Twitter board agrees to $44 billion sale to billionaire Tesla founder Elon Musk

[bilateralrope]

X fails to avoid Australia child safety fine by arguing Twitter doesn’t exist

Elon Musk merging Twitter into X didn't absolve X from child safety fine.

Ashley Belanger – Oct 5, 2024 6:19 AM

Elon Musk's X (formerly Twitter) remains on the hook for an approximately $400,000 fine after failing to respond to an Australia eSafety Commission 2023 inquiry, which largely sought to probe measures X is currently taking to combat an alleged proliferation of child sexual abuse material (CSAM) on its platform.

To void the fine, X tried to persuade Australian Judge Michael Wheelahan that X had no obligation to comply with an Online Safety Act notice issued to Twitter because Twitter "ceased to exist" a few weeks after receiving the notice—when Musk merged the app into his company X Corp.

Wheelahan summarized X's argument as saying that "X Corp was not obliged to prepare any report in Twitter Inc’s place, as X Corp was not the same person as the provider to whom the notice was issued."

But Wheelahan ruled Friday that the fine should be upheld, rejecting the "bare premise" that X assumed no legal responsibility to respond to the notice after Twitter ceased to exist.

X's argument failed because Wheelahan found that under Nevada law, merging Twitter into X turned Twitter into a "constituent entity," which then transferred all of Twitter's legal consequences to X Corp.

In his order, Wheelahan devoted a decent chunk of time to calling out testimony from X's expert on commercial business law, Scott Bogatz, as "molded to support the conclusions he expressed in his report."

Particularly "superficial" and requiring "leaps of logic," Wheelahan wrote, was Bogatz's attempts to persuade the court that the meaning of "liabilities" in Nevada merger law strictly applied to financial liabilities.

"It is clear under Nevada Law that the term ‘liability’ refers to monetary obligations," Bogatz had argued in court, but Wheelahan did not find this persuasive.

"I cannot accept this evidence without a much better explanation of Mr. Bogatz’s path of reasoning," Wheelahan wrote.

Wheelahan emphasized that the Nevada merger law specifically stipulated that "all debts, liabilities, obligations and duties of the Company shall thenceforth remain with or be attached to, as the case may be, the Acquiror and may be enforced against it to the same extent as if it had incurred or contracted all such debts, liabilities, obligations, and duties." And Bogatz's testimony failed to "grapple with the significance" of this, Wheelahan said.

Overall, Wheelahan considered Bogatz's testimony on X's merger-acquired liabilities "strained," while deeming the government's US merger law expert Alexander Pyle to be "honest and ready to make appropriate concessions," even while some of his testimony was "not of assistance."

Luckily, it seemed that Wheelahan had no trouble drawing his own conclusion after analyzing Nevada's merger law.

"I find that a Nevada court would likely hold that the word 'liabilities'" in the merger law "is broad enough on its proper construction under Nevada law to encompass non-pecuniary liabilities, such as the obligation to respond to the reporting notice," Wheelahan wrote. "X Corp has therefore failed to show that it was not required to respond to the reporting notice."

Because X "failed on all its claims," the social media company must cover costs from the appeal, and X's costs in fighting the initial fine will seemingly only increase from here.

Fighting fine likely to more than double X costs

In a press release celebrating the ruling, eSafety Commissioner Julie Inman Grant criticized X's attempt to use the merger to avoid complying with Australia's Online Safety Act.

"Had X Corp’s argument been accepted by the Court, it could have set the concerning precedent that a foreign company’s merger with another foreign company might enable it to avoid regulatory obligations in Australia," Inman Grant warned.

X has been on thin ice with Inman Grant since it responded to the initial 30-question inquiry into how the platform is monitoring and removing CSAM by leaving many questions blank. X then seemingly stalled, delaying responding to subsequent inquiries asking the company to either fill in the blanks or explain why it was unable to answer the questions.

So, when X refused to pay the non-compliance fine last October, Inman Grant seemingly had enough. She soon commenced an additional proceeding in December, this time "seeking the imposition of civil penalties," Wheelahan noted. And that can now move forward, as "the further progress of the civil penalty proceeding" has been awaiting the outcome of Wheelahan's ruling this week, the judge said.

There's little chance that eSafety will drop the civil proceeding. In the press release, eSafety confirmed that the commission "takes compliance with transparency notices seriously and looks forward to ensuring alleged non-compliance is adequately addressed."

According to an Australian government review of the Online Safety Act, X could owe civil penalties up to approximately $530,000 for failing to comply with the reporting notice, potentially more than doubling its costs after fighting the initial fine.

X might have been better off sharing more information on how it's fighting CSAM. Inman Grant reiterated Friday that eSafety is not just targeting X, but all Big Tech platforms failing to be transparent about steps taken to respond to CSAM.

“eSafety remains committed to exercising provisions available under the Online Safety Act to hold all tech companies to account without fear or favor, ensuring they comply with the laws of Australia and prioritize the safety and wellbeing of all Australians,” Inman Grant said.

