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. Last Updated: 07/27/2016

Advertiser Targeted in Mobile Billboard Ban

For MTA mobile billboard owned by Mobikom parked in a yard in Nizhny Novgorod.
NIZHNY NOVGOROD -- In an effort to kick-start their stuttering campaign to eradicate mobile advertising here, local authorities have decided to make an example of Boris Denisov.

Denisov doesn't run an advertising agency, however. He doesn't own the vans fitted with billboards that are parked around Nizhny Novgorod, their license plates removed to make them harder for police to trace.

Denisov owns Nasosoff, a small chain of stores that sells vacuum cleaners and water filters. Earlier this year, he hired a local advertising company, Mobikom, to place billboards in the city. Now the local branch of the Federal Anti-Monopoly Service wants to fine Denisov, not Mobikom, for violating federal restrictions on mobile advertising.

Denisov could not be reached for comment. But Andrei Iordansky, director of the Nasosoff chain, said the authorities were barking up the wrong tree.

"If the Federal Anti-Monopoly Service suspects that the law has been broken, they should take it up with the advertising agency," Iordansky said this week. "Our contract [with Mobikom] specifies that the ad should be placed on a vehicle in accordance with the law."

Federal law forbids the use of vehicles "exclusively or predominantly" for the purpose of advertising. This rules out billboards mounted on vans, but allows ads on city buses and delivery trucks.

The case against Denisov is complicated by the fact that the authorities have cited him under Article 5 of the law on advertising, which deals primarily with unscrupulous and misleading content, not the manner in which ads are displayed.

"We're being charged with something we didn't do," Iordansky said, adding that if his company were found guilty in a Federal Anti-Monopoly Service hearing scheduled for next Wednesday, it would challenge the ruling in court.

Mobikom director Mikhail Tsyplakov agreed that the decision to fine Nasosoff under the unscrupulous advertising clause was misguided. The clause arose from authorities' attempts to combat the use of so-called umbrella brands, which cover a diverse range of products. Umbrella brands covering water and vodka, for example, have been used to evade restrictions on the advertising of alcohol.

"Nasosoff was advertising its own stores, so it's absurd to accuse it of anything unscrupulous or misleading," Tsyplakov said.

Vladimir Solovyov, head of the Nizhny Novgorod regional office of the Federal Anti-Monopoly Service, confirmed that Nasosoff had been fined under the unscrupulous advertising clause. This clause makes no mention of the method in which ads are displayed, however.

Maxim Saibel, a lawyer who represents Mobikom and other advertising agencies, said authorities don't have a leg to stand on in their case against Denisov.

"Only advertising agencies can be held liable for the violations with which the owner of the Nasosoff chain has been charged," Saibel said. "If the advertiser in this case is found guilty of breaking the law on advertising, it will set a dangerous precedent, because this goes beyond the bounds of the law."

Before the Borisov case, the authorities had cited only advertising agencies under the new restrictions on mobile advertising. Ten citations have been issued since the new rules came into effect on Jan. 1.

One of the operators cited was Tsyplakov, then head of the Rich agency, which faces a 40,000 ruble ($1,550) fine. He has appealed the fine to the Nizhny Novgorod Regional Arbitration Court, and a second hearing is scheduled for June 13.

Advertising agencies maintain that mobile billboards are more effective than their stationary counterparts. They also allow smaller companies to break into the market, which has largely been monopolized by a trio of established firms.

The outdoor advertising market in Nizhny Novgorod, as in most cities, began chaotically in the early 1990s. As the market grew, the city took steps to bring it under control.

At that time, three well-connected companies -- Anzh, Rektaim and Rosserv -- gradually squeezed out their smaller competitors. It was not uncommon in those years for billboards belonging to rivals of Anzh, Rektaim and Rosserv to be mysteriously dismantled and carted off at night, only for one of the big three to turn around and put up a billboard in the same location -- with permission from the city.

These three companies were subsequently taken over by News Outdoor Russia, which now controls about 90 percent of the city's outdoor advertising market, according to industry insiders.

Mobile billboards began to appear in 2004. By 2006, some 15 agencies were operating up to 170 vans, and mobile advertising accounted for 2 to 3 percent of the outdoor advertising market.

Anatoly Igonin, head of the Klim advertising agency, which used mobile billboards until the tough federal restrictions kicked in, said van-mounted ads were roughly 25 percent cheaper than stationary ones because they eliminated the expense of leasing land from the city, which runs about 750,000 rubles (just over $29,000) for a three-year lease plus 1,600 rubles ($2,150) per month in rent.

Iordansky of Nasosoff said mobile billboards delivered more bang for the buck in other ways as well.

"Ads mounted on vehicles work better for us because they can be placed in areas that have no billboards and driven to where our customers are -- outside the city and in front of our stores," he said.

The city tried to regulate mobile advertising, but ran into opposition from the agencies, said Natalya Zemskova-Shamba, head of the Volga Federal District office of the Russian Association of Communication Agencies, a trade organization.

The city then launched a campaign against traffic hazards and enjoined the traffic police to crack down on illegally parked vans, Zemskova-Shamba said. Advertising agencies responded by removing license plates from the vans and no longer parking them on the streets, preferring sidewalks and yards instead.

"It was a clever move to convert GAZel vans into billboard platforms," Zemskova-Shamba said. "And mobile advertising could have developed in a normal way. But it needed regulation, and the owners of the vans sabotaged this process. In the end, this led lawmakers to outlaw this kind of advertising."

The ban leaves many smaller operators out in the cold.

Mobikom's Tsyplakov said the city's outdoor advertising market has become nearly impossible for smaller companies and start-ups to penetrate because of corruption. Auctions of billboard sites held by the city are a sham, he said.

The head of the city's advertising agency, Alyona Gartman, countered that regulations have been changed to open the market up to smaller companies. For example, the law now requires the city to offer some billboard sites in small lots, making them more affordable.