1. Overview of the legal and regulatory regime for advertising
The Russian Constitution guarantees common economic space, protection of competition, freedom of thought and speech, and ensures the right to freely look for, receive, transmit, produce and distribute information by any legitimate means. This general rule, established by the primary Russian statute, constitutes the foundation of advertising business regulation in Russia, which is further developed in the Law “On Advertising” (hereinafter the Advertising Law). The Advertising Law is the most important piece of federal legislation for the advertising industry in Russia.
Article 1 of the Advertising Law defines its main goal as facilitating the development of the market economy based on the principles of fair competition and ensuring common economic space. In a nutshell, the Advertising Law prevents false or misleading advertising and sets out industry-specific regulations and certain prohibitions over how competitors may deal with each other as well as how businesses should treat their customers.
The first Advertising Law was adopted in 1995, in the early days of the emerging Russian market economy. As the competitive environment advanced, the demand for more sophisticated legislation became apparent. Responding to the call of the times, the State Duma passed the current federal law on March 13 2006. Even though the legislature tried to consider the then-current economic situation, since the date of its enactment the Advertising Law has undergone 324 amendments, with the latest introduced on December 28 2013.
Because of the large number of questions relating to the enforcement of the Advertising Law that have been posed by the Russian arbitration courts, the Plenum of the Supreme Arbitration Court of the Russian Federation (the SAC) adopted on October 8 2012 Ruling 58 “On Certain Issues of Enforcement of the Federal Law ‘On Advertising’ by the Arbitration Courts” (the SAC Ruling). The SAC Ruling clarifies important legal issues, with special emphasis on the concept and definition of advertising, the specifics of certain types of advertising, and enforcement of the Advertising Law by the arbitration courts.
The Federal Antimonopoly Service of the Russian Federation (the FAS) is the state administrative body responsible for enforcement of the Advertising Law. The FAS initiates administrative cases ex officio, on a submission of the public prosecutor or at the petitions of individuals and legal entities; it also carries out inspections, brings administrative and legal actions against infringers, and issues mandatory orders to rectify discovered violations. The FAS’s orders or rulings can be challenged in court in the manner prescribed by the Arbitration Procedure Code of the Russian Federation. The period of limitation for the institution of administrative cases under the Advertising Law is one year from the date of the violation committal.
Violation of the Advertising Law results in administrative and civil liability for the advertiser, advertising producer and advertising distributor, as the case may be. Administrative procedure is initiated by the FAS, which determines the case and imposes an administrative fine on the infringer, whereas civil liability is incurred upon judicial consideration of the case initiated by the rights holder. A person whose rights were infringed by the inappropriate advertising can apply to court and claim compensation for losses (including lost profit), recovery of damages, compensation for moral damages and public refutation of false advertising. In one of the cases the Russian court held the advertiser liable for violation of the Advertising Law and stated that advertising under the slogan “Bought the driving licence? Buy a car!”, distributed by Plaza AutoDar LLC, had a negative characteristic towards the State Road Police responsible for issuing driving licences, and denigrated the honour, dignity and business reputation of the State Road Police officers, as well as the business reputation of the state body, namely the Ministry of Internal Affairs. The court obligated Plaza AutoDar to cease the advertising and pay a fine for defamation.1
Violations of the Advertising Law are not subject to criminal penalties (such as imprisonment).1
1.1 False and misleading advertising
The general requirements for advertising are set forth in Article 5 of the Law, which states that the advertising should not be false and misleading.
The advertising is considered false if it:
- contains incorrect comparison of the advertised goods with other goods in circulation produced by other manufactures and sold by other sellers;
- denigrates the honour, dignity and business reputation of other persons;
- advertises goods that are prohibited from being advertised if it is done in the likeness of the advertising of other goods whose trademark is identical or confusingly similar; or
- constitutes an act of unfair competition.
The Russian court has previously ruled as false advertising and unfair competition the actions of a management company that had distributed promotional leaflets warning tenants in a building it managed regarding a competitive management company. The leaflets contained allegations that the other management company was soon to be declared bankrupt, whereas the company distributing the leaflets was the only reliable company that could manage a condominium partnership. At the same time, the leaflets did not contain any supporting evidence of the allegations. Therefore, the court decided that the actions on distributing the leaflets constituted unfair competition and ruled to cease the infringement.2
One of the most common cases of false advertising is groundless positioning of a brand, goods or a manufacturer or service provider as ‘the best’ or ‘number one’. Both the FAS and the Russian courts require that, in order to prove superiority, the advertiser should indicate the criteria of comparison and, if necessary, provide documentary confirmation of the claimed fact.
