Musk’s “illegal boycott” case — Elon Musks lawsuit over alleged X ad boycott a very weak case, professor says Law is unfavorable to X, but Musk filed suit in potentially friendly Texas court.
Jon Brodkin – Aug 9, 2024 4:05 pm UTC EnlargeAurich Lawson | Getty Images reader comments 253
Antitrust law professors aren’t impressed by Elon Musk’s lawsuit alleging a supposed X advertising boycott amounts to an antitrust violation. Based on the initial complaint filed by Musk’s X Corp., it looks like “a very weak case,” Vanderbilt Law School Associate Dean for Research Rebecca Haw Allensworth told Ars.
“Given how difficult this will be to win, I would call it an unusual strategy,” she said.
The lawsuit against the World Federation of Advertisers (WFA) and several large corporations says that the alleged boycott is “a naked restraint of trade without countervailing benefits to competition or consumers.” The “collective action among competing advertisers to dictate brand safety standards to be applied by social media platforms shortcuts the competitive process and allows the collective views of a group of advertisers with market power to override the interests of consumers,” X claims.
Musk already won a victory of sorts as the WFA yesterday shut down the Global Alliance for Responsible Media (GARM) initiative that is the main subject of X’s allegations. “GARM is a small, not-for-profit initiative, and recent allegations that unfortunately misconstrue its purpose and activities have caused a distraction and significantly drained its resources and finances. GARM therefore is making the difficult decision to discontinue its activities,” the WFA said.
But the GARM shutdown won’t result in Musk’s company obtaining any financial damages unless X also wins in court. The company formerly named Twitter sued in a federal court in Texas, part of the conservative 5th Circuit, a venue that Musk likely believes will be more favorable to him than a court in another state. The District Court judge overseeing the lawsuit is also handling Musk’s case against Media Matters for America, a nonprofit that conducted research on ads being placed next to pro-Nazi content on X.
Texas is one of three states, along with Louisiana and Mississippi, where appeals go to the US Court of Appeals for the 5th Circuit. “The 5th Circuit is well known as the most conservative circuit in the country,” Professor Stephen Calkins of Wayne State University Law School told Ars. The law here is very unfavorable to X
Despite the potentially friendly Texas court venue, Musk’s X faces a high legal bar in proving that it was the victim of an illegal boycott.
Allensworth said X must show “that the defendants did actually enter into an agreementthat they had a deal with each other to pull advertising spend from X as a group, not that each brand did it individually to protect their own brand status or make their own statement about Elon Musk. The law here is very unfavorable to X, but the complaint describes a lot of conduct that could support a jury or judge finding an agreement. But its a fact question, and we only have half the story.”
A bigger problem for Musk “is that X must show that the boycott harmed competition, not just that it harmed X,” Allensworth said. “The complaint is far from clear on what competition was harmed. A typical boycott will harm competition among the boycotters, but that doesnt seem to be what the complaint is about. The complaint says the competition that was harmed was between platforms (like X/Twitter and Facebook, for example) but thats a bit garbled. Again, we may know more as the suit develops.”
There’s one more problem that may be even bigger than the first two, according to Allensworth. Even if X proves there was an explicit agreement to pull advertising and that a boycott harmed competition, the advertisers would have a strong defense under the First Amendment’s right to speech.
“Concerted refusals to deal (boycotts) are not vulnerable to antitrust suit if they are undertaken to make a statementessentially to engage in speech,” Allensworth explained. “It would seem here like that was the purpose of this boycott (akin to lunch counter boycotts in the ’60s, which were beyond the reach of the antitrust laws). Given that the Supreme Court has only increased First Amendment rights for corporations recently, I think this defense is very strong.”
All of those factors “add up, to me, to a very weak case,” Allensworth told Ars. But she cautions that at this early stage of litigation, “theres a lot we dont know; no one can judge a case based on the complaint alonethats the point of the adversarial system.”
An X court win wouldn’t force companies to advertise on the platform. But “if somehow they prevail, X could ask for treble damagesthree times the revenue they lost because of the boycott,” Allensworth said. Page: 1 2 3 Next → reader comments 253 Jon Brodkin Jon is a Senior IT Reporter for Ars Technica. He covers the telecom industry, Federal Communications Commission rulemakings, broadband consumer affairs, court cases, and government regulation of the tech industry. Advertisement Channel Ars Technica ← Previous story Next story → Related Stories Today on Ars
