By Tara Cosoleto and Holly Hales in Melbourne

A “concerning precedent” for tech giants has been avoided after X Corp was ordered to comply with an Australian safety notice about child sexual abuse issued to Twitter.

The US-based social media company took Australia’s eSafety Commissioner to the Federal Court, arguing it should not have to pay a fine or any further penalties for non-compliance.

The commissioner fined Twitter $610,500 in October 2023, alleging it failed to adequately respond to questions about harmful content on its platform, particularly child sexual abuse material.

The penalty, issued under Australia’s Online Safety Act, could attract daily fines of $780,000 for each day the company did not respond.

X Corp barrister Bret Walker SC in September argued the commissioner’s sanctions could not be passed on to another company following a merger.

Twitter, incorporated in the US state of Delaware, stopped being a company when it merged with X Corp in Nevada and any penalty process would need to be restarted, Mr Walker said.

But the commissioner’s barrister Stephen Lloyd said the entity known as Twitter was not “dissolved” at the time of the March 2023 merger, and its assets and liabilities should transfer to X Corp.

Justice Michael Wheelahan on Friday agreed, dismissing X Corp’s case.

The eSafety Commissioner Julie Inman Grant said the court’s rejection of X Corp’s argument was in line with the Online Safety Act’s aim to “hold all tech companies to account without fear or favour”.

“Early last year, we asked some of the world’s biggest technology companies, including Twitter, to report on steps they were taking to comply with the Australian Government’s Basic Online Safety Expectations in relation to child sexual exploitation and abuse material on their platforms,” she said.

“Had X Corp’s argument been accepted by the court it could have set the concerning precedent that a foreign company’s merger with another foreign company might enable it to avoid regulatory obligations in Australia.”

In published reasons, Justice Wheelahan said the social media company had failed to show that it was not required to respond to the reporting notice.

“The status of X Corp changed so that it became the surviving entity into which Twitter Inc merged,” the judge said.

“From the perspective of Nevada law, X Corp’s new status entailed being subject to all the liabilities, including the regulatory obligations, to which Twitter Inc had been subject immediately before it merged into X Corp.”

Justice Wheelahan dismissed the case and ordered X Corp pay the commissioner’s legal costs.

The commissioner has also separately commenced civil penalty proceedings against X Corp, in relation to its alleged non-compliance with the transparency notice.