CA affirms Rappler not 100% Filipino-owned

Metro Manila (CNN Philippines, March 11) — The Court of Appeals (CA) denied the motion for partial reconsideration filed by Rappler and its holding company, Rappler Holdings Corp. (RHC), on the case the media outfit had with the Securities and Exchange Commission (SEC).

In the 25-page ruling dated February 21, the CA Former Special 12th Division upheld its stance that Rappler violated foreign equity restrictions in mass media under the Constitution. This was SEC's ground to cancel Rappler's license to do business.

"After a careful scrutiny of the instant Motion, this Court finds that it presents no compelling reason to justify the reconsideration of this Court's Decision dated 26 July 2018. The arguments raised by petitioners are essentially the same as those that have already been discussed and were exhaustively passed upon," the Court ruling obtained Tuesday said.

Rappler previously argued in its petition that the restriction did not apply to them since they were not a mass media entity under constitutional provisions. But the CA affirmed that the firm is a mass media entity, and subject to laws on foreign equity restrictions concerning outstanding capital stock and voting rights.

"The capacity to control a corporation may also exist without owning shares of stock or voting rights in that corporation through corporate control-enhancing mechanisms," the CA said.

In January 2018, the SEC revoked Rappler's business registration due to its alleged violations, after the news agency allowed its foreign investor Omidyar Network (Omidyar) to hold Philippine Depositary Receipts (PDRs). A PDR is a financial instrument that foreign entities can buy into for financial returns in a local company but not in the form of dividends which are tied to ownership.

But the CA affirmed that RHC cannot claim it fully owns Rappler shares since a clause in the PDRs granted to Omidyar allowed it to direct the voting on Rappler's shares.

"Mere grant of control, regardless of the actual exercise of such control, already constitutes a violation of the foreign equity restriction on mass media," it said.

The CA also did not find grave abuse of discretion on the part of SEC for its decision.

But the appellate court refrained from commenting on Omidyar's donation of the $1.5 million (around ₱78 million) investment to the media agency's 14 Filipino managers, since it has remanded the ruling back to the SEC.