The ‘ad cartel’ Elon Musk accused of collusion is shutting down rather than fight X’s lawsuit
The Global Alliance for Responsible Media, a nonprofit initiative founded by the World Federation of Advertisers, said Thursday it would halt its activities because it couldn’t afford to fight a lawsuit from X. The Elon Musk-owned social platform sued the group over a boycott that deprived the company of billions of dollars in ad revenue.
In an email to members, WFA CEO Stephan Loerke said the WFA will remain fully operational, and had every intention of fighting X’s lawsuit in court, according to Business Insider and the New York Times, who obtained the email.
“This decision was not made lightly, but GARM is a not-for-profit organization, and its resources are limited,” Loerke wrote, according to BI.
The WFA did not immediately respond to Fortune’s request for comment.
GARM was founded in 2019 after a mass shooting in a Christchurch mosque was live-streamed on Facebook. The group intended to influence social-media content moderation policies by making sure member advertisers avoided hate speech and misinformation and steering them toward platforms considered ethical.
X filed the lawsuit earlier this week, citing GARM, the WFA, and member companies CVS Health, Mars, Unilever and Orsted as defendants. The suit’s claims stem from an investigation into GARM by the Republican-controlled House Judiciary Committee this year.
After Musk bought X (then Twitter) in 2022, GARM “signaled” to its members to pull their advertising from Twitter, according to the House committee report. In a survey of its members conducted around the time of Musk’s takeover of the company, GARM found that over 80% of ad buyers felt the change in Twitter’s ownership was a serious issue, and more than 70% of advertisers “[felt] that change in ownership will have a negative or very negative impact on Twitter.”
“This type of information, coming with the imprimatur of GARM, would give advertisers the confidence to pull advertising campaigns without losing out to their competitors,” the House report stated.
Twitter’s ad revenue plummeted as 18 GARM members stopped advertising on the platform, and dozens of others cut their spending, according to the lawsuit.
“We tried being nice for 2 years and got nothing but empty words,” Musk wrote on X after the suit was filed. “Now, it is war.”
Immediately following the news that GARM would shutter, Republicans on the Judiciary Committee and X CEO Linda Yaccarino rushed to claim victory in what they described as a win for free speech.
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#BREAKING: The “Global Alliance for Responsible Media” is discontinuing.
Big win for the First Amendment.
Big win for oversight.
— House Judiciary GOP 🇺🇸🇺🇸🇺🇸 (@JudiciaryGOP) August 8, 2024
“No small group should be able to monopolize what gets monetized,” X CEO Linda Yaccarino wrote in a post following the announcement. “This is an important acknowledgment and a necessary step in the right direction. I am hopeful that it means ecosystem-wide reform is coming.”
No small group should be able to monopolize what gets monetized. This is an important acknowledgement and a necessary step in the right direction. I am hopeful that it means ecosystem-wide reform is coming. https://t.co/BlHqHqZEyp
— Linda Yaccarino (@lindayaX) August 8, 2024
The WFA is a global network of the biggest advertising brands and agencies, representing over 90% of the global marketing and communications spending in the world, according to the group’s website. X’s lawsuit claims GARM violated antitrust laws by colluding with brands to monopolize advertising revenue and “collectively withhold billions of dollars [from X.]”
On its own, though, GARM is a small organization, and the standards it sets for its members are voluntary. It has just two full-time staffers, and retained outside counsel to respond to the Judiciary Committee’s investigation requests. At a hearing before the committee in June, the organization’s director, Rob Rakowitz, told lawmakers the investigation had consumed a considerable amount of his time and impacted his ability to effectively do his job.
This story was originally featured on Fortune.com
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