X Hit with AI Privacy Lawsuits in the EU

It’s been a busy few weeks of news cycle for X-née-Twitter owner Elon Musk, who, among a million other Muskian things, is suing advertisers. But one story that’s liable to get lost in the hubbub: Nine privacy complaints have been filed against the company in the European Union, alleging that Grok — X’s AI chatbot and answer to ChatGPT — illegally hoovers up citizens’ user data. 

Big Tech’s Bugbear

The privacy lawsuits filed against X are being led by an organization called noyb, a longtime thorn in Big Tech’s side. Noyb’s boss is privacy activist Max Schrems, who successfully filed a case against Meta arguing its method for transferring EU data to the US breached the bloc’s stringent GDPR privacy laws. That case ended in a €1.2 billion fine for Meta as well as a logistical headache, and in June, complaints from noyb prompted Meta to hit pause on using EU users’ data to train its AI systems.

Now noyb has turned its attention to X, arguing that it did not ask for EU users’ consent before using their data to help train Grok. A spokesperson for noyb told The Daily Upside that the complaints could result in a fine of up to 4% of the company’s annual turnover. The punitive measures would hurt, too, because X has a lot less cash to play with than Meta: 

• X is no longer a public company, so we can’t see exactly how its cash reserves are doing, but we do know it took on roughly $25 billion in debt with a very high leverage ratio when Musk bought it in 2022. 
• Since then, the banks that helped fund the deal have struggled to unload their share of the debt, and Fidelity has given us clues to the firm’s valuation by announcing cuts to the value of its stake. At last count in March, Fidelity’s stake was 73% less valuable since the acquisition.

But even before Musk bought the company, Twitter was a small fish in the Big Tech pond that had struggled to stay consistently profitable.

Keir We Go Again: X is also losing political capital overseas. The EU opened an investigation into X over its content moderation policies late last year, specifically citing the spread of misinformation. Last week, misinformation on X became a huge part of the political discussion around far-right riots in the UK, and Musk himself waded into a war of words with UK Prime Minister Keir Starmer. The UK’s new Online Safety Act is not yet enforceable, so X doesn’t have much to fear in the way of big fines coming from Blighty, but the riots led some politicians to argue the act should be given more teeth. A spokesperson for Starmer said on Monday that the government will “look more broadly at social media” regulation in the wake of the riots.