UPDATE 1-Russian watchdog rejects Google bid for ad firm

(Adds Google comments, details, background)

MOSCOW, Oct 23 (Reuters) - Russia's anti-trust watchdog rejected on Thursday a $140 million bid by Google Inc. (GOOG.O: Quote, Profile, Research) to buy the Begun advertising agency, claiming the deal would reduce competition in the online advertising market.

Russia's Federal Anti-monopoly Service, FAS, said it had blocked the deal because Google had not provided enough information that would allow FAS to properly assess its consequences and thus potentially hurt competition.

"Having reviewed the documents and information received relating to this deal, FAS on Oct. 22, 2008, made a decision to refuse to satisfy the appeal," FAS said in a statement on its website www.fas.gov.ru.

FAS has been stepping up its presence over recent months as part of a plan to build the service up into one of the government's most powerful agencies.

Russia's anti-monopoly service has been under the spotlight since Vladimir Putin, Russia's powerful Prime Minister, demanded the anti-trust service become more active.

"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.

"At this time, we are awaiting the FAS's decision. Once the review process is complete, we will decide on our next steps."

Google agreed to buy Begun from Rambler Media (RMG.L: Quote, Profile, Research), the British-registered owner of Russia's Rambler Internet portal, in July this year for $140 million [ID:nL18181676].

Begun is the largest contextual advertising network in the Russian sector of the Internet. It provides a service similar to Google's targeted text advertisement serving programme AdSense. (Reporting by Alexander Gelogayev and Maria Kiselyova; editing by Elaine Hardcastle)