Musk seems to think he's clever enough to avoid answering any questions from government agencies that he doesn't like.

[Solauren]

He thought that would work?

Fucking moron.

You merge a company into another, or two companies, etc, ALL the responsibilities, orders, fines, carry over.

Hell, depending on the nature of the government action, just acquiring the assets of a corporation could make you liable.

Example - Company A owes the government $200M in taxes. The assets are all moved to Company B, and Company A is shut down.
The government will now go after Company B for the owed taxes, up to the value of the transferred assets.
In Canada, that's part of the income tax act and excise tax act.
There are similar provisions for just about every other government and legal action in Canada. They're specifically written to prevent stunts like this.

Most countries laws are written the same way.

[Ralin]

Has it occurred to you that he likely doesn't believe that and is saying it as a way of clowning on them because he believes he is above the rules they're trying to enforce?

[bilateralrope]

Has it occurred to you that he likely doesn't believe that and is saying it as a way of clowning on them because he believes he is above the rules they're trying to enforce?

Only if he confuses the legal process being slow with him winning at it.

[EnterpriseSovereign]

Why is Elon Musk obsessed with British politics?

Elon Musk's dislike of Keir Starmer is off the scale. The world's richest man, who is about to become a key player in the Trump administration, has been berating the British prime minister since the moment he won July's general election.

First, he was "two-tier-Kier" based on Musk pushing a conspiracy theory that UK police were treating far-right protesters differently to minorities.

Next Musk was supporting farmers hit by an inheritance tax change, then demanding a fresh general election after Labour performed badly in the polls.

In the last two days, his hatred of Starmer has spilled out in a series of posts relating to the grooming gangs in places like Oldham and Rotherham - a scandal in which perpetrators mainly of south Asian heritage - were found to be abusing teenage girls.

The crimes were heavily covered in the media (including the suggestion that authorities failed to act quickly enough because of cultural sensitivities) and have been subject to a series of inquiries.

Nevertheless, on Thursday Musk took the extraordinary step of suggesting the Home Office minister, Jess Phillips, "deserves to be in prison", for rejecting a request from Oldham Council for a Home Office backed local inquiry into the scandal.

The truth of the matter is far more nuanced than Musk would like to engage with.

Oldham have already held a local inquiry, but urged by victim groups to go further they requested that central government carry one out.

Phillips' response was to say she didn't believe that Whitehall should get involved, but she also backed Oldham to carry out its own local inquiry (a position the council seem happy with according to senior sources).

On Friday, he has gone further, claiming Starmer was "complicit in the rape of Britain" as director for public prosecutions, and saying he must face charges for complicity "in the worst mass crime in the history of Britain".

What is raising eyebrows in government about the row is that the scandal is years old, has resulted in prosecutions (which began when Starmer was Director of Public Prosecutions), and has led to several inquiries - both local and a broader national one on child sexual exploitation.

The approach was put in place by the previous Conservative government and yet its leader, Kemi Badenoch, turbo-boosted Musk's arguments by throwing in her own demand for a national inquiry.

But Musk wasn't stopping there. He also began pushing for the far-right, anti Islam activist Tommy Robinson to be released from jail.

Robinson was imprisoned because he repeatedly ignored a court order to stop defaming a Syrian refugee (in fact he made a film repeating the defamation that was circulated to tens of millions of people).

On that point - has he gone too far? Nigel Farage, who is no doubt delighted that Musk has also claimed that only Reform UK can save Britain, is no fan of Robinson's - and quit UKIP because it had become too obsessed with Islam and had hired Robinson as an adviser. Farage does not want to be associated with the activist.

From where has Musk become so obsessed with Britain - and why does he hate Starmer? Some think that his views are a result of his obsession with his own social media website, X.

Imran Ahmed, CEO of the Centre for Countering Digital Hate (who has clashed with Musk) told me: "Elon Musk is the prime example of how the Twitter algorithm radicalises people into believing all kind of whacky and potentially dangerous conspiracy theories."

He also argued that Musk had one clear driving motivation.

"Elon Musk can sound irrational at times but he is focused on enriching himself. He sees the key to that as deregulation so that his companies can be unleashed to do as they like."

It certainly is true that a running theme in Musk's commentary is this idea that people in Britain are being jailed for free speech, while claiming that those who have committed historic sex crimes are not.

And so his own interest as a tech billionaire is threaded through his critique. Perhaps his concern is that a centre-left government in Britain will move to further regulate technology companies like his.

After all, it is not just the UK that has caught his attention.

Musk has also waded into German affairs, with strong-backing for the far right AfD. Musk's views seem to be strongly driven by anti Islamist views, anti migrant views and a dislike of progressive governments.

But some think the rightwing administrations he is backing may not offer the deregulation he seeks.

[EnterpriseSovereign]

Elon is believing his own lies by regurgitating the very bullshit his own platform peddles. Wouldn't it be a shame if the Government gets sick of said bullshit and blocks X in the UK?