More crypto lobbying — FOMO ads — Merger control – POLITICO

A weekly newsletter on campaigning, lobbying and political influence in the EU.

By BJARKE SMITH-MEYER

Tips, tales, traumas to @bsmithmey or [email protected] | View in your browser

Welcome to this week’s Influence newsletter that I have the pleasure of handling in Sarah’s absence. But fear not! She will be back with you next week. We have met once before — last summer, in fact. And I’m here to give you another flavor of the crazy crypto world I cover. Hold fast!

CRYPTO LOBBYING SURGE

GROWING CRYPTO COAXING: Last year was a tough one for the crypto industry as it went through a heavy downturn. But that didn’t slow its lobbying effort — if anything, that pushed it into overdrive. Crypto lobbying outlays in 2022 more than doubled when compared to the prior year, reaching a new height of $25.5 billion in the U.S. That’s remarkable considering how when we last spoke in August, the crypto market had seen two-thirds of its value evaporate into thin air.

The crypto market hasn’t gotten much better since. The world’s third-largest crypto trading venue FTX collapsed in early November after it had emerged that client cash had been used to make risky bets elsewhere. The exchange’s collapse was not just a shock to the crypto system, but also highly embarrassing for U.S. lawmakers who’d come to see it as the respectable face of a controversial market. The scandal particularly burned some Democrats after they’d accepted FTX campaign money for the midterm elections.

Best defense is offense: U.S. crypto exchange Coinbase led the spending spree on lobbying, according to a recent report by India-based The Money Mongers, which describes itself as an independent crypto think tank. The report found that Coinbase, which is making a big push into the European market, hired 32 new lobbyists in the U.S. last year, forking out more than $3.3 million. That’s half again as much as the lobbying expenditure of the Blockchain Association, which came in second place with $1.9 million. Coinbase’s rival exchange Crypto.com came in sixth, at $1.18 million. Even FTX spent $720,000 on lobbying before it collapsed — and that’s not accounting for its political donations!

FOMO ADS

GETTING THE MESSAGE OUT: Financial regulators are scratching their heads over how to police online advertising for risky financial products and cryptocurrencies. Crypto exchanges are watching this space with bated breath after having perfected a marketing strategy that capitalizes on people’s fear of missing out. The message is pretty simple and is as old as the hills: Convince people they need to get on the gravy train before it leaves the station.

Fans & jocks: If you’re a sports fan, you’ve definitely seen these ads. And that’s no accident. Research shows that sports fans and jocks are the most likely types to buy crypto … explaining why many a crypto exchange has put their name on stadiums and competition billboards, such as the soccer World Cup.

The ads are deliberately vague and make very little reference to the services or products they sell and provide. What defunct exchange FTX ran for last year’s Super Bowl is a great example.

Ring-fencing: There are no hard-and-fast rules for regulating crypto advertising — some EU countries have introduced crypto ad laws though in most, that’s not the case. Sports sponsorship tends to involve ring-fenced agreements with an event organizer, rather than a specific country. So, a deal with the FIFA World Cup in Qatar isn’t about advertising to local Qataris, but securing brand recognition for a one-off event — a handy loophole.

Outdated rules: The legal gray area here is in what regulators call “reverse solicitation,” which is when people go out of their way to solicit the services of a company that is based and regulated outside of their borders. EU regulators draw the line if a foreign firm actively markets its products and services across the bloc without adopting local safeguards that protect European citizens from scam artists.

That worked fine in the old world of dial telephones and financial brokers who could advise people on which foreign firms to approach; not so much in the online world.

Solution coming: EU legislators last year agreed a rulebook for crypto, called MiCA, that’ll require the bloc’s securities regulator to develop new guidelines on how foreign companies can service EU investors. Lawyers are expecting them to be strict. Read the full story here.

MERGER CONTROL

SMALL WORLD: The world of competition economists is a relatively small one, dominated by a handful of consultancies — Compass Lexecon, Charles River Associates, RBB Economics and NERA. They’re frequently called in to analyze markets to show the potential effects of a deal or a company’s behavior. So frequently, indeed, that merger officials may be flooded with spam in the form of economic submissions — “a strategy that exploits the regulator’s finite administrative capacities,” a group of academics said in a paper published last week. 

Quantity over quality: The paper flags “significant increases” in submissions of merger cases and the number of economic consultancies hired by merging parties. It also links the increase in submissions to a drop in quality, which it says is “another indication of spamming — of seeking to overwhelm rather than to inform.”

Conflicts of interest: The paper criticizes the anonymization of academic experts, “which increases the likelihood of undisclosed conflicts of interests.” It suggests that regulators could issue guidelines for consultancies’ conduct, including a professional code and monitoring system, similar to how lawyers have to deal with potential conflicts. 

