Overview

In late January 2021, President Putin instructed the Presidential Administration and the Russian Government to prepare proposals on additional requirements for foreign tech companies operating in Russia, to level the playing field for foreign and Russian tech companies. On July 1st, he signed the resulting bills on Residency and Internet Audience Measurement into law, providing the Russian state with new tools to manage the internet.

PBN H+K Strategies has analyzed the upcoming changes in Russian legislation to provide an understanding of the new regulations and their potential impact on companies operating on the Russian internet.

  • The Internet Audience Measurement law creates a mechanism to measure the internet resources’ audiences while the Residency law requires foreign tech companies with over 500,000 Russian users per day to register official branch offices.

  • The purpose of these legislative initiatives is to identify major companies operating on the internet in Russia, to determine the most influential players and to help the regulation of platform content.

  • Politically, the legislation creates additional tools for the Russian government to control “undesirable” online content. Economically, the aim is to increase tax revenue from international companies operating on the Russian internet.

  • The requirements will affect hosting providers, messengers, advertising system operators and online “organizers of information distribution.”

Internet Audience Measurement law

A single measure of online audience is long overdue and will provide the government and market with clearer information about online viewing of content, including professional content

Anton Gorelkin, Member of the State Duma Committee on Information Policy, Information Technologies and Communications
  • The law focuses on measuring the number of users per day of all platforms operating on the internet in Russia. The new mechanism will be used as a tool for the implementation of the more comprehensive Residency law.

  • Audience measurement requirements will apply to websites, information systems and programs used for the distribution of media products, audiovisual content and other publicly available information.

  • Roskomnadzor will select the organization responsible for measuring the audience of internet platforms by October 2021. Mediascope is a leading candidate, already having proven itself efficient at monitoring television audiences. The body chosen will only be able to use the data received for audience measurement.

Residency law

The bill on residency of foreign tech companies is not repressive at its core and envisages primarily economic sanctions for violators

Alexander Khinshtein Chair of the State Duma Committee on Information Policy, Information Technologies and Communications
Bodies obliged to install the measurement system to determine the number of RUSSIAN users of an internet resource

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Operating on the internet in Russian territory

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Foreign legal entities Foreign organizations Foreign citizens Stateless persons

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Distributing information
Placing ads for Russian users
Processing Russian user data
Receiving money from Russian legal entities or individuals

If the audience of an internet resource is more than 500,000 Russian users per day, owners will be obliged to:

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Refusal to comply with this or other laws may trigger one or more of the following measures:

  • Users will be informed by search engines and special tags that the company violates the Russian law
  • A ban on advertising on the resource
  • A ban of the resource from search engines
  • Partial restriction of access to the resource (traffic slowdown)
  • A ban on the distribution of advertising about the resource in Russia
  • Restrictions on money transfers and payments from Russian individuals and legal entities
  • A ban on cross-border personal data transfer
  • Complete ban on accessing the resource from the Russian segment of the internet
 
  • Roskomnadzor will have an extensive mandate to apply enforcement measures if a foreign entity violates Russian legislation.

  • In cases not specified in the law, Roskomnadzor will have the right to apply measures at its discretion.

  • Company branches, representative offices or authorized legal entities will have to be opened by January 2022 and Roskomnadzor will apply enforcement measures if foreign entity doesn’t provide Roskomnadzor with information on advertisements on platforms from September 2022.

Outlook

The provisions of the newly adopted laws provide the Russian Government with extensive tools to increase oversight of foreign tech companies, by forcing them into Russian jurisdiction. International companies might find themselves faced with an uneasy choice – fully comply with the fast-changing Russian legislation or consider leaving the market.

  • The new Residency law will make it easier for the government to track and enforce compliance with Russian legislation, such as requirements to localize the storage of personal data of Russian users.
  • Foreign companies may face additional costs for the installation of the new audience-measurement systems. The process for the provision and installation will be determined by Roskomnadzor later.
  • Compliance may entail significant changes for a foreign company’s operations on the Russian market (e.g. provision of customer service, organisational structure).
  • Amongst a greater trend, these laws further expand the powers of Roskomnadzor, potentially turning it into one of the most powerful law enforcement agencies The laws provide Roskomnadzor with broad authorisation to block unwanted resources and control content generated on the internet, which could affect the tech market in Russia as a whole.
  • The laws reflect a growing attention of the state to the IT & internet sector. Further legislative initiatives to increase the Government’s control over the industry are to be expected.

CONTACT INFORMATION:

RUSSIA
Pavel Steshin
Vice President for Public Affairs
Tel: +7.495.775.0077
Pavel.steshin@hkstrategies.com