The FAS has previously considered the advertising of a vodka brand as ‘a number one in Russia’ unfair competition as the producer was not able to prove that the vodka was, indeed, ranked the number one. Moreover, an expert opinion showed that the vodka did not have the best-quality characteristics and had never been awarded any quality prizes.
The Advertising Law contains an extensive list of information regarding goods (services) and their manufacturers (providers) that may be considered misleading advertising, including information on:
- the advantages of the advertised goods in comparison with the goods in circulation produced by other manufacturers and sold by other sellers;
- the characteristics of the goods, including nature, composition, method and date of manufacture, qualities etc;
- the range of the goods, as well as the time period during which and the place where they are available for sale; and
- the price of the goods, payment method, discounts, tariffs and other terms and conditions of their purchase.
In addition to the above, the Advertising Law defines ‘misleading advertising’ as advertising containing untrue information about other persons’ intellectual property rights and means of individualisation (eg, trademarks, company names and trade names). In a case from 2009, the Russian court found that Milano New LLC violated the Advertising Law and infringed Milano LLC’s exclusive right to the firm’s name, which existed earlier by use of the designation ‘MILANO’ in its firm’s name and trade name. The court affirmed the claim and stated that by using the claimant’s firm’s name in the advertising, the defendant misled potential consumers.3
As was clarified by the SAC Ruling, the use of a trademark with respect to goods that were duly introduced into civil circulation is allowed by other persons in the advertising of their sales activity of such goods. Lack of the trademark owner’s authorisation will not automatically result in considering such advertising as misleading, provided that the customers deem such advertising as the advertising of an independent seller or service provider. The Russian court has previously found that a limited liability company was not violating the Advertising Law by using in its advertising the trademark ‘KAMAZ’ belonging to a well-known truck manufacturer, because it was not positioning itself as an official vehicle service provider but instead informing its potential customers about the goods and services it was providing.4
2. Comparative advertising
The Advertising Law does not prohibit comparative advertising as such unless, as provided by Article 5.2.1 of that law, the advertising contains incorrect comparison of the advertised goods with other goods in circulation produced by other manufactures and sold by other sellers, or, as provided by Article 5.3.1, makes dubious claims about the advantage of the advertised goods over competitor products.
The Advertising Law does not define the criteria for ‘incorrect comparison’, leaving it to the discretion of the FAS and the courts, as the case may be. As per the SAC Ruling, comparison based on the ‘disparate’ criterion or on incomplete comparison is prohibited. The SAC has also stated that the advertiser should be made liable for dissemination of false information, not only with respect to the advertised goods but also the goods of the competitors.
In the Maggi case from 2012, the Russian subsidiaries of two consumer goods giants – Nestlé and Unilever – were in dispute over the incorrect comparison of cooking-stock cubes and flavourings. Nestlé (the owner of the Maggi brand) initiated an action against Unilever (the owner of the Knorr brand) claiming that the slogan used in Unilever’s TV commercial, “Knorr – True Taste. No Magic”, contained an incorrect comparison of the two products, constituted inappropriate advertising and discredited Nestlé’s business reputation. Three Russian courts dismissed the claim and ruled that Nestlé was not able to prove the infringement of its rights and interests by the disputed TV commercial nor that the challenged advertising was inappropriate or denigratory. The courts also stated that the mere similarity between the two words (‘Maggi’ and ‘Magic’) did not constitute incorrect comparison.5
Interestingly, before the Maggi case the Russian courts had considered similar situations where the slogans contained words similar to famous brands, and in those cases it was held to be an incorrect comparison and false advertising, and advertisers were banned from using such slogans.6
3. Online behavioural advertising
Online behavioural advertising in Russia is not regulated by the Advertising Law. However, the general principle set forth in Article 23.2 of the Russian Constitution guarantees privacy of correspondence and other communications. In addition, the federal law “On Personal Data” (hereinafter the Personal Data Law) provides for protection of certain types of information by which an individual can be identified. Unauthorised use of such data, including in online advertising, can result in administrative liability in the form of a fine. The Federal Supervision Agency for Information Technologies and Communications (Roskomnadzor), a state body responsible for enforcement of the Personal Data Law, is entitled to initiate administrative proceedings against and impose an administrative fine on an infringer.
