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11 Jan, 2008 05:02

Firms face new costs in using 'Russia' brand

A new law came into force at the start of the year banning companies from naming themselves after a country. It means that firms with 'Russia' in their name may be forced to re-brand – an expensive process that will boost the government's coff

Under the new law, even Russia’s flag carrier, Aeroflot Russian Airlines, may have to change its name.

From this year, a company operating in Russia can use the name of the country or any of its derivatives only if the government owns 75% of its shares.

Nestle Russia, one of the leading confectionary producers in the country, does not have the government among its shareholders.  But it does own a brand – Russia Generous Soul.

Nestle spokesman Andrey Bader said he hoped the firm we be allowed to keep its name, adding that he wanted greater clarity from government.

“There are no comments which would specify how the companies, now enjoying this name in the official names of their legal entities, would be expected to act. Remember, a lot of our companies are using this name – Russia,” Bader said.

Companies already pay a royalty to the government for using the name Russia or Russian in their names but it seems this is not enough.

Creative director of advertising agency Rodnaya Rech, Irina Zvereva, says the law will oblige companies to re-register their names, bringing additional revenues to the government.

“I think that large companies have a choice: one is  re-branding, which requires additional unplanned  budgets . Or they will have to reach an agreement with the government, and this also costs a lot,” Zvereva said.

The new law also threatens foreign companies working in Russia that identify their origin through their name, like Deutche Bank or British American Tobacco.

Although the new law is already in force, companies will not be able to judge its impact until the first test cases go to court.