The European Union (EU) on Thursday said it was asking for further details from Elon Musk’s X regarding adjustments to its corporate structure, months since the social media app was acquired by xAI in a $33 billion transaction. The acquisition had raised eyebrows in regulatory circles, especially due to concerns over transparency, platform governance, and potential overlaps between Musk’s various ventures, including Tesla, SpaceX, and xAI.
“We are following closely changes in the corporate structure of X, as we would changes in any other designated platform,” a spokesperson for the European Commission, the EU’s executive arm, said. The Commission is tasked with enforcing the Digital Services Act (DSA), a sweeping piece of legislation aimed at holding large online platforms accountable for user safety, transparency, and content moderation.
EU Eyes Possible Penalties Under the Digital Services Act
The spokesperson however did not verify an earlier statement from Bloomberg News that indicated regulators were considering potential fines on X under the Digital Services Act. The DSA, which came into full effect for designated Very Large Online Platforms (VLOPs) in 2023, has strict rules about algorithmic transparency, content moderation practices, and misleading design.
Prior to its summer break in August, the regulator might issue a fine against X for suspected violations of the DSA, although delays cannot be ruled out, Bloomberg said. These developments come amid broader EU scrutiny of digital platforms and a more assertive regulatory stance toward U.S.-based tech giants. Representatives for xAI and X did not have an immediate comment on Reuters’ request.
EU Penalties Loom for Potential DSA Breaches
Any company which is found in violation of the DSA will be liable to a fine of up to 6% of its worldwide turnover, while repeat violators could be barred from operating in Europe at all. Such penalties underscore the high stakes for companies operating under the EU’s digital rulebook. Last week, X emphasized a disclaimer on its blue checkmark in a bid to preempt a potential large fine from EU antitrust authorities.
DSA Concerns Over Paid Verification
The Commission made preliminary conclusions under the DSA in July last year that X broke rules on deceptive design, particularly by converting the blue checkmark into a paid verification, ascribing false credibility to users.
X had objected to the conclusion. The EU announced in December 2023 an investigation into X’s suspected violations of the DSA. The outcome could set a precedent for how digital platforms handle monetization features and user authenticity across the continent.