Google and Facebook are looking at losing their ad revenues in Russia, while Google has also locked horns with a local conservative TV station over the blocking of its YouTube channel.

In early May, Russian legislators came up with a draft law stipulating that foreign tech giants running websites with a daily audience of at least 500,000 should register local subsidiaries.

Apparently, the draft legislation is primarily aimed at Facebook, Instagram, Twitter and WhatsApp.

"[The legislation] has no political goals or motives," Anton Gorelkin, one of the legislators behind the draft law, claimed on his Telegram account, adding that the main idea is protection of Russian users, who are "powerless" against major global tech firms as they "can't file their complaints to foreign courts or headquarters of major tech giants."

However, the legislators may be more concerned about Russian authorities' inability to target foreign tech companies than about protecting regular users' interests.

So far, Russian courts have had trouble collecting fines that have been imposed on Twitter and Facebook, as the two companies don't have proper offices in Russia, and Russian courts' decisions are of little importance outside Russia.

Specifically, Twitter and Facebook have failed to pay RUB4mn ($54,000) fines imposed on the two companies for declining to comply with a Russian law stipulating that Russians' personal data should be stored within Russia. The next step is imposing RUB18mn ($243,100) fines on Twitter and Facebook, but the chances of actually collecting the cash are slim.

"The only tool that [Russian authorities] have is blocking access to these social media," Fyodor Kravchenko, managing partner at the media lawyers' college, was quoted as saying by Kommersant FM radio station. "But that would lead to social unrest. Hitting them financially would be more effective, but [the authorities] can't do it."

"What the legislators want is to have a Russia-registered company, so that it could be easily fined or searched, its Russian director could be arrested, and that would be pressure [on the headquarters]."

If the proposed draft becomes law, failure to comply would cost foreign tech companies their Russian ad revenues. In 2020 alone, Google's Russian revenue is estimated to be RUB60bn ($810mn) and that of Facebook just over RUB5bn ($203mn).

In addition to Russian authorities, local competitors, including VKontakte and Odnoklassniki, would benefit from barriers to global tech giants' operations, as well as online streaming services such as Gazprom Media Digital or Ivi.

Russian video services were instrumental in a 2017 decision to slap an extra tax – often referred to as "the Google tax" – on all foreign companies selling online content in Russia. The tax is estimated to annually bring RUB50bn ($675mn) to the state budget.

Russian authorities have had issues with major global tech firms for quite a while. Back in 2015, the adoption of the personal data legislation resulted in the exit of the recruitment website LinkedIn, which refused to comply with the legislation.

Twitter, Facebook and Google have been able to continue operating, facing insignificant fines for failure to comply with the personal data law. More recently, however, Google has seen a more serious challenge.

In early May, a Moscow arbitration court ruled that Google illegally blocked the YouTube channel of conservative, reactionary Russian TV network Tsargrad back in July 2020.

Google plans to appeal against the verdict, but the amount in damages the tech giant will have to pay if the ruling is upheld looks exorbitant – RUB94 trillion ($1.3 trillion). Still, as Google has no Russian office, the chances that the company will even consider paying the fine are slim.

What the ruling could achieve is to give more arguments to legislators demanding that global tech giant should have Russian offices.  

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This article is part of bne IntelliNews coverage of technology, blockchain, fintech, cryptocurrencies and the new economy. Sign up for the free monthly newsletter bneTech here, or read more tech stories on the website here.

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