In a pivotal ruling that underscores the growing scrutiny of social media platforms, X Corp, the entity formed from the merger of Twitter Inc., has encountered a significant legal setback in Australia. The Australian Federal Court has mandated that X Corp must comply with a safety notice issued by the eSafety Commissioner, a decision that not only holds the company accountable for regulatory obligations but also highlights the broader implications for tech giants operating in increasingly regulated environments.
The crux of the matter lies in the eSafety Commissioner’s concerns regarding harmful content, particularly child sexual abuse material, disseminated through social media channels. In October 2023, the Office of eSafety assessed a hefty fine of $610,500 against Twitter—now X Corp—after the platform failed to adequately respond to inquiries about its policies and actions related to harmful content. This fine was levied under Australia’s Online Safety Act, with the potential for daily penalties soaring to $780,000 for each day of continued non-compliance. Such staggering figures not only reflect the serious nature of the violations but also serve as a warning to other tech firms that regulatory patience is wearing thin.
The timeline of this legal entanglement began with a notice issued in February 2023, which required Twitter to furnish a detailed report on its compliance with the eSafety Commissioner’s expectations for the preceding year. The deadline for this submission was set for March 29, and the notice contained 31 specific questions, many of which included sub-questions aimed at drawing out comprehensive responses. However, the Commissioner later informed the court that the information provided by the platform was “absent, incomplete, or inaccurate,” raising serious concerns about the company’s commitment to user safety.
In a bid to sidestep responsibility, X Corp argued that the merger with Twitter Inc. absolved it of any penalties incurred by its predecessor. During the court proceedings, X Corp’s barrister, Bret Walker SC, contended that any penalty process should be restarted given the change in corporate structure. Yet, the eSafety Commissioner’s legal representation, Stephen Lloyd, countered this argument, asserting that Twitter had not been dissolved; rather, its assets and liabilities had merely transitioned to X Corp. This perspective was further supported by a letter from X Corp’s solicitors, which acknowledged that all of Twitter’s assets, liabilities, and rights were automatically transferred to X Corp at the time of the merger.
Justice Michael Wheelahan ultimately sided with the eSafety Commissioner, delivering a clear message: the status change of X Corp did not exempt it from the regulatory obligations that Twitter Inc. had faced. “From the perspective of Nevada law, X Corp’s new status entailed being subject to all the liabilities, including the regulatory obligations, to which Twitter Inc. had been subject immediately before it merged into X Corp,” Justice Wheelahan articulated in his ruling. This decision not only dismissed X Corp’s case but also imposed the Commissioner’s legal costs on the company.
The implications of this ruling extend far beyond the immediate financial penalties. It serves as a critical reminder that tech companies must navigate the complex landscape of regulatory compliance with diligence. As governments worldwide tighten the reins on online platforms, the case of X Corp illustrates how legacy issues can follow companies through mergers and acquisitions, and highlights the necessity for robust compliance frameworks within these organizations.
This ruling also raises pertinent questions about the responsibilities of social media platforms in safeguarding users from harmful content. With increasing public awareness and concern over online safety, platforms are under mounting pressure to demonstrate accountability. A recent study from the Pew Research Center indicates that a significant majority of users believe tech companies should take greater responsibility for the content shared on their platforms. The X Corp case exemplifies the potential consequences of failing to meet these expectations, not only in terms of financial penalties but also regarding public trust and reputation.
As the landscape of digital regulation continues to evolve, companies must prioritize transparency and compliance to navigate this complex terrain. The Australian Federal Court’s ruling against X Corp serves as a clarion call for social media platforms to take user safety seriously, lest they find themselves ensnared in similar legal battles in the future.
