For companies that are interested in entering the Russian market, but reluctant to establish a physical presence in the country, an online presence can be a viable alternative. The foreign share of online sales is steadily increasing (from 8% in 2010 to 33% in 2016). In 2016 online sales of goods in Russia reached $12 billion (4% of total retail sales), of which $4.3 billion was from non-Russian vendors.(1) Almost all imported goods purchased online by Russian consumers enter the country without being subject to value added tax or customs duties.(2)
The legal requirements for selling goods to Russian customers online are similar to those of other countries. For sellers outside Russia, a key question is what law should apply. Can online terms and conditions simply specify that the seller's law applies? No, as Russian mandatory requirements (especially those concerning IP rights, personal data protection, advertising and consumer protection) apply if information on a website is targeted at Russian consumers. In addition to complying with the mandatory requirements of Russian law, sellers should also make use of the benefits offered therein.
Apart from trademark and entity name-related issues, various other regulatory requirements must be considered when selecting a domain name in Russia. One of the major requirements is the regulation regarding personal data. Due to the recent data localisation law, the collection of personal data from Russian consumers – from placing the order to further storage in a database located abroad – is no longer permitted.
Russian consumers' personal data must be stored and processed using databases located in Russia. The Russian data protection authority is currently monitoring compliance with the data localisation law, specifically in the e-commerce sector. The relevant requirements can be complied with by, among other things, locating the website database that contains personal data in a Russia-based data centre or server.
Russian law requires that advertising targeted at or conducted in Russia must be in Russian. However, sometimes English phrases are desirable. In such cases, English can be used without restriction as long as the text which appears in English also appears in Russian in an identical form (ie, with regard to content, sound and form). In practice, when English phrases are used, it is common for the Russian version to be displayed in a much smaller font size. Some exceptions to this dual-language requirement exist, such as the display of foreign company names and trademarks.
Russian law also stipulates that consumers must be informed of the seller's full company name and its address in Russian in a clear and accessible manner.
Comparative advertising is allowed as long as it is factually correct. General descriptions, such as 'the best', 'leader' or 'number one' should include a reference to objective evidence of such superiority. Disparagement of competing goods or services is generally not permitted, especially if it is based on false, inaccurate or distorted information.
In general, the anti-monopoly authority which is responsible for enforcing advertising laws does not consider information published on a company's own website to be advertising. Rather, it views a company's website as being intended to inform visitors about the company's commercial activities, goods, terms of purchase, prices, discounts and privacy policies and, as such, the advertising regulations do not apply. Such information will be considered an advertisement only if the website is designed to attract the attention of end users of specific products and distinguish them from competing goods or attract the attention of the company itself (eg, pop-up banners).
The fact that fair advertising laws do not apply to a company's website does not mean that anything goes; statements that constitute unfair competition are also prohibited. Examples include:
- the dissemination of false or inaccurate information that disadvantages another company;
- the dissemination of information that misleads consumers about the company's products;
- the use of another company's intellectual property; and
- the dissemination of information that will lead to confusion regarding a competitor's business or products.
Search engine advertising, including keyword purchases, is common in Russia. The use of a competitor's trademark as a search engine keyword is generally permissible. The keywords themselves are a form of search technology and are not seen by the consumer. Thus, unlike trademarks, keywords cannot identify any goods or services. However, such use constitutes unfair competition and trademark infringement if the competitors' trademarks are not only used as keywords, but also displayed:
- on a website;
- in contextual or search engine advertising;
- in the title of the HTML code; or
- in photos of similar products displayed on the website.
Online merchants in Russia can use a wide variety of targeted and untargeted advertising channels to reach their intended audience. For targeted electronic ads, Russia takes the opt-in approach. A consumer may be deemed to consent to opting in as part of a website's terms and conditions.
When allowing users to comment on goods or adding any other comment function, online store operators should always consider the relevant risks associated with user comments. For instance, the relevant rules for using the website should address the issue of publishing offensive or otherwise illegal comments to ensure that the online store operator avoids potential issues arising from being associated with the relevant comments. Therefore, pre-moderation of comments (including user-generated product reviews) before they are published on the website is generally advisable.
A separate issue is the risk of being subject to anti-terrorism regulations. In May 2014 Parliament adopted a law which introduced the definition of an 'organiser' of the dissemination of information on the Internet. Due to the existing definition, there is a risk that even online stores with a comment function (eg, comments on products) may be considered organisers. To date, this has not been the case in practice and the relevant register of organisers lists only web chat services, social media and other similar applications. Therefore, it is unlikely that an online store would be required to comply with this requirement. However, the authorities' practice in this regard should be monitored.
Sales conditions Russian consumer protection law and the distance selling provisions contain the following mandatory rules for online sales.
The offer of goods on a website addressed at an indefinite number of consumers is regarded as a public offer. Consequently, a sale and purchase agreement is deemed to be concluded once a consumer displays an intention to buy the relevant goods, including by placing an order on the website.
Merchants selling to Russians must offer a cash payment option. For online sales, this means that the product must be shipped before payment is made and the customer pays cash to the delivery person. Alternatively, an advance payment method via the Russian post may be used.
The limitation of damages in relationships with consumers to foreseeable damages is not permitted. The seller's liability towards consumers arises irrespective of its fault and can be excluded only in cases of force majeure.
In accordance with the distance selling regulations, a customer can return or exchange a product of satisfactory quality within seven days. However, if a seller fails to inform a customer in writing about this rule, this term can extend to three months.
Further, under Russian consumer protection law, in the case of defective products, a consumer may demand one of the following remedies:
- a free-of-charge repair;
- a free-of-charge replacement with the same product;
- a free-of-charge replacement with a similar product of another model (with a recalculation of the price);
- a full refund; or
- a price reduction.
No limitation of these rights by the sales policy is allowed. A consumer can lodge a defect claim only if the defects are discovered within the warranty period or, if the warranty period is shorter than two years, within two years of the delivery date.
However, the consumer may demand a free-of-charge repair of any significant defects (eg, defects which cannot be removed or which reappear after elimination) which are discovered:
- after expiry of the warranty period, but within the service life; or
- if no service life is established, within 10 years from the delivery date.
One of the most important provisions for a foreign online store concerns cross-border data transfers. However, it should be ensured that no data recipients can be located in a country which is not considered to provide adequate protection for personal data as, in such cases:
- the online store operator would need to collect handwritten consent forms from the buyers.
For further information on this topic please contact Natalya Babenkova or Vyacheslav Khayryuzov at Noerr by telephone (+7 495 799 56 96) or email (firstname.lastname@example.org or email@example.com). The Noerr website can be accessed at www.noerr.com.
(1) More information is available at www.ewdn.com/reports/e-commerce-in-russia-insights/.
(2) Goods that are purchased from abroad by an individual and declared as goods for personal use are not subject to value added tax and customs duties if they do not exceed €1,000 in value and 31 kilograms per month in weight (more information is available here). The price limit with be gradually reduced over the next few years (to €500 in 2018 and €200 in 2019).
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.