European Union regulators are preparing major penalties against Elon Musk’s social media platform X for breaking a landmark law to combat illicit content and disinformation, said four people with knowledge of the plans, a move that is likely to ratchet up tensions with the United States by targeting one of President Trump’s closest advisers.

The penalties are set to include a fine and demands for product changes, said the people, who declined to be identified discussing an ongoing investigation. These are expected to be announced this summer and will be the first issued under a new E.U. law intended to force social media companies to police their services, they said.

European authorities have been weighing how large a fine to issue X as they consider the risks of further antagonizing Mr. Trump amid wider trans-Atlantic disputes over trade, tariffs and the war in Ukraine. The fine could surpass $1 billion, one person said, as regulators seek to make an example of X to deter other companies from violating the law, called the Digital Services Act.

E.U. officials said their investigation into X was progressing independently from tariff negotiations after Mr. Trump announced major new levies this week. The investigation began in 2023 and regulators last year issued a preliminary ruling that X had violated the law.

The E.U. and X could still reach a settlement if the company agrees to changes that satisfy regulators’ concerns, the officials said.

X also faces a second E.U. investigation that is broader and that could lead to further penalties. In that investigation, two people said, E.U. officials are building a case that X’s hands-off approach to policing user-generated content has made it a hub of illegal hate speech, disinformation and other material that is viewed as undercutting democracy across the 27-nation bloc.

“We have always enforced and will continue to enforce our laws fairly and without discrimination toward all companies operating in the E.U., in full compliance with global rules,” a spokesman for the European Commission, the E.U.’s executive branch, said in a statement, declining to comment specifically on X.

X declined to comment.

Officials in Brussels expect Mr. Musk, who has criticized European policies as a form of censorship, to fight any regulation. Last July, after the E.U.’s preliminary findings were released, Mr. Musk said he looked forward to contesting any penalty in “a very public battle in court.”

That could set up a legal confrontation with wide-ranging ramifications. If Mr. Musk refuses to comply with E.U. orders to change his service, it may result in a standoff over how to get X to comply.

The X investigation has been closely watched as the first major attempt to enforce the Digital Services Act, which requires companies to better police their platforms and to provide adequate transparency about how their services work. The law has become a flashpoint in a trans-Atlantic debate about free speech, with Vice President JD Vance in February likening E.U. regulation to digital censorship.

After Mr. Trump was elected, European regulators slowed down the X investigation to assess the potential fallout, one person said. More recently, as trade tensions with the United States intensified, the authorities decided to press ahead.

Last year, European regulators concluded that X was violating the law by refusing to provide data to outside researchers, making it difficult to measure how disinformation and other harmful material spreads on the service. The authorities also believe X has failed to provide adequate transparency about advertisers, or to verify the authenticity of users who pay to have a “verified” account, making the platform more vulnerable to abuse and foreign interference.

The E.U. and X have been in discussions for months over the investigation. After the preliminary judgment against X last year, the company replied with hundreds of points of dispute that regulators have been working through to rebut, two officials said.

E.U. officials said the exact penalty against X would not be decided until closer to a final announcement. Under the Digital Services Act, companies can be fined up to 6 percent of global revenue, though regulators rarely pursue the largest-possible penalty.

Unlike Google, Meta, Apple and Amazon, which are publicly traded, X is owned solely by Mr. Musk. E.U. regulators are considering using a piece of the law that lets them calculate a fine based on revenue that also includes other companies Mr. Musk privately controls, like his rocket maker SpaceX. That increases the potential penalty to well over $1 billion, one person said.

X is not the only tech company in the E.U.’s cross hairs. Regulators are expected to announce penalties against Meta and Apple for violating a 2022 law, the Digital Markets Act, intended to boost competition in tech. Meta is also under investigation for potentially violating the Digital Services Act by inadequately protecting minors.

The investigations show that the E.U. plans to continue aggressive regulation of American tech giants. For more than a decade, the E.U. has investigated or fined U.S. tech giants including Amazon, Apple, Google and Meta for anticompetitive business practices, lax data privacy and weak oversight of user-generated content.

European tech regulation may have played a role in the size of the tariffs Mr. Trump announced this week against the E.U. In February, the White House published a memo warning that the Digital Markets Act and Digital Services Act were being scrutinized for unfairly targeting American companies.

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