Roblox Corporation (RBLX) is dealing with a fresh regulatory headache in Europe. The Netherlands Authority for Consumers and Markets launched a formal investigation Friday into whether the gaming platform does enough to protect its youngest users, and the market didn't love the news.
Shares dropped more than 10% as the probe was announced, and Wedbush analyst Alicia Reese trimmed her price target from $165 down to $110, though she's keeping an Outperform rating on the stock.
What's Behind the Investigation
The Dutch regulator, known as the ACM, is examining whether Roblox takes adequate steps to keep young users safe across the European Union. The agency is wielding the EU's Digital Services Act, which demands strong safeguards for minors on online platforms.
Here's the concern: children on the platform may face harmful content and unsafe interactions. The ACM said it received reports suggesting Roblox's current measures might not meet EU standards. Given that Roblox draws tens of millions of daily users worldwide—many of them children and teens—that's not a small issue.
Critics have raised red flags about minors encountering violent or explicit content on the platform, where users can both play games and create their own experiences.
Roblox's Response Efforts
To be fair, Roblox isn't sitting idle. In January, the company announced it would require all users to complete a private age check to access chat features. The changes include age-based chat limits, keeping chat turned off by default for users under nine without parental consent, and using camera-based age estimation through Persona with optional ID verification.
Whether that's enough to satisfy European regulators remains to be seen.
What Happens Next
The ACM said it reviewed information during a preliminary phase before deciding to open this formal investigation. The regulator expects the process could take about 12 months, depending on how things develop.
Under the Digital Services Act, online platforms must take appropriate and proportionate steps to protect children's privacy, safety and security. If Roblox falls short, enforcement options include binding orders, fines, or periodic penalty payments.
Roblox shares were trading at $67.71, down 10.58% at the time of publication Friday.