectively placed X under the AI startup’s umbrella.

The move raised concern in Brussels that the restructuring could affect the scale of penalties the company may face under the Digital Services Act (DSA).

Under the DSA, the EU holds the power to fine digital firms for up to 6% of their annual global turnover if they fail to address illegal content, disinformation, or comply with transparency requirements.

According to insiders cited in publications, the European Commission is currently evaluating whether to include revenue from Musk’s other ventures, such as SpaceX, Neuralink, and The Boring Company, when calculating a potential fine against X.

By attaching the penalties to the company’s total global revenue, the regulation raises the stakes for large corporations like Musk’s X.

“We are following closely changes in the corporate structure of X, as we would changes in any other designated platform,” The Commission spokesperson Thomas Regnier said on Thursday. He confirmed that the Commission sent a request for information to X, emphasizing that such structural changes could influence the ongoing investigation.

EU regulators may pass fine decision by summer

Regulators have yet to issue their first major penalty under the DSA, and insiders have revealed that a decision regarding X’s case could come before the Commission’s summer recess in August. However, the timeline for the decision remains unclear because the final size or even the rationale for a fine is still being determined.

The investigation into X started in 2023 and is a result of multiple suspected DSA breaches, including the platform’s failure to curb disinformation, lapses in transparency for advertisers and researchers, and most notably, the controversial overhaul of its blue checkmark system.

The European Commission argued that the change to the checkmark policy deviated from established industry norms and contributed to a more opaque information environment. X explained the blue checkmark’s current functionality in a recent attempt to avoid penalties, but it is unclear if it satisfied the Commission’s inquiry.

Platforms under DSA scrutiny have the opportunity to make binding commitments to address violations in exchange for leniency. Brussels has thus far shown limited tolerance for superficial fixes.

X has yet to respond publicly to the Commission’s latest inquiries.

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