Wiley claims that X’s new ad format may be a liability for advertisers, who themselves could face compliance issues if their content is not properly labeled, and that that their posts are labeled as advertisements. Check My Ads included screenshots of these documents in its complaint to the FTC. This means that advertisers may believe their ads are correctly labeled when they are not. To complicate matters further, X began accepting ads from Google Ads and InMobi, third-party ad exchanges where advertisers can purchase ads, which then appear on directly with all its advertisers.
“It raises a whole host of compliance issues in terms of transparency,” says Wiley. “It’s very difficult for advertisers to know where their ad spend is actually going.”
An FTC investigation into the company could be another blow to X, whose valuation has fallen to less than half of the $44 billion Musk paid for the company.
The FTC has discretion over which cases it pursues, meaning a single complaint may be enough to prompt the regulator to open an investigation, according to Christopher Terry, an associate professor of media law at the University of Minnesota.
Terry estimates that if the FTC pursues an investigation, it could take a year or more to reach a conclusion. But if the regulator follows up on the complaint, the consequences for X could be significant. The commission has the ability to fine a business up to $44,100 per violation. That could lead to “a virtually unlimited number” of sanctions, Terry says. “Typically, in a situation like this … what we would most likely see is a consent decree providing for a very large sum of money.”
A consent decree is essentially a threat of legal action from the government. Terry notes that the FTC tends to charge higher fines than other agencies. In 2019, Facebook settled $5 billion with the FTC for violating its users’ privacy.
X is already subject to a 2011 consent decree, which prohibits the platform from “deceiving consumers on the extent to which it protects the safety, confidentiality and confidentiality of non -public consumer information” for 20 years. The FTC slapped the old Twitter with the consent decree after revealing that the company’s lax data protection left user data vulnerable to two separate hacks. Last year, the FTC amended the consent decree, adding a $150 million fine for violating the 2011 consent decree.
