Musk bought the company later that year and renamed it X. By then, the FTC had launched a new investigation based on an explosive whistleblower complaint by former Twitter head of security Peiter Zatko, who said the company’s engineers had wide access to data with ineffective tracking.
Musk’s legal team asked U.S. Magistrate Judge Thomas Hixson to throw out the FTC order on the grounds that the agency had improperly increased its scrutiny after Musk took over and also pressured an outside assessor of the company’s security practices to find fault with them.
Hixson denied that motion after a hearing in San Francisco, ruling that the court was only involved in the underlying case for limited procedural reasons, such as the transfer of case documents to the Justice Department. He wrote that he lacked authority to set aside a consent order approved by an FTC administrative judge.
Hixson also declined to interfere in the FTC investigation by letting Musk avoid a deposition.
In his 11-page ruling, Hixson noted other problems with X’s argument. For example, the company had cited an Ernst & Young employee who said in his deposition that he felt the FTC expected him to find issues with X’s privacy program. But Hixson noted that the same employee said his work was delayed by the constant turnover in the executive ranks after Musk took charge and the lack of designated parties in charge of multiple aspects of the privacy program.
And while it is true the FTC increased its activity post-takeover, it had provided reasons for that, Hixson wrote.
“The government says this increase in investigative activity should not be surprising because Musk directed at least five rounds of terminations, layoffs or other reductions in X Corp.’s workforce, which affected the security, governance, risk and compliance team. The government argues that the FTC was concerned about X Corp.’s ability to comply with the Administrative Order given these significant changes to the company,” he ruled.
“As for deposing Musk, the government argues that the major changes to the company appear to have been initiated by Musk himself,” the judge said in declining to stop the deposition.