Opening up: Corporate Europe Observatory, a lobbying and transparency campaign group, is asking for economic consultancies to join the EU’s Transparency Register. It also wants the European Commission’s antitrust department to disclose more about the submissions it receives and to address revolving door issues with staff.

Case in point: Yale professor and a former U.S. Justice Department chief antitrust economist Fiona Scott Morton is in the running to become the EU’s new chief competition economist, three people have told POLITICO. Scott Morton previously advised Amazon and Apple.

OMBUDSMAN KEEPS OMBUDDING

DEFENSE FUND SCRUTINY: EU Ombudsman Emily O’Reilly called on the Commission to offer more transparency on the role of external experts who give the green light to projects under the €8 billion European Defence Fund. The EU’s executive arm has yet to respond to a letter from O’Reilly, who asked how the Commission can respect the EU’s code of conduct and safeguard against conflicts of interest that may arise from such experts.

The ombudsman pointed out that these experts’ names are nowhere to be found — which is unusual by EU standards and undermes public scrutiny, in her estimation. “We imagine that over the coming years this [defense procurement] is going to be an even bigger topic […] so it’s really important that conflicts of interests are identified,” O’Reilly told reporters Tuesday after the ombudsman’s annual report was published.

More Pfizer questions to VDL, please: O’Reilly also bemoaned apparent declining interest of journalists in Commission President Ursula von der Leyen’s mysterious text messages on vaccine purchases with Pfizer chief executive Albert Bourla — even though POLITICO has persisted in following up on the controversy.

“President VDL is out there, she’s a public figure […] but there has never been an opportunity to ask her directly: ‘What about the text messages?,’” said the Ombudsman. “I noticed that there was a big article, an interview with her [von der Leyen] on the Financial Times, where the text messages weren’t even mentioned.” Ouch.

Excess communication: So you’re in a consultancy handling comms for a company or organization? Then make sure you don’t add to journalists’ work — or inbox clutter — both of which can be head-spinning as it is. That includes: not asking for a list of questions several weeks ahead of an interview; not sending and resending PR and followup emails without investigating the topics reporters actually cover; and last but not least, not forwarding press releases the journalists already received directly from the company. We guarantee reporters will like you better for it.

INFLUENCERS

EUROPEAN COMMISSION

— Roser Domenech Amado has been appointed director of One Health in the Commission’s DG Health and Food Safety. 

— Elena Kostadinova, the legal policy officer behind the Commission’s upcoming proposal on standard essential patents, has left DG GROW to join the smart and sustainable growth department at DG Regional and Urban Policy.

— Penelope Papandropoulos has became head of DG COMP’s data analysis and technology unit. Until very recently, she was a close adviser to EU antistrust boss Margrethe Vestager and previously worked for her predecessor, Spain’s Joaquín Almunia.

— Marietje Schaake, a former Dutch MEP, tweeted that she’s been appointed as a special adviser to the Commission‘s antitrust boss Margrethe Vestager “with a focus on geopolitics and technology.”

— Maria Tsoni is leaving the Commission spokespersons’ service after more than six years to become a legal and policy officer in DG Communications Networks, Content and Technology, in the unit working on the implementation of the Digital Markets Act.

INDUSTRY

— Sofie Carsten Nielsen is leaving the Danish Parliament to become Bio Project Director for the Confederation of Danish Industry, starting in Brussels from May 1.

TRADE

— Matthijs Geuze has joined specialized lobbying law firm Alber & Geiger as a senior partner.

TECH

— UBER HIRING: Ride-hailing platform Uber is looking to hire a legal counsel on EU affairs, based in Amsterdam.

— Stephen Turner, the former Brussels head lobbyist for Twitter, has joined PlayStation. He will lead the company’s public policy team for Europe, Middle East and Africa.

— Meanwhile, Twitter’s former head of lobbying for Europe Ronan Costello also announced he will work for Reddit starting next month.

— Philippe Régnard, who spent three years as Huaiwei’s head of public policy and government affairs, has start his own consulting agency for tech public affairs called Tech Publica.

TRADE

— Siobhan Kahmann will become a partner at CMS Brussels’ competition and trade team from May 1.

ADVOCACY

— Mark Dempsey has joined the nonprofit organization ARTICLE 19, which campaigns for the freedom of speech and expression, as a senior advocacy officer.

UK

— MATERNITY LEAVE: The British Secretary of State for the Department of Science, Innovation and Technology, Michelle Donelan, is planning a “short” maternity leave of around two months. Chloe Smith, the former secretary of state for work under Liz Truss, will act as an interim.

THANKS TO: Aoife White, Gregorio Sorgi, producer Fiona Lally and my editor Sonya Diehn.

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