Despite the lack of specific ruling, the FAS is now paying considerable attention to the activity of internet companies. In particular, in March 2013 it was reported that the FAS sent Google an inquiry saying that the company did not act in conformity with the Russian privacy law while using the information from the Google mail services to target its users with online behavioural advertising. Answering the controlling body’s inquiry, Google stated that being a US corporation and having no servers in Russia it does not have to abide by the Russian Personal Data Law. However, although no court action has followed, this case shows growing attention of the enforcement body to the activity of internet companies with respect to online behavioural advertising. The FAS suggests changing current situation by amending the Personal Data Law so that foreign companies will also be obligated to abide by its rules.
4. Sales promotions
Sales promotions are not specifically regulated by the Advertising Law; the Russian courts apply general principles in the prohibition of false and inaccurate advertising. For example, the Arbitrazh Court of Moscow held that the advertising on the building face of the upscale TSUM store and on the store’s website of 30% and 50% discount created the impression that the discount applied to all goods offered for sale in the store, whereas in fact the discount only covered items from the previous collection. Based on the circumstances the court came to the conclusion that the seller distributed misleading advertising containing inaccurate information on the price of the goods sold, which misguided customers.7
Despite the foregoing, Federal Law 138-FZ dated November 11 2003 “On Sweepstakes” (hereinafter the Sweepstakes Law) provides a rather detailed regulation of promotional sweepstakes. Promotional sweepstakes are subject to prior notification to the tax authority, which is responsible for overseeing the sweepstakes activity. Such notification should contain information on each sweepstake type and territory, the entity organising the sweepstake and the promoted goods/services. The sweepstake organiser should also submit an overview of the terms and conditions of the sweepstake, ways of informing potential participants, procedure for the prize draw, and other matters.
A number of other requirements should be satisfied in order to avoid liability by the sweepstake organiser. For example, promotional sweepstakes cannot be conducted with the use of automatic equipment (lottery machines) – this measure is aimed at eliminating illegal gambling activity, which is restricted in Russia.
Other promotional events that do not fall under the criteria of promotional sweepstakes are not expressly regulated by Russian law. Certain requirements are set forth in Article 9 of the Advertising Law, providing that the advertising for promotional events, including promotional sweepstakes, should contain information on the time period of the event and the source of detailed information on the promotional event.
With regard to promotional sweepstakes, of practical concern is compliance with the administrative requirements. For instance, in the Makfa case, the consumer goods company Mafka was held liable for organising a promotional sweepstake when it was not allowed by the Russian Federal Tax Service due to an incomplete set of documents having been submitted by Makfa.8
Attention should also be paid to advertising promotional (‘promo’) events. For instance, in the Viktoria case, the large Russian retail chain Viktoria was fined by FAS for failing to provide consumers with all the necessary information on the details of a promo event. Viktoria argued that in their advertising the sources of all necessary information were indicated (website, phone numbers etc). The courts found no infringement in Viktoria’s actions, stating that the Advertising Law allows the indication only of sources of necessary information in promo events advertising.9
5. Ambush marketing
With respect to the regulation of ambush marketing, attention should be paid to the general prohibition imposed by the Advertising Law by which the use of a third party’s means of individualisation or the official symbols of international organisations is not allowed. In addition, advertisers should observe the prohibition of unfair competition imposed by the Advertising Law and the Competition Law.
There is also an express prohibition on use of the Olympic Games symbols without receiving a licence from the relevant Olympic body, as set forth in the federal law “On Organising and Conducting the XXII 2014 Winter Olympic Games and XI Winter Para Olympic Games in the City of Sochi …” (the Olympic Law). This measure, aimed at protecting the interests of the Olympic Games sponsors, is set forth in Article 6.3 of the Olympic Law, under which advertising containing false information on the advertiser’s relationship to the Olympic Games or on its sponsorship status with respect to the Games is deemed unfair advertising.
In a majority of the cases, the Russian courts have decided against companies using in their advertising the Olympic symbols or the designations identical or similar thereto. A rare example of alternative court practice is the Tekhnograd case from 2011, in which the court found for the advertiser. In its ruling, the FAS stated that in the disputed advertising the images of the goods sold by Tekhnograd were arranged in a way that created an image similar to the official symbol of the Vancouver Winter Olympic Games of 2010. The court disagreed with the FAS and stated that the FAS had failed to prove that the claimed similarity led consumers to think that the company had affiliation to and relations with those Olympic Games organisers.10
However, contrary to the Tekhnograd case, in a case from 2012 the court decided against General Motors Company and ruled that it had illegally used the Olympic symbol in its trademark ‘Olympic White’ for the colour of its Chevrolet cars.11
Note: This article originally appeared as a chapter in International Advertising Law: A Practical Global Guide, published by Globe Law and Business, May 2014.