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Elon Musk and Twitter Brace for Legal Fight: All You Need to Know

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Elon Musk and Twitter Brace for Legal Fight: All You Need to Know

Tesla CEO Elon Musk and Twitter are bracing for a legal fight after the billionaire said Friday he was abandoning his $44 billion (roughly Rs. 3,37,465 crore) bid for the social media company.

Twitter is vowing to challenge Musk in court to uphold the agreement. Shares of Twitter slid more than 11 percent on Monday. Here’s a look at what could happen next.

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Why is musk backing out?

There are a lot of reasons why Musk might have had second thoughts. But he alleged Friday that Twitter has failed to provide enough information about the number of fake accounts it has.

Twitter said last month that it was making available to Musk a “firehose” of public raw data on hundreds of millions of daily tweets. But Musk’s lawyers have argued that the company was providing Musk with sometimes “incomplete or unusable information” and less data than it offers some of its big customers.

Twitter said last week it uses a mix of public and private data to determine the amount of spam. Private user data isn’t available publicly and thus isn’t in the data “firehose” that it gave Musk. That would include IP addresses, phone numbers and location. Twitter said such private data helps avoid misidentifying real accounts as spam.

Twitter has said for years in regulatory filings that it believes about 5 percent of the accounts on the platform are fake. But on Monday Musk continued to taunt the company, using Twitter, over what he has described as a lack of data.

What is twitter’s response?

Twitter declared its intent to sue Musk. The company could have pushed for a $1 billion (roughly Rs. 162 crore) breakup fee that Musk agreed to pay under these circumstances. Instead, it looks ready to fight to complete the purchase, which the company’s board has approved and CEO Parag Agrawal has insisted he wants to consummate.

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The chair of Twitter’s board, Bret Taylor, tweeted Friday that the board is “committed to closing the transaction on the price and terms agreed upon” with Musk and “plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”

The trial court in Delaware frequently handles business disputes among the many corporations, including Twitter, that are incorporated there.

Who’s going to win?

It’s almost impossible to predict the outcome of any protracted legal battle. But law and business experts believe Twitter likely has the stronger case.

Morningstar analyst Ali Mogharabi noted that Twitter has described its estimate of fake and spam accounts for years in regulatory filings while explicitly noting that the number might not be accurate given the use of data samples and interpretation.

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Given current market conditions, Mogharabi said, Twitter may also have a solid argument that the layoffs and firings of the past weeks represent “an ordinary course of business.”

“Many technology firms have begun to control costs by reducing headcount and/or delaying adding employees,” he said. “The resignations of Twitter employees cannot with certainty be attributed to any change in how Twitter has operated since Musk’s offer was accepted by the board and shareholders.”

The case could also end in a settlement, for instance with the two sides negotiating a lower price. If Musk wins, there’s also the question of the $1 billion breakup fee. He can certainly afford it, but will he want to pay?

What happens to Twitter now?

The Musk saga has been, to put it mildly, a distraction for Twitter’s workers, executives and even users. Some employees have quit, while others were laid off or fired. Job offers have been rescinded and discretionary spending curtailed.

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“For Twitter this fiasco is a nightmare scenario,” Wedbush analyst Dan Ives, who follows the company, wrote Monday. He said the result would be “an Everest-like uphill climb for Parag & Co.” given concerns over employee morale and retention, advertiser concerns and other challenges.”

Twitter itself is unlikely to go anywhere regardless of whether or not it changes hands. But if the turmoil continues it could scare away advertisers. If too many engineers and other employees leave, the platform’s quality could suffer as well.

“The one bright spot is that if (Twitter) is ultimately victorious in the courts, it could potentially take north of the $1 billion in break-up fees that Musk could have to pay,” said CFRA analyst Angelo Zino.

If he loses, will musk comply?

Even if Musk loses the court case, some observers wonder if the world’s richest man will abide by the outcome. That’s in part based on his antagonistic approach to unfavourable actions from the US Securities and Exchange Commission over Musk’s tweets claiming he had the funding to take Tesla private in 2018.

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That led to a securities fraud settlement with the SEC requiring that his tweets be approved by a Tesla attorney before being published. But the SEC later investigated whether the Tesla CEO violated the settlement with tweets last November asking Twitter followers if he should sell 10% of his Tesla stock.

Musk had argued that the agency can’t take action about his tweets without court authorization. This time, however, he could very well face an actual court order to pay the $1 billion breakup fee — or to finish the acquisition even if he doesn’t want to.


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Delhi High Court Grants Time for Government to Reveal Plans to Regulate De-Platforming of Social Media Users

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The Delhi High Court on Wednesday granted time to the Centre to inform if it was drafting any regulations to govern the issue of de-platforming of users from social media. Justice Yashwanth Varma was hearing a batch of petitions concerning the suspension and deletion of accounts of several social media users, including Twitter users.

Central government counsel Kirtiman Singh urged the court to list the cases after two weeks to enable him to come back with further instructions concerning any draft policy on the de-platforming of social media users.

Senior counsel for one of the social media platforms said that in case such guidelines are formulated, the scope of proceedings before the court can be navigated accordingly.

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The court listed the case for further hearing in September while asking the Centre to state its stand.

