In a bold move that has sent shockwaves through the advertising industry, X has taken legal action against a coalition of major advertisers for allegedly orchestrating a boycott of the platform. The lawsuit, filed in federal court in Texas, accuses the World Federation of Advertisers of colluding with companies to withhold advertising on X due to concerns over relaxed safety standards since Elon Musk took control of the platform in 2022. This move by the advertisers has cost X billions of dollars and has sparked a fierce legal battle.
The companies named in the lawsuit, including CVS, Unilever, and Mars, are members of the World Federation of Advertisers, which has been pushing for stricter safety guardrails on social media platforms. The group’s concerns revolve around ads appearing next to illegal or harmful content, such as child pornography or hate speech. Following Musk’s acquisition of X, the WFA allegedly organized an advertiser boycott to pressure the platform into complying with their desired safety standards.
Musk’s takeover of X marked a shift towards his vision of free speech, which included reinstating banned accounts like those of Kanye West and Donald Trump. This move, along with the introduction of a new paid verification system, led to a high-profile incident where a fake post from an account impersonating Eli Lilly caused panic and led to the halting of all ad campaigns with the platform. This incident, along with the advertisers’ concerns over safety standards, fueled the boycott that has now resulted in a legal battle.
The lawsuit alleges that the WFA’s advertising agency members recommended to their clients to suspend advertising on X, causing the platform to fall significantly below revenue forecasts. Despite X’s claims that its safety standards exceed industry norms and that the majority of its ad placements meet the WFA’s standards, the boycott has had a detrimental impact on the platform’s revenue and pricing strategies.
The legal action taken by X brings a claim for a violation of section one of the Sherman Act, which prohibits restraints on trade. This move follows previous conflicts between Musk and X’s major advertisers, including accusations of blackmail and attempts to influence online content by withholding advertising dollars.
The escalating hostility between X and major advertisers highlights the power dynamics at play in the digital advertising industry. As the legal battle unfolds, the outcome will have far-reaching implications for how platforms, advertisers, and industry organizations navigate issues of safety, free speech, and market competition in the digital age.
