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Twitter Might Win Its Big Battle With Trump -- For a Price

While the legal changes sought by the Trump Administration might not hold up in court, Twitter could see hits to its top and bottom line due to multiple factors.

When the dust settles, there might not be significant legal fallout from the Trump Administration’s attempts to crack down on social media platforms perceived by it to be censoring political views.

But there could still be a financial cost involved for Twitter  (TWTR) - Get Report, assuming that it doesn’t backtrack from the actions that sparked the Administration’s actions. And that might help explain why Twitter’s stock is down about 2% in Friday trading.

As many readers probably know by now, on Tuesday Twitter attached links to a pair of tweets from President Trump that declared California’s plans to send mail-in ballots to all registered voters would result in a “substantially fraudulent” and “rigged” election. The links lead to a page that among other things includes a short statement from Twitter that’s critical of the claims made within Trump’s tweets.

Later, on Friday morning, Twitter attached a notice to a tweet from Trump regarding the riots that have been taking place in Minneapolis, stating that the tweet violates Twitter’s rules about “glorifying violence” but isn’t being removed since Twitter feels “it may be in the public’s interest for the Tweet to remain accessible.”

In response to Twitter’s Tuesday action, President Trump signed an executive order on Thursday afternoon that aims to remove legal protections enjoyed by internet platforms under Section 230 of the Communications Decency Act (signed into law in 1996), should those platforms be deemed to “engage in deceptive or pretextual actions stifling free and open debate by censoring certain viewpoints.”

The order also calls upon the FCC to help set rules clarifying when an Internet platform’s attempts to censor content aren’t protected by Section 230, and that the FTC should consider taking action in response to complaints about platforms stifling free expression. And it calls upon each federal agency to share its ad spend on various internet platforms with the DOJ, which would then decide which of those platforms “are problematic vehicles for government speech due to viewpoint discrimination, deception to consumers, or other bad practices.”

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For reference, Section 230 features two provisions. The first one protects providers and users of “an interactive computer service” from being viewed as “the publisher or speaker” of content shared on the service by others, and thus liable for its content. The second protects providers and users of such services from being liable when they take actions “in good faith” to restrict access to content deemed to be “obscene, lewd, lascivious, filthy, excessively violent, harassing or otherwise objectionable.”

Since the executive order was signed, a host of legal experts from a variety of backgrounds have pointed out that the executive branch doesn’t have the power to change how a law drafted and passed by Congress, and reviewed many times over the years by federal courts, should be interpreted. Many have also noted that Section 230 was never meant to cover statements made by a platform owner itself -- those, rather, are covered by the First Amendment.

As a result, there’s a good chance that any attempt to remove Section 230 protections in response to actions such as the ones that Twitter carried out this week and/or hold it legally liable for such actions won’t hold up in court. However, in the interim, should a platform such as Twitter be declared by the Trump Administration to no longer have Section 230 protection, it could be on the receiving end of a host of lawsuits over content that its users published and/or that Twitter chose to remove.

Meanwhile, should federal agencies stop advertising on Twitter, it would act as one more headwind for an ad business that’s already facing major top-line pressures thanks to both execution issues and COVID-19’s impact on ad spend.

Last but certainly not least, if Twitter is serious going forward about fact-checking or removing statements made by high-profile accounts that it considers to be false or misleading, it can’t limit those efforts to one or a handful of accounts without facing a backlash and accusations of bias.

Already, following Twitter’s attaching of a notice to Trump’s Minneapolis tweet, FCC chairman Ajit Pai and others have called attention to how Twitter hasn’t taken action against recent tweets from Iran’s Supreme Leader that call for Israel’s destruction. And previously, others have taken Twitter to task for not removing tweets from Chinese government officials that spread an unfounded conspiracy theory about COVID-19 being created by the U.S. Army.

One certainly doesn’t have to look hard on any given day to find tweets from accounts with substantial followings that arguably make false or misleading claims or glorify violence. If Twitter is serious about countering the spread of such messages on its platform, it will have to invest substantially in that effort. And that, too, is likely to have a meaningful financial cost.