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Rappler challenges SEC decision to revoke license

Online news website Rappler urged the Court of Appeals (CA) on Monday to nullify the revocation of its articles of registration by the Securities and Exchange Commission (SEC), as the news platform argued it was deprived of due process.

In its 70-page petition, Rappler and Rappler Holdings Corporation (RHC) argued the state regulator applied a different procedure in its case, thus also depriving it of the right to equal protection of laws.

The SEC ordered the revocation of Rappler’s registration in a decision issued on January 11 for violation of the Foreign Equity Restrictions in Mass Media enshrined in the 1987 Constitution, and enforceable through the Mass Media Law, Anti-Dummy Law, and the Foreign Investment Act.

In its petition, Rappler argued that the special panel created by the SEC to examine Rappler and RHC only had the mandate “to determine if there exists sufficient basis to initiate administrative charges” and “did not have the power, authority or jurisdiction to adjudge Rappler and/or RHC administratively liable and to impose administrative sanctions.”

Moreover, the special panel “had already made a finding that Rappler and RHC were liable” when it issued a show cause order, Rappler said.

“Worse, the Special Panel recommended the imposition of revocation on Rappler and RHC directly to the [SEC en banc]. No formal charge was filed against Rappler and RHC as required by the SEC Rules.”

Because of the alleged absence of a formal charge, Rappler claimed it was not provided with sufficient notice of any charge and, subsequently, was not accorded the opportunity to be heard.

Rappler said the Philippine Depositary Receipts (PDRs), worth over $1-million, it sold to US-based Omildyar Netowrk Fund LLC “[do] not confer upon Omidyar control, much less ownership and management.”

In the SEC decision, the state regulator said the Omidyar PDRs contain a provision wherein Rappler “is required to seek approval of the [Omidyar] PDR Holders on corporate matters.” The SEC explained that the Foreign Equity Restriction mandates that anything less than 100% Filipino control is a violation and anything more than 0% foreign control is a violation.

“[Rappler] stockholders must have prior discussion with and approval of at least 2/3 of the PDR Holders, meaning Rappler is at the very least under obligation to consult with Omidyar Network. The stockholder has become, in effect, subservient to the holder.

“It is neither 100% control by the Filipino stockholders, nor is it 0% control by the foreigner PDR holders,” the SEC decision stated.

Rappler maintained the SEC itself had admitted that Omidyar is not a stockholder and has not participated in the management of Rappler. It further argued that Omidyar is not involved in decision-making with respect to the Articles of Incorporation or By-Laws of Rappler, and cannot have been granted control of Rappler or influence over it.”

“There was no finding whatsoever that Omidyar actually exercised control over Rappler, which finding was the basis for the revocation of the certificates of incorporation… the SEC en banc could not possibly deny that Rappler and RHC ‘have all-Filipino shareholders, directors and officers…,’” the petition stated.

Rappler further insisted it is a not a mass media company and is, therefore, not subject to the constitutional bar on foreign ownership.

Citing deliberations of the 1986 Constitutional Commission, Rappler said “mass media” is limited to print and broadcast media, while Rappler is “akin to the way Facebook, Twitter, YouTube and blogs operate.”

“Unlike print and broadcast media, the information found on the website and other platforms of Rappler does not emanate from one source and does not promote the acceptance of approved ideas. Rather, Rappler provides platforns or online venues for everyone, to share information about various topics.

“It then elicits feelings, thoughts and ideas from those who access these platforms through its Mood Meter and various other forms of crowdsourcing,” the petition explained.

In its ruling, the SEC stressed that “mass media” was not further defined in the Constitution itself in order “to adapt to changing times and to new technologies that may arise after 1987.”

“‘Mass media’ refers to any medium of communication designed to reach the masses and that tends to set the standards, ideals and aims of the masses, the distinctive feature of which is the dissemination of information and ideas to the public, or a portion thereof,” the SEC said.

“The citizenship requirement is intended to prevent the use of such facilities by aliens to influence public opinion to the detriment of the best interests of the nation,” the SEC added.

Rappler did not seek the immediate issuance of a halt order against the state regulator’s ruling; instead it reserved the right to file the same, citing the SEC’s pronouncements that its decision is not final and executory pending Rappler’s right to appeal before the CA.

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