Why it would not be beneficial to declare that the revocation of Rappler’s Certificate of Registration is

a violation of the constitutional right to free speech and press freedom.

The grave abuse of

The negative side believes that upholding the SEC Resolution is beneficial for these three acounts

We need not utter technical terms why Rappler’s license should be revoked, we just need to refer to
the clear and absolute prohibition in our Constitution.

What the affirmative side has failed to consider

The revocation did not violate the freedom rather it puts conflicting interest on equal footing

Two fold purpose – protection and regulation

Beneficiality

As future members of the legal profession, we should uphold the Constitution and promote respect for
the law.

We are not against the freedom of speech and of press, what we are against is the exercise of this right
outside the bounds of the Constitution.

I would show how upholding the revocation far ourtweigh the

1. First, it will set a good precedent

- To strike down the SEC decision might open the Pandora’s box or long term repercussions.
- COMELEC should be comended for performing its duties in accordance with the
Constitution. Its resolutions are entitled to great weight and respect by virtue of their
expertise in the matter in line with presumption of regularity in the performance of their
duties.
- We preserve the trust and confidence in the government?
- Stricter implementation of this constitutional mandate will promote compliance with the
law
2. Second, it will uphold the Filipino-first policy
3. It will uphold the freedom of speech and of press
4. Balancing of interest – susbstantial government interest- freedom from foreign control

Hence, the value of beneficiality is found in our side and not theirs.

[A] Government regulation is sufficiently justified [1] if it is within the constitutional power of the
Government; [2] if it furthers an important or substantial governmental interest; [3] if the
governmental interest is unrelated to the suppression of free expression; and [4] if the incidental
restriction on alleged First Amendment freedoms [of speech, expression and press] is no greater
than is essential to the furtherance of that interest.8
it is not an absolute freedom just
like all the civil rights under our Bill of Rights.

This constitutional circumvention is something the State cannot tolerte

Mass media refers to any communications designed to reach a mass of people. It includes electronic
media including the internet (Tobacco Regulation Act of 2003)

Spirit and intent of the Constitution- to prevent foreigners from wielding influence public opinion to the
detriment of the best interests of the nation

The ON PDR contain a provision wherein the “Rappler” is required to seek approval of the ON PDR
Holders on corporate matters, alter, modify or change AOI By laws or any act which will prejudice the
rights of PDN Holders. This stipulation was intended to give the foreign holder some degree of control
over PDR holders, and inevitably control over rappler. Influence over corporate policy in terms of equity
derivative.Control ois not limited to ownership of stocka and management of the board, it embraces
wide range of schemed that grnat influence over corporate policy

100% filipino control means 0% filipino control.

The medium is different. But the function is the same: to communicate ideas to the masses

Rappler Inc claimed to be a Mass media entity before the courts in Rappler v. Andres Bautista in its
petition for certiorari in its prayer d. Issuance of PMI requiring the respondent to ensure an unimpaired
and equal access to all mass media, online or traditional, to all the debates(presidential debates)
(Rappler argued that online mass media should be on equal footing with other traditional media (to
allow them to broadcasrt the debates) This is upheld by SC.

Also the scheme, it need not form Rappler Holdings Corp and constitute itself as all-filipino owned

It is estopped from claiming otherwise

Special law- intent is immaterial. Mere commission is enough.

PLDT’s foreign ownership issue was a “question of fact best left to the SEC as the
court is not a trier of facts.”
Read more: http://newsinfo.inquirer.net/855487/sc-upholds-pldts-60-40-
position#ixzz58F7UYl00
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may bring about significant changes to the equity structures of corporations engaged in
nationalized activities.

Gamboa v Tevez – 60- 40 requirement. ThIt remains faithful to the constitutional

objective to develop a national economy effectively controlled by Filipinos

Read more: http://business.inquirer.net/128047/sec-on-foreign-ownership-limits-a-

healthy-compromise#ixzz58F9nQnEZ
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The failure of government regulation over the activities of these corporations has allowed these
corporations to directly compete with legally existing domestic corporations engaged in similar activities
in the mass media industry

this is a clear and blatant violation of the 1987 Constitution

"In the broader Philippine media industry, Rappler is just one among the
thousands of media entities in the country and whose operations have
remained free," Paul Gutierrez, head of the country's oldest and biggest press
organization, said in a statement.
"To say that the fate of one media entity found to have run afoul with the law
translates to media repression in the country is stretching the argument a bit
too much."

