Billionaire Elon Musk’s social media company, X, is facing a potential fine of over $1 billion for violating the European Union’s (EU) Digital Services Act (DSA). The news was first reported by the New York Times, citing sources familiar with the matter. One of the sources stated that the EU “wants to make an example of X” to hinder other companies from breaching the law. The DSA law aims to combat the featuring of illicit content and the spread of disinformation on social media platforms. Following the news, Musk said on X that the penalty was “an unprecedented act of political censorship and an attack on free speech.”
The news adds further pressure to the ongoing tensions between the EU and the U.S. over tariffs, trade disputes, and the unending Ukraine war. European regulators began the investigation against X in 2023, and their preliminary findings, issued last year, ruled that X had indeed violated the DSA law. However, following President Trump’s election and considering Musk’s close ties with him, the probe slowed down.
X Faces Huge Penalty for its Free-Speech Stance
The EU’s penalties include both fines and demand for product changes, which could be ruled on this summer. According to the DSA, companies can be fined up to 6% of their global revenue. In X’s case, the EU is considering including all of Musk’s companies to calculate the fine, thus bringing the total to more than $1 billion. Musk is the CEO of EV maker Tesla (TSLA) and owns the space exploration company SpaceX, brain-chip company Neuralink, internet provider Starlink, and AI startup xAI, which recently acquired X.
The ruling against X would be the first to be issued under the new EU law, which requires social media companies to police their content. The two parties have been negotiating over the investigation for months. Following the EU’s preliminary findings last year, X contested with hundreds of points of dispute. The parties could still reach a settlement if Musk agrees to implement the product changes demanded by the regulator.
Furthermore, X is subject to another larger EU probe, where regulators are alleging that X’s lax content moderation policies for user-generated content is causing hate speech and spreading disinformation across Europe. The European watchdog seems determined to penalize companies for their violations without discrimination, while Musk is committed to challenging any fines in court. The EU is also preparing fines against American tech giants Apple (AAPL) and Meta Platforms (META) for violating its Digital Markets Act (DMA).
Is Tesla a High-Risk Stock?
Analysts maintain a Hold consensus rating on Tesla stock owing to the ongoing challenges. This is based on 16 Buys, 11 Holds, and 12 Sell ratings received during the past three months. Also, the average Tesla price target of $312 implies 16.7% upside potential from current levels. In the past year, TSLA stock has gained 56.2%.
