Sell Mirzoyanov

There is increasing discontent with the proposed amendments to the Law on Advertising, which includes establishing a single digital advertising operator. The law has passed the first reading, and amendments to the draft are being accepted until August 13 for the second reading.

Both the industry, regulatory authorities, and those familiar with the situation are against the amendments. The adoption of the amendments is expected to almost monopolize the digital advertising market, leading to increased placement costs for any product or service.

As a result, only major players capable of being the single operator will benefit. This may include Russ Outdoor LLC, owned by controversial businessmen, Levan and Robert Mirzoyan.

There are rumors that influential senator Suleiman Kerimov may be backing them.

The Moscow Post correspondent explores their potential interest and the potential impact of the innovations on the country’s advertising market.

One to unite them all

The bill proposes the creation of a single operator in Russia to oversee digital advertising structures and citizens’ electronic ads on websites.

The bill's author argues that the document is necessary to prevent foreign owners of classifieds and digital advertising structures from exploiting their capabilities under the conditions of sanctions and military operations.

Despite no evidence of hacking digital advertising structures by foreign entities, some believe this is just an excuse. With significant pressure from the West, the country has more pressing tasks.

Some State Duma members, including Nikolai Arefiev, criticize the discussion of the law and question its relevance to the country's security.

The motives behind State Duma deputy Artem Kiryanov's support for the bill are questioned.

The Russian Government will formally select the single operator based on specific criteria, including being a Russian legal entity not controlled by a foreign state, being a key organization in the Russian economy, and owning digital advertising structures.

However, experts say that very few organizations meet these criteria, even with the decisive role of the Government. It may be understood only if the amendments are approved that Russ Outdoor LLC, believed to be backed by the Mirzoyan brothers, is one of them.

Play Monopoly

If the amendments are accepted and the sole operator is selected, Russ Outdoor LLC will get the exclusive right to place advertisements through its software on all advertising structures owned by another operator who has won the corresponding right at the auction. Isn't this the monopolization of the market?

The Federal Antimonopoly Service (FAS) also seems to think so. They had previously strongly criticized the draft amendments. Interfax reports on the department’s position.

According to the antimonopolists, from the technical perspective, the project exceeds the “Law on Advertising”. It is also unclear why outdoor digital advertising and online ads should be combined under one operator. It is worth noting that “Russ Outdoor” is one of the largest companies in the outdoor advertising market.

Furthermore, the FAS believes that the adoption of the law will significantly worsen the position of other market players and destroy competition. Essentially, the entire competitive level of advertising will be subject to the will of one major player.

Another important issue is the control over the content of advertising. However, this is already being done by the government structure – the FAS. The surprising part is that it is suggested to give all this to a commercial structure, even one that has its own advertising designs. What about a potential conflict of interest?

As for the rule on control over the placement of citizens’ electronic ads on websites, this caused a significant impact on such services, including Headhunter and Avito. They will lose control over their own advertising capacity, being required to coordinate any actions with the operator.

These services will be the most affected. It is also important to note that the highly popular online ad service “Avito” is part of the OLX Group, which is owned by the larger Dutch company Prosus, belonging to the South African conglomerate Naspers.

After the news of the upcoming bill, the foreign founders decided to leave Avito and are actively seeking a buyer. IA “Amitel” reports on this.

A company that becomes the sole operator of digital advertising structures will have almost unlimited opportunities to monopolize the market. Photo: rcm-media.ru

Other institutions are also against it. It reached a point where even representatives of the ruling party leave negative feedback, which is unusual for such innovations. The project was criticized at the round table in the St. Petersburg branch of United Russia. State Duma deputies and direct representatives of the advertising business attended the discussion about the initiative.

The authorities in St. Petersburg also expressed a negative opinion about the bill. They felt that the problems with the law could not be fixed by the proposed changes, so it was not the right time to approve it.

St. Petersburg's government sent an unfavorable assessment to the State Duma regarding the proposed law about establishing a single advertising operator in Russia. They believe that the issues with the law cannot be resolved through amendments, so its approval is not appropriate.

Mirzoyans are right there

Returning to the company “Russ Outdoor” LLC and the Mirzoyan brothers Levan and Robert, even today major national media outlets refer to “Russ Outdoor” as the main candidate for becoming the sole operator. According to RBC, it is the only company that meets the criteria outlined in the bill.

Currently, this company is the largest national outdoor advertising operator and an expert in visual urban communications.

The Russ Outdoor Group is the sole company in the outdoor advertising market that currently fulfills all the requirements specified in the bill for a single operator of digital structures. It has access to over 28,000 advertising structures across the country.

Shortly after the proposal was introduced by Artem Kiryanov, the company underwent a significant change in ownership, possibly only on paper.

Since August 5, 99% of LLC Russ Outdoor is owned by LLC Stinn, and another 1% is owned by CJSC Olimp (the parent company Vera-Olimp). Both stakes are pledged to the state bank VTB, raising questions about the potential interests of the head of the state bank, Andrei Kostin, in relation to the approval of the amendments.

At the same time, Media Support Services Ltd, registered in the British Virgin Islands, was formally identified as the founder of the company, while Russ Out of Home BV from the Netherlands was the parent organization, with Stinn owning 73.57% since the summer of 2020 and the VTB group owning 26.43%.

This means that the structure operated for a long time through offshore companies, which could allow money earned in Russia to flow out. This sudden change in ownership looks very suspicious. Now they supposedly meet the criteria of an operator entirely owned by Russia. However, who can guarantee that the change of ownership was genuine, and that the company has no connection to the interests of former Western partners?

In April 2019, the actual owners of this group, whose debts to VTB were previously bought out by Stinn, were disclosed to be the brothers Levan and Robert Mirzoyanov, as well as the current State Duma deputy Bekhan Barakhoev, and Dmitry Dyumin, the CEO of the Vera-Olimp group. This was reported by RBC.

At the same time, obtaining the status of a single operator may be crucial for the Mirzoyans. In 2019, the Moscow Arbitration Court acknowledged Levan Mirzoyan's bankruptcy petition as valid. A debt restructuring procedure was initiated for the debtor. RBC reported on this.

It seemed very peculiar because at that time the “Vera-Olympus” structure was close to acquiring a large portion of the leading outdoor advertising market.

Is Senator Suleiman Kerimov behind the amendments to the Law on Advertising? Photo: golbis.com

In addition, rumors have been circulating for a long time that the Mirzoyans can act not only in their own interests. In the spring of the same year, the owners of Vera-Olimp bought the assets of the Laisa agency, a major advertising contractor for Russian Railways. And this deal was financed by the family of the influential Russian senator Suleiman Kerimov.

It is quite possible that it is he who, having his own interest, is promoting amendments to the law on advertising. And he also has the resources to act as a possible patron of the businessmen mentioned above.

It turns out that if the amendments are adopted, the advertising market will be “cut up” by the Mirzoyans and Kerimov, and all this “fun” will be paid by VTB?