436 television broadcast stations, 411 AM radio stations, over 1,000 FM radio stations and more
than 400 newspapers today operating freely in the country CEO of National Press Club

Balancing of Interests Test The courts should BALANCE the PUBLIC INTEREST
served by legislation on one hand and the FREEDOM OF SPEECH (or any other constitutional right)
on the other. The courts will then decide where the greater weight should be placed.
Suspension of the program stops not only petitioner, but also the other leaders of
his congregation from exercising their constitutional right to free speech through
their medium of choice, which is television. The majority opinion attempts to
assuage petitioner's misery by saying that petitioner can still exercise his right to
speak his mind using other venues. But this proposition assumes that petitioner
has access to other venues where he may continue his interrupted exercise of
free speech using his chosen mode, television broadcast.

The majority's ruling in this case sets a dangerous precedent.

This decision makes it possible for any television or radio program, on the slightest
suspicion of being a danger to national security or on other pretexts, to likewise
face suspension. The exacting clear and present danger test is dispensed with to
give way to the balancing of interests test in favor of the government's exercise of
its regulatory power. Granting without conceding that balancing of interests is the
appropriate test in setting a limitation to free speech, suspension of a television
program is a measure way too harsh that it would be inappropriate as the most
reasonable means for averting a perceived harm to society. The restriction on
freedom need not be greater than is necessary to further the governmental
interest.[25]

The balancing of interests test requires that a determination must first be made
whether the necessary safeguarding of the public interest involved may be
achieved by some other measure less restrictive of the protected freedom.[26] The
majority immediately resorted to outright suspension without first exploring other
measures less restrictive of freedom of speech. It cites MTRCB v. ABS-CBN
Broadcasting Corporation[27] in justifying the government's exercise of regulatory
power. But the ABS-CBN case involved a mere fine as punishment, not a prior
restraint in the form of suspension as in this case. In the cited case, one of the
episodes of The Inside Story, a television program of ABS-CBN, was aired
without prior review and approval by the MTRCB. For this omission, the MTRCB
subsequently fined ABS-CBN in the amount of P20,000. However, even as the
television station was fined, the program continued to be aired and was never
suspended.

By having approving power over the corporate decisions of Rappler, Inc., Omidyar enjoyed the
power to direct the voting of the former’s securities. negative control
As the Decision succinctly said, “The Foreign Equity Restriction is very clear. Anything less
than One Hundred Percent (100%) Filipino control is a violation. Conversely, anything more
than exactly Zero Percent (0%) foreign control is a violation.” form of control was irrelevant

What the Gamboa case did was define the meaning of the term “capital” under the
constitutional restrictions on public utilities, and direct the SEC to investigate the
matter and implement a plan of action using this definition. Whatever ruling the
Supreme Court issued, it was nevertheless clear that it recognized that the SEC had the
“power and function to suspend or revoke, after proper notice and hearing, the franchise
or certificate of registration of corporations, partnerships or associations.”
The SEC certainly hit the Rappler corporations, but it is also clear that the SEC acted
within its authority and jurisdiction, and in accordance with its legal mandate.

Furthermore, Article XVI, Section 11 of the Constitution merely states how a mass media
organization should be incorporated, but does not dictate how it should operate or report its
news.

press freedom was never a license to operate outside the bounds of law

Otherwise, it would have given the message that it was ok for mass media corporations to
surrender control to foreign entities, at least temporarily, in exchange for funding, at least until
the SEC directed them to be divest such foreign control.

