The public is getting a crash course in financial instruments, with the decision of the Securities and Exchange Commission (SEC) to declare null and void, Philippine Depositary Receipts, or PDRs, a type of security that some corporations issue to raise capital without conferring ownership of stocks. This type of security, critics contend, allows corporations in the Philippines to circumvent domestic legal requirements restricting foreign ownership of local companies.
You can't go wrong by reading two articles on PDRs and the SEC decision. See "Misconception on PDRs" by Raul Palabrica, who basically invented PDRs back in the late 1980s, and who therefore fully supports Rappler's argument that it did not violate the constitution. And there's Singapore-based lawyer Oscar Franklin Tan who is more sympathetic to the SEC. But both believe the SEC's decision has far-reaching implications for local business.
But here's something else to consider, while the issue gets joined and will probably require resolution in court. The thing to consider is, has the whole idea of limiting foreign ownership of industries like media, or even advertising, become increasingly irrelevant, even obsolete, in our internet age?
A quick review. Since 1935, all our constitutions have operated on the principle that foreign ownership should be limited so that foreigners can't own more than forty percent of many kinds of companies. This also includes a prohibition on foreigners owning land. Since 1973, our constitutions have also required one hundred percent Filipino ownership of mass media. In 1987, our present constitution also stated that advertising should be owned and run by Filipinos, requiring seventy percent Filipino ownership of advertising firms.
What constitutes mass media and where advertising occurs has evolved over time. In 1976, President Marcos issued Presidential Decree No. 1018, defining mass media as follows: the "print medium of communication, which includes all newspapers, periodicals, magazines, journals, and publications and all advertising therein, and billboards, neon signs and the like, and the broadcast medium of communication, which includes radio and television broadcasting in all their aspects and all other cinematographic or radio promotions and advertising." Writing in 2014, Raul Palabrica, a former SEC Commissioner, mentioned that a 2003 law, the Tobacco Regulation Act, said that mass media included the internet. This means advertising ownership limits would also apply online, closing off an opinion by the Department of Justice back in 1998, that the internet was not mass media.
Now come the things to consider. The first is that our government is committed to abolishing these old rules concerning Filipino ownership. Or making them irrelevant. Back in early September last year, House Bill No. 5828 was passed. It amends Commonwealth Act No. 146 (the Public Services Act) by limiting its coverage to electricity distribution or transmission, and water pipeline or sewerage pipeline systems. Last November I'd pointed out in my column that according to critics, the amendment effectively removes telecoms, power generation, transport and possibly even broadcast media from ownership restrictions that require such firms to be 60 percent Filipino-owned (or in the case of media, 100 percent Filipino-owned). And of course there's the ongoing effort to amend the constitution, which is supported by the business community which for many years has wanted limits on foreign ownership lifted, period.
The second is how the Internet has made borders and the laws that apply within them, meaningless in many respects. Let's set aside print, which is the least of anyone's problems because as an industry, it's dying the world over. So while theoretically you cannot sell anything in print unless you're a Filipino, fewer and fewer people are consuming print products. Consider then, things like broadcasting and advertising instead.
You subscribe to Netflix and chances are it will suck up so much of your time, you won't watch domestic television anymore. Or even subscribe to cable. While governments can still do old-fashioned things like jam TV and radio signals, and close down satellite local offices of media outfits, which is what's happened recently to Al-Jazeera, in the end you would really have to clamp down on the Internet the way China does, to fully control what people can access online. And for now, at least, a China-style Great Firewall isn't something a democracy like ours would willingly tolerate.
Even something like advertising from which not only media but individual bloggers derive income from, is hard to square away with the borderless online world. You visit any site or social media platform and the majority of the advertising you see is provided by means of algorythms with most of the profits going to FaceBook or Google, which may have local offices primarily to service corporate clients, but which all remit their profits to the mother companies abroad. And returning, for a moment, to print, the digital version of established publications sell far less on paper than they do in terms of relatively affordable online subscriptions--which puts them in direct competition with domestic publications.
So the simple but increasingly relevant question is this. Can you police every online pipeline, and control every ISP, to distinguish between media outfits with brick and mortar facilities here, which would place them under the jurisdiction of our laws, to enforce rules that date back to the era of mid-20th Century technologies? Of course you could --but it would require a police state. Something no one, formally at least, publicly advocates. The fact is, our present constitution is biased towards free speech. And while some members of Congress have proposed a constitutional amendment to redefine free speech as only being free when exercised responsibly, the same people wanting these changes are also pushing to abolish rules that gives the government a reason to look into the ownership of local media.
So we're looking at the end of an era. Some media might die, today, because of rules written yesterday, even as these rules will soon no longer apply tomorrow. What a brave new world.
Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.