Mass media and changing technology

The Securities and Exchange Commission (SEC), in its June 28, 2022 en banc ruling in the case of Rappler, had the occasion to explain why the Constitution itself requires why mass media in the Philippines should be wholly owned and controlled by Filipinos.

The 1987 Constitution, in particular Article 16 Section 11, provides that the ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, wholly owned and managed by such citizens.

The SEC explained that the importance and significance of this constitutional provision relate to the policy which the Constitution sets to implement – the protection of the best interests of the nation, that being the prevention of public opinion from being influenced by foreigners; otherwise, the country can easily be influenced, if not manipulated by foreign entities.

Noting the important role of mass media in shaping the minds of the people and influencing public opinion, the Commission said that the power of mass media is such that it can attract and direct public attention, persuade in matters of opinion and belief, influence behavior, structure definitions of reality, confer status and legitimacy, and inform quickly and extensively.

Foreign entities acquiring control over mass media, it emphasized, will have the power and the means to effectively control, shape and influence public opinion, and will have the ability to direct public sentiment in any direction they so choose to the detriment of the Filipino people.

The SEC affirmed its earlier decision revoking the certificates of incorporation of Rappler Inc. and Rappler Holdings Corp. and declaring as void the Philippine depositary receipts or PDRs issued to foreign entity Omidyar Network (ON) due to violation of the Constitution, the Securities Regulation Code, and Presidential Decree 1018 which limits the ownership and management of mass media to Philippine citizens and provides for penalties for its violation, including cancellation of permit and imprisonment, fine, or both.

In its 2018 decision, the SEC noted that Rappler Holdings issued 7.2 million PDRs covering shares of Rappler Inc. which were sold to Omidyar. The said PDRs contain a provision wherein the issuer was required to seek approval of the PDR holders on corporate matters, in particular prohibiting any amendment of the articles of incorporation or by-laws of the issuer without first getting approval of PDR holders holding at least two-thirds of all issued and outstanding PDRs.

Control over mass media, which the Constitution allows to be exercised wholly by Filipinos, is not limited to stock ownership or management in the board, but includes equity derivatives that grant control which includes influence over corporate policy.

A PDR is a security which grants the holder the right or option to purchase the underlying security, in this case shares of Rappler Inc. They do not therefore necessarily translate to ownership in Rappler Inc. Unfortunately, the PDR provision gave control over a mass media entity to Omidyar, which the Constitution absolutely prohibits.

As to Rappler’s claim that it is not engaged in mass media, SEC then said that the term includes technologies that were not present at the time the Constitution was granted such as internet, mobile technology, and social media but are nonetheless included in the spirit and intent of the law which is to prevent foreigners from wielding influence over the minds of the Filipino people.

Meanwhile, in its 2018 decision, the Court of Appeals recognized the donation by Omidyar of all its PDRs in favor of the staff of Rappler and directed the SEC to examine the propriety of the sanction of revocation of license which SEC imposed in its January 11, 2018 ruling in light of the alleged supervening donation.

The CA also found and affirmed that Rappler and RHC were not denied due process.

But the SEC in its later order said that the deed of donation did not and will not cure Rappler’s constitutional violation which was committed the moment the PDRs, which granted to Omidyar control over corporate policies and affairs of a mass media entity, were issued.

It added that the waiver was issued only during the pendency of the proceedings with the SEC clearly showing that its execution was merely an afterthought and made for no other purpose than to make it appear and convince the Commission and the CA that Omidyar will not exercise control over Rappler even if the same was granted in the PDRs.

The SEC stressed that the PDRs, being the instrument which facilitated the grant of control by a mass media entity to a foreign entity, were void for being contrary to the Constitution and law. Being a void and inexistent contract or document, the PDRs cannot and can never be a valid object of a donation, it said.

Considering that the donation is void for being contrary to law and public policy, the Commission said in its decision that the same cannot be ratified for the purpose of curing a violation that was already committed.

Incorporation, the SEC noted, is a mere privilege granted by the State to those who are able to show to the satisfaction of the Commission that they have complied with the statutory and regulatory requirements and if the SEC finds that a corporation has violated the Constitution or any law, rule or regulation, it is duty bound to impose the appropriate penalties, including the ultimate penalty of revocation of its certificate of incorporation, if warranted.

Rappler, it added, cannot be allowed to go scot-free by the simple expediency of a waiver and/or donation for what is otherwise a criminal offense.

Of course Rappler has said that it will be business as usual and that it will question the SEC ruling before the Supreme Court.

It will be interesting and enlightening for all of us how the SC will decide on this matter, especially on the issue of what the term mass media now covers.

Gencos still committed to PSA

Consumers have been reaping the benefits of the power supply agreement (PSA) between Meralco and generation companies such as Ayala’s AC Energy Inc (ACEN) and First Gen.

ACEN and First Gen were are among the four gencos contracted by Meralco to supply power to the electricity distribution utility under the PSA scheme.

Through the PSA, Meralco is able to keep its commitment to keep the price of electricity stable under the fix-pricing scheme of the PSA, mitigating more price increases.

Indications show that ACEN and First Gen companies are standing by their agreement with Meralco, thereby unburdening the public from more power rate increases caused by the surge of fuel prices in the world market brought about by the conflict in Ukraine.

Experts say that this partnership with ACEN and First Gen has protected Meralco’s subscribers from additional power rate increase while the public is still recovering from the economic backlash caused by two years of restrictions due to the COVID-19 pandemic

It has been said that the two firms are in fact shouldering part of the generation costs which have increased due to surging fuel prices.

In these trying times, PSAs play an essential role in stabilizing power rates in the country, benefitting consumers besieged with economic challenges.

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