The press, or mass media, is sometimes known as the Fourth Estate, the unofficial
fourth pillar holding power and significant influence over society, and serving as a
vanguard against corruption, untruths, and personal agenda. It is for this reason that
the 1987 Constitution took great lengths to protect the independence and integrity of a
free press, declaring that no law shall be passed abridging the freedom of speech, of
expression or of the press.

And it is also the reason why the Securities and Exchange Commission was right when it
revoked the certificate of incorporation of Rappler, Inc. and Rappler Holdings
Corporation.
But before we get ahead of ourselves, the SEC would probably be the first to say that it
issued its ruling on the merits, as the arbiter of all things related to corporations and
securities; and on that account, it would be completely correct. Strictly on the merits,
the SEC has Rappler (the corporation, not the mass media website) by the balls, so to
speak.

The Decision
The gist of the SEC’s Decision is that Rappler, Inc., a corporation operating mass media,
is partially controlled by foreign entities in direct violation of Article XVI, Section 11 (1)
of the Constitution, which states that “[T]he 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.” However, if one will go by
the outstanding shares of Rappler, Inc., it is 100% owned by Filipino nationals. To be
precise, 98.84% percent of its shares are owned by Rappler Holdings Corporation,
which is likewise a corporation fully owned by Filipino nationals. How, then, is Rappler,
Inc. partially owned or controlled by foreign entities?
This is where it gets interesting.

In July 2011, Rappler, Inc. was registered as a domestic corporation, which owns and
operates the Rappler website and the mass media network that it entailed. Then, in
December 2014, Rappler Holdings Corporation was registered. Sometime in 2015,
Rappler, Inc. increased its capital stock and sold practically all its shares to Rappler
Holdings Corporation.

Rappler Holdings Corporation, now effectively the owner of Rappler, Inc., then turned
around and issued Philippine Depositary Receipts (PDR) to two foreign nationals, North
Base Media, Ltd. (Cayman Islands) and Omidyar Network Fund LLC (Delaware, USA)
in an effort to secure additional funding of over one million dollars. These PDRs covered
the outstanding shares of stock of Rappler, Inc.

What are PDRs, in the first place? Depositary Receipts are securities that grant the
holder a right to the delivery sale of underlying shares of stock (in this case, shares of
Rappler, Inc.). They are essentially derivatives, deriving their value from the value of the
shares of stock that they cover. In essence, the PDRs issued in favor of North Base and
Omidyar are directly linked to the shares of stock of Rappler, Inc.

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In the Decision, the SEC goes on to explain that there is no prohibition against issuing
derivatives in the form of PDRs in itself, as they do not constitute actual ownership of
the underlying shares of stock, and have been a recognized way to raise additional
capital without having to issue any new shares. The complication, however, is that the
PDRs issued to Omidyar included this very peculiar provision which effectively required
Rappler, Inc. to seek approval from the Omidyar PDR holders on certain matters:

“The Issuer (Rappler Holdings Corporation) undertakes to cause the Company (Rappler,
Inc.)… not to, without prior good faith discussion with ON PDR Holders, and without the
approval of PDR Holders holding at least two thirds (2/3s) of all issued and outstanding
PDRs, alter, modify or otherwise change the Company Articles of Incorporation or By-
Laws or take any other action where such alteration, modification, change or action will
prejudice the rights in relation to the ON PDRs.”
In the eyes of SEC, this is the smoking gun: Rappler, Inc. surrendered partial control of
its corporate matters to a foreign entity. After all, in the 2015 Implementing Rules and
Regulations of the Securities Regulation Code (IRR-SRC), the SEC defined “control” as
the “power to determine the financial and operating policies of an entity in order to
benefit from its activities,” and also clarified that “control” exists whenever one entity
has the power “to govern the financial and operating policies of [another] entity under a
statute or agreement.”

All this having happened under its watch, the SEC

was bound to bring the hammer down, which it did
quite dramatically on January 15 when it published
the Decision.

