Google's plans for worldwide expansion hit an unexpected roadblock when the Iron Curtain of the Russian Federal Antimonopoly Service (FAS) blocked the search engine leader's proposed $140 million acquisition of Zao Begun, a search-and-contextual-advertising company owned by the Russian company Rambler Media.
The watch dog group claims they blocked the deal because Google did not provide them with enough information to allow FAS to access whether or not the deal would help or hurt competition. "Having reviewed the documents and information received relating to this deal, FAS on October 22, 2008, made a decision to refuse to satisfy the appeal," it said in a statement on its Web site.
FAS head Igor Artemyev said Google had not provided reliable and sufficient information about persons who could influence the company's economic operations and the full list of owners, which prevented FAS from calculating the possible consequences of the deal, in particular whether it would help or hurt competition. Google will have to file a new request, he said.
Google began talks with Rambler Media in July of this year to purchase the ad company. Begun is the largest contextual advertising network in the Russian Internet. With Begun, Google, which currently has a mere 5 per cent of the Russian market, would have become the biggest competitor to Yandex, which controls 64 per cent of the market. Begun currently has a 20 per cent share. But, for now, Google's expanding ad empire will be put on hold.
The rejection of the deal in Russia underscores the difficulty Google is having in some markets. While it dominates search in Western countries, Google faces strong competition from local search engines in places such as South Korea, China and Russia.
"We are very disappointed to hear that FAS has come to this decision since we strongly believe that this acquisition will enable us to significantly improve opportunities for Russian users, advertisers and publishers as well as the entire industry," said Google Russia PR director Alla Zabrovskaya.
However, this setback doesn't mean that Google will drop its intent to purchase the company. "At this time, we are awaiting the FAS's decision. Once the review process is complete, we will decide on our next steps," said Zabrovskaya.