Will DOGE's Aim at Thomson Reuters Hurt their Legal AI Business?

How much of $1.56 Billion in US Government Contracts are at Risk?

The last 24 hours has seen significant speculation on X about Reuters contracts with the US Federal Government. Even Elon Musk chimed in on the posts dated December 16, 2024. An X account controlled by Mike Benz highlighted over $1.56 billion in contracts between Thomson Reuters (parent of Reuters) and the US Government.

A search on the US Spending Government website lists numerous contracts with various agencies and spending over time. While questions about the Government contracts might raise the “Department of Government Efficiency” DOGE alarms, we shouldn’t underestimate retaliation as a motivation for targeting Thomson Reuters.

While receiving $$$ from various agencies, Reuters won a Pulitzer in for a series about Elon Musk’s companies. “The Musk Industrial Complex” highlighted investigations from the very same agencies that were paying for Thomson Reuters contracts.

Reuters' Musk series, "The Musk Industrial Complex," revealed a spate of worker injuries and one death at Musk's rocket company SpaceX and the mistreatment of animals at his brain-implant company, Neuralink.

In addition, Reuters found that electric car pioneer Tesla covered up dangerous defects, rigged its cars' dashboard driving-range estimates and shared sensitive images recorded by its vehicles without drivers' knowledge. The series prompted investigations in the U.S. and Europe and calls for action from U.S. lawmakers.

Multiple news outlets including the NYT piled on the story about Elon Musk and his companies. Ever since Elon Musk purchased Twitter/X the investigations have been ongoing. President Biden literally called for an investigation of Elon Musk in November 2022. Most of the time, speculation on X doesn’t reflect reality, but this time, the potential of a DOGE investigation of Thomson Reuters could have some legs.

Mike Benz has over 500k followers on X and his post about Reuters and their Pulitzer series about Elon has already received over 1.3m views.

In October 2019, multi-year contracts between DOJ, FBI and Thomson Reuters were announced.

MINNEAPOLIS-ST. PAUL, October 28, 2019 – Thomson Reuters announced it has been awarded a long-term contract to provide its leading legal research and investigative technology tools to the Department of Justice (DOJ) professionals. In all, more than 25,000 users will have access to Thomson Reuters products under this agreement. Terms of the deal were not disclosed.

U.S. Attorneys and other legal professionals across the DOJ will have access to state-of-the-art legal products and services, including Westlaw Edge, Practical Law, Litigation Analytics and Drafting Assistant, to offer efficiency and accuracy throughout every step of the department’s efforts to ensure the fair and impartial administration of justice.

It is anyone’s guess how much of these contracts highlighted in the USA Spending website have been fulfilled, or how much is outstanding. I am not a government contracting expert. Thomson Reuters specifically cited the “increase in transaction revenue was driven by the government business” in there 2023 Annual Report to Shareholders.

Thomson Reuters is in an unenviable situation with a high profile news organization attached to its core legal technology and information assets. They have to tow a fine line when reporting on corporate clients while trying to sell their Westlaw products to the very same lawyers that may be employed by those corporate entities.

On June 27, 2023 the company announced it’s $650m acquisition of California based legal tech AI superstar, CaseText. In a Press Release, the company committed to an acquisition budget of $10 billion.

June 27 (Reuters) - Thomson Reuters (TRI.TO), opens new tab said on Monday it had agreed to acquire Casetext, a legal startup with an artificial intelligence-powered assistant for law professionals, in a $650 million all-cash deal.

Thomson Reuters' chief financial officer, Michael Eastwood, had said last month that the company planned to spend about $100 million a year to invest in artificial intelligence (AI), which would be separate from the news and information company's merger and acquisition budget of about $10 billion from now till 2025.

The contribution of revenue derived from the CaseText acquisition is not specifically identified in the Thomson Reuters financial filings. Back in June 2024 I wrote about the companies AI strategy, Does Thomson Reuters Need a Generative AI Intervention? It didn’t seem like Thomson Reuters was living up to its $10 billion budget target for acquisitions and there were questions if it was spending the $100m per year beyond the CaseText acquisition. The companies Q1 2024 financials didn’t show a lot of traction for its AI acquisitions.

While ‘Legal’ is the largest customer segment by far in the Thomson Reuters ecosystem, it is also the slowest growing in the group, unless you really want to ad their “Print” business in the matrix. Thomson Reuters Legal only grew by 1% year over year.

There may be a silver lining to the potential scrutiny of future business between Thomson Reuters and US Government Contracts. It appears from the USA Spending Government Website that the existing contracts may have been front-loaded. Certainly, another silver lining from this controversy will be the potential business generated for companies like LexisNexis which competes directly with Thomson Reuters.

The Department of Government Efficiency is barely 5 weeks old, having been announced on November 12, 2024. Trump recently settled a defamation case with ABC for $15m plus attorney fees of $1m. Trump is also going after the Pulitzer organization, and has recently racked up a win in court for a libel action over awards given to NYT and Washington Post regarding Russia collusion.

It would be foolish to think that Elon, isn’t going to turn the tables and take a cold hard look at Thomson Reuters. Obviously this is bad for Thomson Reuters bottom line, but possibly good for other players in the legal technology and Generative AI space.

This time it seems, Karma is in fact a DOGE.

Edward Bukstel

CEO

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