Elon Musk’s X filed a federal antitrust lawsuit on Tuesday, Aug. 6, against the World Federation of Advertisers and four members for what the company’s CEO says was a “systematic, illegal boycott against X.” The companies include CVS Health and Mars Inc., both of which were part of the trade group’s Global Alliance for Responsible Media or GARM, a nonprofit that helped member “advertisers avoid inadvertently supporting harmful and illegal content.”
“These organizations targeted our company and you, our users,” X CEO Linda Yaccarino said in a post on the site published Tuesday, Aug. 6. “The evidence and facts are on our side. They conspired to boycott X, which threatens our ability to thrive in the future.”
The company is striking a decidedly different tone than when Musk took a shot at advertisers during an interview at The New York Times’ DealBook Summit last November.
“If somebody’s going to try to blackmail me with advertising, blackmail me with money, go f— yourself,” he said.
In the wake of the lawsuit, the World Federation of Advertisers announced it would be “discontinuing” GARM’s work. Musk had long been skeptical of the organization’s mission and lobbied Rep. Jim Jordan, R-Ohio, and other conservative members to investigate the group’s practices.
Eventually Jordan subpoenaed GARM for documents to prove an anti-conservative bias. In July, the House Judiciary Committee issued a report called “GARM’s Harm: How The World’s Biggest Brands Seek to Control Online Speech.”
Doug Melamed, who brought a successful antitrust case against Microsoft back in the 1990s, said X and Musk’s argument is akin to price fixing.
“Let’s take a more simple story,” Melamed said in an interview with Straight Arrow News. “Suppose a bunch of customers, let’s say supermarkets, got together and said to the Coca-Cola company, ‘We’ve agreed that we’re not going to distribute any products sold in bottles smaller than 20 ounces.’ I think that would probably be the antitrust violation. Even though they didn’t specify the price, they specified an important term of the contract between the buyer and the seller. And competing buyers shouldn’t do that.”
Musk’s lawsuit claims 18 brands stopped advertising on Twitter from November 2022 to December 2022, and dozens more were part of the coalition and cut back on ad spending in 2023.
“I don’t know what he’ll be able to show in terms of real damages, but he has a plausible case,” Melamed said.
When Musk bought the social site, he promised to loosen restrictions to adhere to his “free speech absolutist” beliefs. The site faced criticism for allowing hate speech and false content on the platform. Musk also welcomed back a number of users who had been banned from Twitter in the platform’s previous life.
Melamed, who is now a visiting fellow at Stanford Law School, said there’s still a high burden of proof to show X was wronged. If advertisers had just agreed on a code of best practices and could still operate independently and advertise with X, then it wouldn’t really pass antitrust muster.
“But if they agreed, ‘We won’t put ads on X until they change in the following specific ways, then I think there is an agreement that probably on the face of it, would suggest some antitrust concern,” he explained.
Melamed added that it may be harder to prove the advertisers’ actions harmed competition between X and other social media sites. Part of X’s complaint is that other sites don’t have to compete with its ad rates.
“Even if the implication is that these companies might wind up spending a little more advertising on other platforms – [and] I’m not sure that’s true at all, but even if it were true – it’s probably not enough to change the basic structure of the market,” Melamed said.
Meanwhile, conservative social media platform Rumble joined in X’s fight against GARM this week.
“If they don’t like what some speech might happen on Rumble or X, they can say, ‘We’re not going to touch that,’” Rumble CEO and founder Chris Pavlovski said in an interview with Fox Business on Thursday, Aug. 8. “Which then causes advertising rates to go higher because now they’re only accessing a certain portion of the market and then drives higher prices for their shareholders and their brands.”
The decision by GARM to officially cease operations won’t affect the lawsuit by the social media sites.
“It won’t make the case go away because they’re potentially liable for the conduct in the past, but it will certainly affect whatever remedies the court might issue,” Melamed said. “Maybe they’re hoping it will kind of take some of the sting out of the motivation for Musk to pursue it.”
X said in its lawsuit that the advertiser “boycott and its effects continue to this day, despite X applying brand safety standards comparable to those of its competitors.”
