European Union fines X $1 billion, Trump clashes with memorandum on ‘corporate extortion protection’

 

European Union fines X $1 billion, Trump clashes with memorandum on ‘corporate extortion protection’

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The European Union is pushing to impose a ‘1 billion dollar fine’ on Musk’s X, and US President Trump’s ‘corporate extortion protection’ memorandum has started a conflict.

An EU official told the New York Times that "the X fine could exceed $1 billion" for violating Europe's Digital Services Act.
The NYT said on the 3rd that "this is because regulators are trying to make an example of X to prevent other companies from violating the Digital Services Act," and "the investigation into X was conducted independently of the tariff negotiations, and in the investigation that began in 2023, the regulator made a preliminary ruling last year that X violated the law."

The European Commission said in a press release on December 18, 2023 that it had “launched a formal procedure to assess whether X may have breached the Digital Services Act (DSA) in the areas relating to risk management, content moderation, dark patterns, advertising transparency and data access for researchers.” “Based on the preliminary investigation carried out so far, including the analysis of X’s risk assessment report submitted in September, X’s transparency report published on November 3, and X’s response to a formal request for information regarding the dissemination of illegal content related to Hamas’ terrorist attacks against Israel, the Commission has decided to open a formal infringement procedure against X under the Digital Services Act.”

The EU then launched an investigation into “violations of Articles 34(1), 34(2), 35(1), 16(5) and 16(6), 25(1), 39 and 40(12) of the DSA.”

 

On February 21 of this year, President Trump signed the “Protecting America’s Sovereignty in the Economy” memorandum to “Protect American Businesses and Innovators from Foreign Extortion.”

The Trump administration, through this ‘memorandum’, instructed the Office of the Trade Representative (USTR) to renew the DST investigation under Section 301 that began during President Trump’s first term and to investigate additional countries that use DST to discriminate against American companies, and on that day, the White House defined the strategy for responding to fines against American companies in Europe as ‘protecting American companies from extortion’.

The White House memorandum defined ‘European fines for digital companies’ as ‘exploitation’ based on the provision that <America’s digital economic dominance is driven by American high-tech companies and the American innovation and workers behind them>, and announced a strong response, saying that <such exploitation goes beyond DSTs and leads to other forms of unfair fines, practices, and penalties that weaken the ability of American companies to operate as intended and force them to bear additional compliance costs, thereby reducing America’s global economic competitiveness>.

 

The White House stated in the memorandum that “the Trump administration will consider countermeasures, such as tariffs, to counter foreign governments’ imposition of digital services taxes (DSTs), fines, practices, and policies on American companies,” and that “the one-time spending law (DST) allows foreign governments to collect taxes from American companies simply because they operate in foreign markets, even if they are not generally subject to foreign jurisdiction.”

The Trump administration’s response was to issue an executive order stating that “foreign governments will not be allowed to appropriate the U.S. tax base for their own benefit,” and that “the administration will review whether laws, policies, or practices of the European Union and the United Kingdom encourage U.S. companies to develop or use products and technologies in ways that undermine free expression or promote censorship,” and that “regulations that govern how U.S. companies interact with consumers in the European Union, such as the (European) Digital Markets Act and the Digital Services Act, will be subject to the administration’s scrutiny.”

In response to the European investigation, two EU officials told the Times that “they are building a case that X’s hands-off approach to policing user-generated content has made it a hotbed of illegal hate speech, disinformation and other material that undermines democracy in the 27-nation bloc.” A European Commission spokesperson said in a statement that “we have always enforced the law fairly and without discrimination against all companies operating in the EU, in full compliance with global rules,” but omitted specific references to X in the statement.
The investigation into X would be the first to be applied under the Digital Services Act, which requires EU-created companies to better police their platforms and provide adequate transparency into how their services operate.
The EU law clashed with the Trump administration from the start, with Vice President J.D. Vance criticizing EU regulations as “digital censorship” in February.
“After Trump was elected, European regulators delayed the X investigation to assess the potential repercussions, but as trade tensions with the United States have intensified, the authorities have decided to press ahead,” an EU official told the Times. “Last year, European regulators concluded that X was breaking the law by refusing to provide data to outside researchers,” the official said. 

The preliminary findings of the investigation by the European Commission are that X’s breaches were due to the refusal to provide data information, making it difficult to measure how misinformation and other harmful material spread on its service, while the European authorities found that X had failed to provide adequate transparency to advertisers, making the platform more vulnerable to abuse and external interference by failing to verify the authenticity of users who pay to have “verified” accounts. 

The grounds for the investigation by the European Commission include: “the effectiveness of measures taken to combat manipulation of information on the platform, in particular the effectiveness of X’s so-called ‘community notes’ system in the EU and related policies to mitigate risks to civic discourse and the electoral process”; “measures taken by X to increase transparency on its platform.

The investigation concerns alleged deficiencies in allowing researchers to access X’s publicly accessible data under Article 40 of the DSA and shortcomings in X’s advertising repository”; and “the alleged deceptive design of the user interface, in particular the checkmarks associated with certain subscription products, the so-called blue checks”.