EU Probes Musk's $33B X Acquisition for Anti-Competitive Concerns

Elon Musk's acquisition of X by his AI startup, xAI, has drawn the attention of EU regulators, who are now scrutinizing the corporate structure of Musk's empire. This move comes months after the deal was finalized, with the EU probing the potential implications of the merger on the market. The acquisition, which involved a significant sum of $33 billion, has raised concerns about the concentration of power and the potential for anti-competitive behavior.

Musk's companies, which have been on different trajectories, are now under the microscope as regulators seek to ensure that the merger does not stifle competition or harm consumers. The EU's investigation is part of a broader effort to maintain a level playing field in the tech industry, which has seen a wave of consolidation in recent years. The outcome of the probe could have significant implications for Musk's empire, potentially leading to fines or other regulatory actions.

The scrutiny from EU regulators comes at a time when Musk is also facing challenges in other areas of his business. His robotaxi launch, for instance, has been delayed due to safety concerns, with Musk himself acknowledging that the date could shift. This, coupled with the EU's investigation, highlights the complex regulatory landscape that Musk's companies are navigating.

The EU's probe into Musk's empire is not an isolated incident. The region has been increasingly active in regulating the tech industry, with recent setbacks for companies like Google in their antitrust battles. The EU's approach to regulation is characterized by a focus on protecting consumers and ensuring fair competition, which has led to a series of high-profile cases against major tech companies.

The European Commission has reportedly sent a fresh wave of inquiries to X concerning the implications of the March buyout. The deal raised xAI’s value to $80B and effectively placed X under the AI startup’s umbrella. The move raised concern in Brussels that the restructuring could affect the scale of penalties the company may face under the Digital Services Act (DSA).

Under the DSA, the EU holds the power to fine digital firms for up to 6% of their annual global turnover if they fail to address illegal content, disinformation, or comply with transparency requirements. According to insiders, the European Commission is currently evaluating whether to include revenue from Musk’s other ventures, such as SpaceX, Neuralink, and The Boring Company, when calculating a potential fine against X. By attaching the penalties to the company’s total global revenue, the regulation raises the stakes for large corporations like Musk’s X.

Regulators have yet to issue their first major penalty under the DSA, and insiders have revealed that a decision regarding X’s case could come before the Commission’s summer recess in August. However, the timeline for the decision remains unclear because the final size or even the rationale for a fine is still being determined. The investigation into X started in 2023 and is a result of multiple suspected DSA breaches, including the platform’s failure to curb disinformation, lapses in transparency for advertisers and researchers, and most notably, the controversial overhaul of its blue checkmark system.

The European Commission argued that the change to the checkmark policy deviated from established industry norms and contributed to a more opaque information environment. X explained the blue checkmark’s current functionality in a recent attempt to avoid penalties, but it is unclear if it satisfied the Commission’s inquiry. Platforms under DSA scrutiny have the opportunity to make binding commitments to address violations in exchange for leniency. Brussels has thus far shown limited tolerance for superficial fixes. X has yet to respond publicly to the Commission’s latest inquiries.

The investigation into Musk's acquisition of X by xAI is a reminder of the regulatory challenges that tech companies face in the EU. As the region continues to tighten its grip on the industry, companies like Musk's will need to navigate a complex web of regulations and potential penalties. The outcome of the EU's probe will be closely watched by industry observers and could set a precedent for future mergers and acquisitions in the tech sector.