X Corp. asks court to terminate Twitter’s privacy settlement with FTC

Elon Musk is trying to avoid a deposition with the Federal Trade Commission and wants a court to terminate or modify a privacy settlement that Twitter and the FTC agreed to last year before Musk bought the company. The May 2022 settlement lets the FTC monitor and enforce Twitter’s compliance, and Twitter claims the US agency became overly aggressive in its investigative demands after Musk bought the firm.

“This motion asks the Court to rein in an investigation that has spiraled out of control and become tainted by bias, and to terminate a misfit consent order that no longer can serve any proper equitable purpose,” Musk’s X Corp. wrote in a motion filed today in US District Court for the Northern District of California.

Republicans in Congress have also been criticizing the FTC’s investigation into Twitter, including at a House Judiciary Committee hearing today.

X Corp.’s motion claimed that “the FTC radically shifted its enforcement strategy after Mr. Musk acquired Twitter, imposing new and burdensome demands and treating the Consent Order as license for invasive scrutiny of any move X Corp. makes, no matter how remote from the data privacy and security concerns that ground both the FTC’s statutory jurisdiction and the Court’s Order.”

The motion asked for “a protective order staying the notice of deposition of Elon Musk,” and “an order terminating or modifying the consent order in this action or staying enforcement of the consent order.”

FTC accused of “bullying” audit firm

X Corp. cited testimony from an FTC deposition of David Roque of Ernst & Young (EY), the independent firm assessing whether Twitter lived up to its privacy and security obligations. X Corp. wrote:

Mr. Roque testified that the FTC’s conduct made him “fe[el] as if the FTC was trying to influence the outcome of the engagement before it had started.” “In some of the discussions… with the FTC, expectations were being conveyed about what those results should be before we had even begun any procedures.”

According to Mr. Roque, he felt that the FTC was attempting to “influence” EY to reach the conclusion that “there were deficiencies in Twitter’s privacy and information security program.” He was so concerned by the FTC’s communications that he and his colleagues discussed whether the agency threatened to become an “adverse threat” to EY’s independence or a party “outside of the arrangement we had with Twitter trying to influence the outcome of our results.”

“This record shows how the FTC attempted to bully EY into acting as an arm of its enforcement staff digging up dirt on X Corp., rather than an objective, independent, third-party auditor bound by its own contractual, ethical, and professional obligations of independence and objectivity. This is extraordinary misconduct,” X Corp.’s motion claimed.

X Corp. claimed that “the FTC’s desire to depose Mr. Musk derives from the same bad faith and improper conduct that has characterized its investigation to date.” The company’s motion said the FTC’s “quest to depose Mr. Musk is baseless, politically motivated, and made in bad faith. Only after Mr. Musk acquired Twitter in late 2022 did the FTC embark on a rapid-fire campaign of endless discovery requests.”

We contacted the FTC about the X Corp. motion today and will update this article if we get a response.

Musk sought meeting with Khan

The settlement with the FTC in May 2022 forced Twitter to pay a $150 million penalty for targeting ads at users with phone numbers and email addresses collected from those users when they enabled two-factor authentication. Twitter also agreed to implement more robust privacy and security protections for users. Twitter was already bound by a 2011 FTC settlement over security failures and was accused of violating the previous settlement.

Musk requested a meeting with FTC Chair Lina Khan late last year, but she refused the request and told Twitter to stop dragging its heels on providing documents and depositions needed for the agency’s investigation into Twitter’s privacy and data practices. The investigation is reportedly focused on whether Twitter has enough resources to protect its users’ privacy after laying off thousands of employees.

“The FTC’s unusually combative posture toward Mr. Musk and ‘Twitter 2.0’ came as a surprise,” according to the new X Corp. filing. “In order to gain a better understanding of the FTC’s concerns, and how Twitter could demonstrate its commitment to user privacy, data protection, and information security, Mr. Musk made several requests to FTC Chair Lina Khan for a meeting.”

“Notably, the FTC has never sought to depose any current X Corp. employee other than Mr. Musk himself,” the motion said. However, the FTC deposed five former Twitter employees. After taking over in late October 2022, Musk reduced Twitter’s staff from about 7,500 to about 1,500.

X Corp. complained that the FTC has issued 16 demand letters since Musk bought Twitter, compared to 28 in the previous 11 years. “X Corp. has responded to this avalanche of demands as best it can, responding promptly to FTC inquiries and producing more than 22,000 documents to date,” the motion said. “The FTC’s overreach has now culminated in a demand to depose Mr. Musk, who is not, and never has been, a party to the Consent Order.”

If the court refuses to terminate the 2022 consent order, X Corp. says it should at a minimum “order the FTC to respond to X Corp.’s reasonable requests for information so that it can assess the extent of the agency’s misconduct and necessary remedies, while staying all enforcement of the Consent Order (including the deposition of Mr. Musk) until that process is complete.”