CUENCO, RACHELLE

FLORES, KIMBERLY
GALLARDO, TIFFANY
MAGAWAY, ANNE THERESE
MASANGKAY, ALEXIS
SOTTO, PIA

No, the defense of Rappler that SEC’s revocation of its article of incorporation is a violation
of their press freedom will not prosper because:

 The issue at hand is the compliance of 100% Filipino ownership and management of
mass media. It is not about infringement on the freedom of the press.

 The problem in the case at bar is the issuance of PDRs to Omidyar Network, or what
Rappler called the “ON PDRs.” The ON PDRs had provisions that granted a
measure of control over BOTH Rappler Holdings and Rappler Inc. The provisions
included a condition that Rappler and Rappler Holdings cannot alter, modify, or
change their Articles of Incorporation and Corporate By-Laws without discussion
with ON PDR holders, AND obtaining the approval of at least two-thirds of all
issued PDRs. Under Article 16, Section 11 of the 1987 Constitution it states 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 citizen…” In other words, Philippine foreign equity restrictions
require that Filipino control should be 100%. If foreigners get greater than 0% control
over the company, then there is a violation of Philippine law on ownership and
control of a media corporation. With the provisions on the ON PDR’s, there was
definitely more than 0% control of foreigners. This is a violation of Philippine law on
media companies.

 SEC aid that control isn’t just about ownership of stock. The Securities Regulation
Code (SRC) has a very broad definition of control which goes beyond ownership of
shares. In the case of PDRs, they are derivative instruments covered by the SRC, so
the law’s provisions govern any transaction in connection to PDRs. And the SEC
found that Rappler has control issues. The SEC said that it does not matter when the
foreigner exercises control, or in what instances the foreigner would step in. What
matters is that there be none.

 Also, it seems that Rappler is inconsistent with their ground that the revocation is an
infringement of their press freedom because one of their defenses is that they are not
to be considered as a mass media company. The Commission disagrees for three
reasons: 1) Rappler fits the definition of Mass Media; 2) Rappler has been
 consistently claiming to be Mass Media; and 3) Rappler’s scheme reveals that it
believes itself to be Mass Media and thus prohibited from directly issuing shares to
raise capital.

If in fact they believe that they are not to be considered as a Mass Media company,
why would they be invoking their right to press freedom?

 While their ground may be given merit, it still does not erase the fact that they did
not properly comply with the Constitutional mandate as provided under Article 16,
Section 11 in relation to Article 2, Section 19 of the 1987 Constitution.

 Considering that this is a first violation of Rappler, we are in the opinion that the
sanction given by SEC was harsh. Perhaps Rappler may be given the chance to
comply with the requirements. The Court may deny Rappler’s petition. However,
the Court should also direct the SEC to issue compliance order and/or suspend
Rappler while the latter is complying with the mandatory requisites. There is no need
to revoke it right away for this might create a chilling effect to other mass media
company.