In fact, it can even be said that Rappler, Inc. surrendered beneficial ownership of its
shares to Omidyar. Under the implementing rules and regulations of the Foreign
Investments Act of 1991 (RA 7402), “[F]or stocks to be deemed owned and held by
Philippine citizens or Philippine nationals, mere legal title is not enough to meet the
required Filipino entity. Full beneficial ownership of the stocks, coupled with
appropriate voting rights is essential.” A “beneficial owner”, in turn, was further defined
in the IRR SRC as “[A]ny person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares voting power
(which includes the power to vote or direct the voting of such security) and/or
investment returns or power (which includes the power to dispose of, or direct the
disposition of such security).” By having approving power over the corporate decisions
of Rappler, Inc., Omidyar enjoyed the power to direct the voting of the former’s
securities.

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According to the Decision, by agreeing to consult with, and secure approval of, Omidyar
for any matters, Rappler, Inc. gave “negative control” over a mass media corporation to
a foreign entity. One can argue that this “negative control” extends only to the corporate
actions of Rappler, Inc.—not its news operations—but the SEC is not allowed to make
that distinction. The agency had to resolve the issue on the basis of corporate control, in
accordance with the Constitution and applicable laws. And as it happens, the
Constitution is absolute inasmuch as it will not allow even a modicum of ownership or
management of Philippine mass media to fall into the hands of a foreign entity. As the
Decision succinctly said, “The Foreign Equity Restriction is very clear. Anything less than One
Hundred Percent (100%) Filipino control is a violation. Conversely, anything more than exactly
Zero Percent (0%) foreign control is a violation.” Hence, the form of control was irrelevant;
whether by the carrot or the stick, the mule tends to will go where it is told. After all, one
would surmise that there would be consequences for the breach of the conditions in the
Omidyar PDR—including the cancellation of the PDR investments—and a million
dollars is a quite big stick to ignore.
And yet, the SEC went even one step further. The Decision stated that there was intent
on the part of Rappler, Inc. to sidestep the constitutional prohibition against foreign
equity by first selling almost all its shares to the holding company, and having the
holding company issue the PDRs to the foreign entities almost immediately thereafter.
The Decision goes on to say that “there is substantial evidence that [the Rappler
corporations] intentionally created an elaborate scheme, upon which its receipt of over a
million dollars from a foreign investor would be theoretically defensible… but [they]
would still be able to give him his money’s worth in the form of negative control and
cash distributions, all through a private contractual agreement.”

All this having happened under its watch, the SEC was bound to bring the hammer
down, which it did quite dramatically on January 15 when it published the Decision.

It has been argued that the SEC acted on the matter with undue haste. However, to be
fair to the SEC, the investigation started back in December 2016, and the Rappler
corporations were called to a conference in February 2017, almost a year before the
Decision came out. SEC proceedings are administrative in nature, and a resolution
within a year’s time is not that unusual. Furthermore, the SEC issued a show cause
order directing the Rappler corporations to submit their explanation on the issue of
foreign ownership, but it was only in December 2017, 4 months later, that the Rappler
corporations submitted the waivers purportedly executed by the holders of the Omidyar
PDRs. I say “purportedly” because the waivers were apparently mere photocopies, and
they were not subscribed under oath. It can be said that the Rappler corporations were
given enough time and opportunity to divest itself of foreign control, but failed to do so
timely or properly.

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Rappler’s lawyers also argued that there was a lack of opportunity for Rappler to
respond to the charges or cure the defective corporate structure. Citing the Supreme
Court case of Gamboa vs. Teves which earlier ruled on the foreign ownership of PLDT,
Rappler argues that the Supreme Court gave PLDT sufficient time to cure its foreign
entity issue, which the SEC should have done. This is not entirely accurate. What
the Gamboa case did was define the meaning of the term “capital” under the
constitutional restrictions on public utilities, and direct the SEC to investigate the
matter and implement a plan of action using this definition. Whatever ruling the
Supreme Court issued, it was nevertheless clear that it recognized that the SEC had the
“power and function to suspend or revoke, after proper notice and hearing, the franchise
or certificate of registration of corporations, partnerships or associations.”
The SEC certainly hit the Rappler corporations, but it is also clear that the SEC acted
within its authority and jurisdiction, and in accordance with its legal mandate. The
question is, was its action correct, all other things considered?
The Fourth Estate in the Spotlight
The Decision was decried as an attack on free press and a blatant violation of the
Constitutional provision on free speech. On the other hand, the SEC also had to contend
with the other constitutional provision which prohibited foreign equity for mass media.
The Decision is now being touted as a heavyweight match between two constitutional
mandates. But does one really have to prevail over the other? This shouldn’t be the case.
To be strict about it, there is no actual suppression of free press to begin with. As much
as Rapper would like to play the persecuted soldier, there is nothing preventing
Rappler’s writers and reporters to tell the news as it sees fit. Even if the Rappler
revocation is upheld, the avenues for full freedom of expression are all still available.

