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- Elon Musk's X sued advertisers for boycotting the platform, alleging illegal collusion.
- Many experts say the lawsuit is baseless but could stymie future responsible ads initiatives.
- Republican-led probes into media organizations, watchdogs, and researchers have been mounting.
On Tuesday, Elon Musk's X fulfilled his promise to sue advertisers over their boycotting of the platform.
In the antitrust suit, filed in a Texas court, X accuses members of advertising trade body the World Federation of Advertisers' Global Alliance of Responsible Media initiative of illegally conspiring to "collectively withhold billions of dollars in advertising revenue" from Twitter, now known as X. Unilever, Mars, CVS, and Ørsted are named defendants.
Since Musk acquired Twitter in 2022, advertising revenue on the platform has plummeted. A report published in November of that year found that half of Twitter's top 100 advertisers left the platform in the 25 days after the tech billionaire took over — many of them the world's biggest-spending marketers. The WFA has more than 100 members, including large advertisers, agency groups, and tech platforms.
Many ad insiders, legal experts, and casual observers think the claims made in X's lawsuit are baseless.
Besides being told to "go fuck yourself" by Musk, most advertisers had never seen Twitter or X as a must-buy platform anyway, even prior to his takeover and firing of hordes of sales and safety staff. GARM creates frameworks to provide common definitions around areas like hate speech and misinformation; it's voluntary whether advertisers use them. It doesn't rank platforms on these issues, and its role isn't to advise advertisers on where to spend their dollars. US advertisers are also protected by the First Amendment to spend or not spend on whichever media platforms they please. (Perplexingly, X remains a member of GARM, as well.)
But the merits of the suit hardly matter. It's the impact of bringing it in the first place.
"I am afraid member organizations of GARM will be hesitant to speak out publicly on these matters out of fear of getting caught in the crosshairs," said Ruben Schreurs, chief strategy officer of the marketing consulting firm Ebiquity.
The WFA declined to comment. X, Unilever, Mars, CVS, and Ørsted didn't respond to requests for comment.
A monthslong Republican investigation into GARM was already rattling the ad industry
Starting last year, the chairman of the House Judiciary Committee, Jim Jordan, R-Ohio, has been probing whether GARM members illegally colluded to demonetize conservative platforms and voices. The Committee has issued subpoenas to companies including Coca-Cola and Procter & Gamble, and compelled executives from the likes of Unilever and WPP's GroupM to testify in congressional hearings.
The investigation led to the publication last month of an interim report titled: "GARM'S HARM: HOW THE WORLD'S BIGGEST BRANDS SEEK TO CONTROL ONLINE SPEECH." X has used some of the findings as the basis for its suit.
"As the Committee found, WFA and GARM limit the views and voices available online by coordinating the actions of large advertisers. This limitation on competition and consumer choice is likely illegal under the antitrust laws and threatens fundamental American freedoms," a spokesperson for the Judiciary Committee said in a statement. "The Committee will continue its investigation into the companies that participate in this conduct to inform potential legislative reforms."
As Business Insider previously reported, advertising industry observers raised concerns that the legal requests and possible damage to its members' corporate reputations could have a chilling effect on GARM's work. GARM has just two full-time members of staff and has retained legal counsel to deal with the Committee's time-consuming requests.
The head of GARM, Rob Rakowitz, confirmed as much in his June interview with the Judiciary Committee, as part of its investigation. Here's an extract from the transcript:
Q: Does responding to these documents account for a significant amount of time, amount of GARM's time, your and [REDACTED] time? A: Yes, it has. Yes. Q: Is it accurate to say that there has been a backlash against responsible advertising practices like the ones that GARM has worked with advertisers to promote? A: Not that I'm aware of. Q: Do you believe that GARM's work has been wrongfully politicized by this inquiry? A: Unfortunately, yes, I do believe that. Q: Has the burden of this investigation affected your ability to do your day-to-day job at GARM? A: Yes, it has. I can't necessarily quantify it, but the work is taking longer. There are personal considerations that I have. The report — forthcoming report also has some bearing on my personal considerations as well. Q: We've mentioned and discussed how reputational harm or brand risk is some of the concerns that advertisers raise when looking at the inequitable application of terms of service agreements on platforms and monetization of advertisements, correct? A: That is correct. Q: Has this investigation also created reputational harm for GARM or its members? A: It absolutely has, yes. Q: And has that affected the ability of them to do their work? A: It has, yes. Q: And has that affected their ability to stem online and offline harm? A: I would absolutely say yes.
The document requests keep coming.
On August 1, Jim Jordan sent letters to the CEOs of an additional 40 major companies — including Verizon, Chanel, and PepsiCo — requesting information about their involvement with GARM. If the X suit moves into the discovery phase, there could be a whole lot more. On Wednesday, the video site Rumble also filed an antitrust suit against the WFA, and the ad agency holding company WPP and its media arm GroupM, alleging they collectively agreed to restrict advertising on social platforms, including Rumble.
"The actions brought by Jim Jordan will have regretfully cost GARM and the brands involved tens of thousands of dollars in legal fees already, and this is likely just the beginning," said Unilever's former general counsel for media Jamie Barnard, who left the company in 2022 and is now CEO of privacy tech company Compliant.
Academics and media watchdogs say Republican legal requests are draining their resources
Experts noted that similar right-leaning suits and investigations are becoming more common — and that they, too, are stymying the defendants' work.
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Last year, academic researchers studying disinformation said their research was being hobbled by an increasing number of resource-draining legal requests led by Jordan and other Republicans. In May, the nonprofit media watchdog Media Matters laid off more than a dozen staffers, a move it said was forced in part by legal fees related to X's "thermonuclear" — in Musk's words — defamation suit filed against the company last year. That case is set to go to trial in 2025.
Advertising experts expressed concern that X's suit and the House Committee investigation before it would further hinder GARM, and the added scrutiny would make it more difficult to get similar initiatives off the ground in the future.
"It definitely has an impact in making many industry participants more cautious about dipping their toes into certain waters," said Brian Wieser, a longtime industry analyst and principal of the Madison and Wall advisory and consulting firm.
In a highly charged environment, where so many topics can become political hot potatoes, marketers may need to accept that voluminous backlash over their media choices or the possibility of getting hauled in front of Congress are now simply a cost of doing business. But that shouldn't make them back down on their values, Wieser said.
"It's actually inconsistency and a lack of conviction that will kill a brand," Wieser added.