Who: The European Consumer Organisation (BEUC) and the European Commission (EC)
Where: European Union
When: 8 June 2023
Law stated as at: 5 July 2023
What happened:
Background
On 8 June 2023, BEUC announced that it had filed a complaint with the European Commission in relation to the alleged facilitation of misleading promotion of crypto assets by social media platforms.
BEUC is an umbrella group for numerous independent consumer organisations across Europe, lobbying on behalf of its members in relation to consumer protection issues. It filed its complaint together with consumer groups in Denmark (Forbrugerrådet Tænk), France (UFC-Que Choisir), Greece (KEPKA), Italy (Altroconsumo), Lithuania (Vartotojų aljansas), Portugal (DECO), Slovakia (SOS Poprad), and Spain (ASUFIN and OCU).
Nature of BEUC’s complaint
BEUC’s complaint alleged that social media platforms were exposing consumers to serious harm by allowing the proliferation of misleading advertisements of crypto assets on the social media platforms concerned. BEUC said this was happening through the advertising and influencer posts on the platforms. BEUC argued this was “unfair commercial practice” exposing consumers to serious harm, such as the loss of significant amounts of money.
BEUC referred to the EU’s Unfair Commercial Practices Directive, under which social media platforms need to exercise a level of care to ensure users are not harmed by others (including influencers). BEUC argued that “due to its high volatility and speculative nature“, crypto was a high-risk investment product which was not suitable for many consumers. This is particularly the case for unbacked crypto assets. It further argued that there are high profile instances of crypto assets exposing consumers to scams and resulting in heavy financial losses.
In the “alert” BEUC published alongside its press release, it noted examples of crypto asset promotions still being visible on platforms which has stated bans against content related to crypto. It also showed examples of promotions of crypto assets by high-profile so-called finfluencers with tag lines such as “HOW CRYPTO GAMING WILL MAKE YOU A MILLIONAIRE!” and “TOP 4 AI CRYPTO’S THAT WILL 100X BY 2025“.
Call for action
BEUC is urging the European network of national consumer authorities, the Consumer Protection Cooperation Network, to take action in light of this. BEUC is specifically calling on the network to:
- Request social media platforms to adopt stricter advertising policies on crypto assets.
- Request social media platforms to take measures to prevent influencers from misleading consumers, by including a prohibition on crypto assets in terms of use and adopt appropriate mechanisms to prevent exposure to such products.
- Inform the European Commission by requiring platforms to submit to the Commission reports on the effectiveness of these measures.
- Co-operate with the European Supervisory Authorities for financial services to ensure the platforms adapt their advertising policies to prevent misleading promotion.
Why this matters:
Investment in crypto assets has gained popularity across the EU and it is widely reported that this type of investment has gained further mainstream acceptability in recent years. The BEUC’s report, for example, highlights that 12% of consumers in the Netherlands report owning (or having owned) crypto assets, as do 18% of consumers in Slovakia. BEUC also notes that in the UK, the Financial Conduct Authority have stated that fewer crypto users regard investment in crypto assets as a “gamble” (38%, down from 47%) and are instead seen more as an alternative to mainstream investments.
This has concurrently narrowed the focus of regulators on tackling perceived associated risks. In the EU, for example, crypto assets will be regulated by the new Market in Crypto Assets Regulation (MiCAR) which was adopted by the European Union on 9 June 2023. MiCAR is intended as a regulatory framework for issuers of certain crypto assets across the European Union. However, the concern for consumer groups is that there are no sector specific rules applying to social media companies who may benefit from crypto asset marketing. In addition, it will take a number of years for Member States to implement in national legislation and effectively enforce MiCAR.
In this wider context, it is expected that social media platforms will continue to face greater scrutiny for their advertising policies in relation to promotion of crypto assets and the extent to which they are able to take action to prevent harm.