Furthermore, Article XVI, Section 11 of the Constitution merely states how a mass media
organization should be incorporated, but does not dictate how it should operate or
report its news. It is unfortunate that a mass media entity (the corporations, not the
website) was effectively weakened by regulatory action, but press freedom was never a
license to operate outside the bounds of law in the first place. By opening themselves to
foreign control, intentionally or otherwise, the Rappler corporations placed themselves
outside the bounds of the Constitution, and laid themselves vulnerable to attack. The
SEC could not be faulted for performing its duty; certainly, it should not have turned a
blind eye simply because the subject of the inquiry was a mass media entity.

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There’s a reason why the Constitution prohibited foreign control over mass media. First
of all, it is related to the state policy under Article II, Section 19 of the Constitution
which states that “[T]he state shall develop a self-reliant and independent national
economy effectively controlled by Filipinos.” Also, knowing the level of power and
influence that the press has in a free society, and the public and national interest it is
imbued with, the Constitutional Commission sought to ensure that mass media will
always be independent and beyond reproach, especially from any insinuation of control,
foreign or otherwise.

The freedom of the press from foreign control is arguably more relevant in today’s global
society, where international investments are more common than ever. Could a news
report be more slightly skewed on one side, if it favors a major foreign investor? In this
situation, foreign negative control, or the mere hint of it, could put into the question the
integrity of mass media. And in the long run, that could be more damaging than any
attempt, perceived or otherwise, to close down a mass media entity.
Free speech must be absolutely free, or it is not free
at all; it cannot be subjected to some kind of vague
standard or qualification, as to do so would be to
suppress it.

Put simply, there should be no conflict between the freedom of speech and the
constitutional prohibition on foreign equity—one need not balance these interests
against each other when they can both stand on the podium. Framing this as a “freedom
of the press” issue, while understandably necessary, is nevertheless a disservice to the
complexity and depth of the Constitution.

Also, it diverts the focus from the erring corporations to the website itself, to dangerous
effect. All of a sudden, someone is proposing that the Constitution should be amended
to state that “no law shall be passed abridging the responsible exercise of freedom of
speech, of expression, or of the press.” Free speech must be absolutely free, or it is not
free at all; it cannot be subjected to some kind of vague standard or qualification, as to
do so would be to suppress it. And yet, this absurd proposal came about because the SEC
Decision is being portrayed as the war between an embattled champion of free speech
and the government when, in fact, it should be seen more as a case of the government
versus an allegedly unconstitutional corporation.
Strictly in a legal sense, the SEC had the full discretion and authority to revoke the
Rappler corporations’ certificates of incorporation. But was the Decision too harsh? Of
course it was; and yet it may have been necessary. Otherwise, it would have given the
message that it was ok for mass media corporations to surrender control to foreign
entities, at least temporarily, in exchange for funding, at least until the SEC directed
them to be divest such foreign control.

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Could the SEC have imposed a lesser penalty? Of course it could have, and it would have
been more peaceful for everyone if it did. But if it were true—as the Decision claims—
that the Rappler corporation intentionally skirted the Constitutional prohibition on foreign
equity, the SEC could not have let it pass with a mere slap on the wrist without violating its
mandate under the Securities Regulation Code.

In the end, the power of the press must prevail as a vital cog in a free society, but always, and
necessarily, in accordance with law and the Constitution.