3 min read
Discussion on the Law and Social Media with Professor Randolph Kahn

This month Platform Mag sat down with Professor Randolph Kahn. Randolph Kahn is an adviser, founder of Kahn Consulting (KahnConsultingInc.com), law professor and award winning author of numerous published works, including his most recent book “The Executive’s Guide To Navigating The Information Universe.”

Platform: Elon Musk recently announced that he was withdrawing from his planned purchase of Twitter because of concerns that the number of bot accounts far exceeded Twitter estimates. Do you believe this was the real reason Musk withdrew from the deal? Or do you agree with those who allege that Musk's complaints about both accounts was merely an excuse to exit the deal, because he's having second thoughts? (Perhaps because of the slide of social media stock, tesla stock, or the fact that he overpaid)

Randolph Kahn: Who knows what really drives Elon Musk. And who knows his real motivation behind pulling out of the deal to purchase Twitter. I don’t know the intricacies of the purchase agreement but the argument that has been made is that a public filing with the SEC indicating there were no more than 5% BOT accounts is allegedly inaccurate. Assuming that is true and assuming that Musk has grounds to attack that public filing as being inaccurate or fraudulent then that would seem to be a legal basis to attack the valuation and the transaction in its totality. As the deal was based on a valuation of revenue stream presumably largely from advertising which would be calculated based upon the number of potential recipients (Twitter users) if the recipient number is substantially erroneously elevated then the valuation would seemingly be higher than If there were indeed only 5% fake accounts.

Platform: Assuming Twitter lied about the number of bot accounts they reported/estimated. Are there laws that mandate a company to accurately list the number of bots, given that the number given will have an impact on the company's value to investors/shareholders?

Randolph Kahn: There are myriad laws that require public companies to make various disclosures and that those material disclosures need to be accurate at the time the disclosure is made. If it can be proven that the fake accounts within Twitter were substantially higher than 5% and that Twitter knew or should have known that reality, then perhaps that is a legal basis for Mr. Musk to walk away from the deal.

Platform: Following the news that Musk was pulling out of the deal, Twitter announced they were planning to file a lawsuit. In your opinion, how strong is Twitter's legal case against Musk?

Randolph Kahn: The uncertainty of litigation for Twitter and its management team and of course shareholders is necessarily bad for the company. Time is not a friend to Twitter with the looming litigation. Even if the company ultimately prevails in forcing Mr. Musk to complete the transaction, that uncertainty will no doubt continue to impact stock price, investors' interest in investing in the company and also may impact Twitter's ability to attract new talent to its workforce. Most importantly it’s a distraction that takes management’s eye off the focus of running the business. Uncertainty for public companies is a necessarily bad thing and one that Twitter does not need. It might be prudent for Twitter to look at this legal challenge as a time to come up with creative ways to come back to Mr. Musk to close the deal on mutually agreeable terms. On the other hand, the court in this case appears to be desirous of moving the case forward in a fast tracked fashion, which would seem to favor Twitter.

Platform: Some on the right have considered creating legislation that will define social media as essential public services and force social media companies to moderate their censorship of political content. Do you think there's a strong likelihood this could succeed and what's your stance on the matter?

Randolph Kahn: Twitter, like all social media companies, enjoys certain legal benefits to be considered a platform and not a content creator. Based upon the appearance that many of the social media companies “censor“ views on the right as a matter of policy that is both bad for the free market of information, bad for freedom of expression, and bad for an economy based upon ideas and information. I believe that social media companies should err on the side of allowing freedom of expression of viewpoints on the right and left. The Constitution and the First Amendment protects hate speech because after-all “love speech” doesn’t need protecting.

Platform: Facebook, Instagram and Google gather huge amounts of data every day. Do you think there's any potential risk of personal data (such as private messages) being leaked online and are there any legal or corporate standards in place to prevent this from happening ?

Randolph Kahn: Privacy is a major issue that impacts all of the Kahn Consulting clients, and confounds companies and individuals across the globe. Laws are being constantly enacted to deal with how information must be managed, including privacy breaches and information security failures. Losing control of information is a major concern for every social media company, every cloud provider and frankly every company that has personal identifiable information of its customers or employees. Laws across the globe vary in terms of what they expect companies to do and what they can and cannot do with personal information. But in the end, loss of control of information is necessarily bad for companies' reputations, executives’ careers, and the public’s confidence in doing business with the company. The court of public opinion can be more painful than a penalty from a regulator or court.

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