In its affidavit filed in one of the cases against the suspension of the petitioner’s Twitter account, the Centre has said that an individual’s liberty and freedom cannot be “waylaid or jettisoned in the slipstream of social and technological advancement” and the social media platforms must respect the fundamental rights of the citizens and conform to the Constitution of India.

It has said that social media platforms should not take down the account itself or completely suspend it in all cases and complete de-platforming is against the spirit of Articles 14, 19, and 21 of the Constitution of India.

Stating that it is the custodian of the users’ fundamental rights in cyberspace, the Centre has said that a social media account can be suspended or de-platformed only in cases such as in the interest of the sovereignty, security, and integrity of India, friendly relations with foreign States or public order or pursuant to a court order or the content is grossly unlawful such as sexual abuse material.


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Social Media Firms Introduce Few Changes Ahead of Upcoming US Midterm Elections

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Social media companies are offering few specifics as they share their plans for safeguarding the US midterm elections. Platforms like Facebook and Twitter are generally staying the course from the 2020 voting season, which was marred by conspiracies and culminated in the January 6 insurrection at the US Capitol.

Video app TikTok, which has soared in popularity since the last election cycle while also cementing its place as a problem spot for misinformation, announced Wednesday it is launching an election center that will help people find voting locations and candidate information.

The center will show up in the feeds of users who search election-related hashtags. TikTok is also partnering with voting advocacy groups to provide specialized voting information for college students, people who are deaf, military members living overseas and those with past criminal convictions.

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TikTok, like other platforms, would not provide details on the number of full-time employees or how much money it is dedicating to US midterm efforts, which aim to push accurate voting information and counter misinformation.

The company said it is working with over a dozen fact-checking organizations, including US-based PolitiFact and Lead Stories, on debunking misinformation. TikTok declined to say how many videos have been fact-checked on its site. The company will use a combination of humans and artificial intelligence to detect and remove threats against election workers as well as voting misinformation.

TikTok said it’s also also watching for influencers who break its rules by accepting money off platform to promote political issues or candidates, a problem that came to light during the 2020 election, said TikTok’s head of safety Eric Han. The company is trying to educate creators and agencies about its rules, which include bans on political advertising.

“With the work we do, there is no finish line,” Han said.

Meta, which owns Facebook, Instagram, and WhatsApp, announced Tuesday that its approach to this election cycle is “largely consistent with the policies and safeguards” from 2020.

“As we did in 2020, we have a dedicated team in place to combat election and voter interference while also helping people get reliable information about when and how to vote,” Nick Clegg, Meta’s president of global affairs, wrote in a blog post Tuesday.

Meta declined to say how many people it has dedicated to its election team responsible for monitoring the midterms, only that it has “hundreds of people across more than 40 teams.”

As in 2020, Clegg wrote, the company will remove misinformation about election dates, voting locations, voter registration and election outcomes. For the first time, Meta said it will also show US election-related notifications in languages other than English.

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Meta also said it will reduce how often it uses labels on election-related posts directing people toward reliable information. The company said its users found the labels over-used. Some critics have also said the labels were often too generic and repetitive.

Compared with previous years, though, Meta’s public communication about its response to election misinformation has gone decidedly quiet, The Associated Press reported earlier this month.

Between 2018 and 2020, the company released more than 30 statements that laid out specifics about how it would stifle US election misinformation, prevent foreign adversaries from running ads or posts around the vote and subdue divisive hate speech. Until Tuesday’s blog post, Meta had only released a one-page document outlining plans for the fall elections, even as potential threats to the vote persist.

Twitter, meanwhile, is sticking with its own misinformation labels, though it has redesigned them since 2020 based in part on user feedback. The company activated its “civic integrity policy” last week, which means tweets containing harmful misinformation about the election are labeled with links to credible information. The tweets themselves won’t be promoted or amplified by the platform.

The company, which like TikTok does not allow political advertisements, is focusing on putting verified, reliable information before its users. That can include links to state-specific hubs for local election information as well as nonpartisan public service announcements for voters.

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TikTok Bans Paid Political Influencer Posts Ahead of Upcoming US Midterm Elections

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TikTok will work to prevent content creators from posting paid political messages on the short-form video app, as part of its preparation for the US midterm election in November, the company said on Wednesday.

Critics and lawmakers accuse TikTok and rival social media companies including Meta Platforms and Twitter of doing too little to stop political misinformation and divisive content from spreading on their apps.

While TikTok has banned paid political ads since 2019, campaign strategists have skirted the ban by paying influencers to promote political issues. The company seeks to close the loophole by hosting briefings with creators and talent agencies to remind them that posting paid political content is against TikTok’s policies, said Eric Han, TikTok’s head of US safety, during a briefing with reporters.

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He added that internal teams, including those that work on trust and safety, will monitor for signs that creators are being paid to post political content, and the company will also rely on media reports and outside partners to find violating posts.

“We saw this as an issue in 2020,” Han said. “Once we find out about it … we will remove it from our platform.”

TikTok broadcast its plan following similar updates from Meta and Twitter.

Meta, which owns Facebook and Instagram, said Tuesday it will restrict political advertisers from running new ads a week before the election, an action it also took in 2020.

Last week, Twitter said it planned to revive previous strategies for the midterm election, including placing labels in front of some misleading tweets and inserting reliable information into timelines to debunk false claims before they spread further online. Civil and voting rights experts said the plan was not adequate to prepare for the election.

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© Thomson Reuters 2022


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