The share of foreigners in the capital of Russian ad services, or classifieds, should not exceed 20%. Such a proposal is contained in the draft amendments to the law “On Information, Information Technologies and Information Protection”, which was submitted to the State Duma by Deputy Chairman of the Duma Committee on Information Policy, IT and Communications Anton Gorelkin on June 10 (the document was published in the electronic database of parliamentary bills).
“A Russian legal entity – the owner of the ad placement service should not be directly or indirectly owned, managed or controlled by a foreign state, an international organization, as well as organizations under their control, a foreign legal entity, a Russian legal entity, the share of foreign participation in the authorized capital which is more than 20%, a foreign citizen, a stateless person, a Russian citizen who has the citizenship of another state, their affiliates, who collectively or individually own, manage or control directly or indirectly in respect of more than 20% of the shares (shares ) in the authorized capital of this legal entity,” the text of the document says.
If violations are detected by the regulator and the refusal to eliminate them, the services will face blocking through the courts.
It follows from the bill that even if a Russian legal entity has a controlling stake, but 20% of this legal entity is owned by a foreigner, it will not be able to own a classified, explains Yury Fedyukin, managing partner of the law firm Enterprise Legal Solutions. “The legislator directly indicates that the presence in the authorized capital of a share of more than 20% owned by a foreign legal entity or citizens of another state, including in aggregate, and not only directly, but also indirectly, prevents the ownership of the service,” the lawyer explained.
In a situation where a classified company has several non-controlling shareholders and all of them are Russian legal entities without a controlling stake, but at the same time, in each legal entity, for example, 49% of foreign ownership, the requirements are also not met. Fedyukin drew attention to the fact that both the amendments and the law “On Information” itself use the concept of “owner”, and not “shareholder”, “beneficiary” or “owner”. Ownership means the right to influence the management of society, to participate in decision-making.
Accordingly, one can speak of ownership not only in a situation where 100% of the votes are concentrated in the hands of one shareholder, but also when the votes are distributed between two or more persons who own the company jointly, Fedyukin added. Therefore, even if one owner of the service in the capital has a foreign entity with a share of more than 20%, it does not meet the criteria proposed by Deputy Gorelkin.
An offshore company, regardless of the ownership structure, will also not be able to own the service. If a company is registered abroad, even if it has exclusively Russian beneficiaries, it may face blocking, the lawyer specified.
“The largest Russian services that have foreign shareholders are likely to adjust their ownership structure, bringing it in line with the new requirements, but it is for foreign services that this barrier may well become insurmountable. In fact, even if they land, that is, register a legal entity in the Russian Federation to manage a business, such a person most likely will not meet the criteria for ownership by a foreign person, ”Fedyukin concluded.
Gorelkin explained that now the activity of classifieds is in a gray zone: the obligations of service owners are not prescribed in the legislation, although in terms of the number of users, some of them exceed the audience of social networks, the media and other information resources. “Classifieds accumulate a huge amount of data from Russian citizens – the fact that the owners of many large online ad sites are located abroad is of particular concern: for example, the well-known Avito service belongs to Prosus from the Netherlands,” the deputy wrote in his Telegram channel . Another problem of classifieds, according to him, is scammers: the volume of thefts amounts to hundreds of millions of rubles.
In addition, the owners of the classifieds will be required to prevent their use for illegal purposes, to prevent the dissemination of defamatory information, to place an e-mail address for sending legally significant messages, to establish a single audience meter, Gorelkin explained the essence of the bill.
He also proposes to give the government the right to establish individual cases and the procedure for the integration and interaction of ad services with the ESIA and the Gosuslug portal. “Essentially, limiting the share of foreign participation is a form of landing classifieds operating in Russia,” explained Gorelkin. Services with a monthly audience of more than 10 million Russian users will fall under the regulation, the explanatory note to the bill says.
The rule on the restriction of foreign ownership in Russia is already functioning in relation to the media operating in the country. Corresponding amendments to the legislation were adopted in 2014. According to them, foreigners are not entitled to own more than 20% in the media.
After the entry into force of the law, many media outlets changed owners – foreigners sold their packages both in print media and on a number of TV channels. For example, the German publishing house Axel Springer sold the Russian version of Forbes, the Finnish publishing house Sanoma, together with partners of the Financial Times and the Wall Street Journal, sold the Vedomosti newspaper, the Swedish holding MTG sold a stake in the CTC Media television company, etc.
The regulation on audience measurement applies, for example, to online cinemas. These measurements are produced by Mediascope.
As Gorelkin clarified to Vedomosti, his initiative is aimed specifically at those services in which ads are placed by individuals. The bill should not apply to commodity aggregators such as Ozon, Wildberries, etc., he added. In the future, the deputy plans to discuss his initiative with market participants. If any ambiguous provisions are revealed in the text of the bill, they will be adjusted by the second reading of the bill in the State Duma, he added.
The deputy’s initiative was commented on by Avito. “We have not yet studied the text of the bill in detail, but we can responsibly declare that Avito is a Russian IT company, managed from Russia, is a full-fledged Russian taxpayer, a Russian employer for almost 5,000 people and complies with all the requirements of Russian legislation, including those directions that are indicated in the initiative,” the company said in its Telegram channel.
Avito also drew attention to the company’s recently announced plans to sell business in the Russian Federation. At the end of May, the main shareholder of the service, the Dutch technology investor Prosus, announced its intention to exit the Russian business. “Recently announced plans of the company call into question the relevance of the proposal itself and the expediency of preparing and submitting such acts to legislators,” Avito believes.
Gorelkin’s initiative, as published now, could lead to difficulties in attracting investors for Russian services, said Karen Kazaryan, chief analyst at the Russian Association for Electronic Communications (RAEC). “First of all, the bill bears the risk of a significant loss of investment attractiveness of Russian Internet companies,” agrees Sergey Polovnikov, head of the analytical agency Content Review. According to him, against the backdrop of such changes in legislation, at least Avito can lose a lot of value. In addition to Avito, Gorelkin’s initiative will affect the activities of such sites as hh.ru, CIAN, as well as Yandex services, Kazaryan draws attention.
Representatives of hh.ru and CIAN declined to comment. The representative of “Yandex” did not respond to the request of “Vedomosti” at the time of delivery of the material. They did not comment on the proposal of the deputy Gorelkin in the press service of VK, which owns the Yula ad service.
Gorelkin proposed similar bills before, experts recalled. For example, in 2020, he introduced a bill to the lower house of parliament that would prohibit foreigners from owning more than 20% stakes in audiovisual services with a Russian audience share of more than 50%. In 2019, the deputy submitted to the State Duma a bill to limit the share of foreigners to 20% in Russian IT companies (“significant Internet resources”). After the draft document was publicly discussed in the State Duma, Yandex’s capitalization on the Moscow Exchange and NASDAQ fell by about $1.5 billion. The company soon announced that it would change its management structure, Gorelkin withdrew the bill, and the shares bounced back.