Shares of Snap (NYSE:SNAP) fell about 1.6% in premarket trading on Thursday after the European Union launched an investigation into whether Snapchat is adequately addressing risks related to child grooming and the sale of illegal products on its platform.
The inquiry is being carried out under the EU’s Digital Services Act, which requires major online platforms to take stronger action against illegal and harmful content or face potential penalties of up to 6% of their global annual revenue.
“From grooming and exposure to illegal products to account settings that undermine minors’ safety, Snapchat appears to have overlooked that the Digital Services Act demands high safety standards for all users,” EU technology chief Henna Virkkunen said in a statement.
The European Commission said it believes Snapchat may lack sufficient safeguards to stop minors from being contacted by users attempting sexual exploitation or other criminal activities.
Regulators also raised concerns that the platform’s content moderation systems may not be effective enough at preventing posts that direct users toward illegal products such as drugs or age-restricted goods including vapes and alcohol.
In addition, the Commission said it will assume control of a Dutch regulatory investigation launched last September that examined the sale of vaping products to minors through Snapchat.
The probe represents another regulatory challenge for social media companies operating in Europe under the Digital Services Act, which introduced stricter rules aimed at improving user protection and strengthening oversight of online content.