How media outlets get their license to operate

Sofia Tomacruz
As private companies, media entities must register with the Securities and Exchange Commission

MEDIA. Rappler's license to operate was approved by the SEC in 2012. Photo by Charles Salazar/Rappler

MANILA, Philippines – In a move widely seen as an attack on press freedom, the Securities and Exchange Commission (SEC) revoked Rappler’s license to do business. The SEC claimed that Rappler had violated the Constitution with funds coming from Omidyar Network, a fund created by eBay founder Pierre Omidyar.  

The SEC said it found Rappler “liable for violating the constitutional and statutory Foreign Equity Restriction in Mass Media, enforceable through laws and rules within the mandate of the commission.” 

The probe was initiated after SEC Chairperson Teresita Herbosa’s office received a “referral letter” from the Office of the Solicitor General (OSG) in December 2016, asking it to conduct an investigation into Rappler.

Here is what you need to know about media licensing in the Philippines: 

What is the function of the SEC?

As private companies, media entities must register with the SEC. 

Section 5 of the Securities and Regulation Code, lists the powers and functions of the SEC:

  • Jurisdiction and supervision over all corporations, partnerships, and associations who are granted government-issued primary franchises and/or a license or permit
  • Formulate policies and recommendations concerning the securities market and advise Congress and government agencies on aspects of this. It can also propose legislation and amendments. 
  • Approve, reject, suspend, revoke or require amendments to registration statements as well as licensing applications of companies
  • Regulate, investigate, or supervise the activities of persons to ensure compliance
  • Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies and other self-regulatory organisations
  • Impose sanctions for the violation of laws and rules. It can also impose regulations and orders on such violations
  • Create, approve, amend or repeal rules, regulations, and orders. It can also issue opinions and provide guidance and supervision on the compliance with such provisions formed. 
  • Ask for the aid and support of any and all enforcement agencies of the government – civil or military– as well as any private entity or person to implement its powers and functions
  • Issue cease and desist orders to prevent fraud or injury to the public
  • “Punish for contempt of the Commission, both direct and indirect, in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court”
  • Order officers of any registered company to call a meeting of stockholders or its members
  • Issue subpoenas and summon witnesses to appear in any proceedings of the Commission. In appropriate cases, the SEC can also order the examination, search, and seizure of all financial and registration records of any company or person under investigation, as may be necessary for disposition of cases and subject to provisions of other laws.
  • Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of entities upon “any of the grounds provided by law”
  • Exercise other powers provided by law that are needed to carry out the SEC’s mandate

How do media companies get their license to operate?

The process of obtaining a license to operate depends on the type of media company set up. 

Broadcast entities must first register with the SEC in order to incorporate its existence and conduct business. Then, a primary franchise –  valid for up to 25 years and subject to renewal – must be obtained from Congress.  

According to a 2013 primer on telecoms and media by law firm SyCip Salazar Hernandez & Gatmaitan, “A congressional franchise is in the form of a law and is enacted in the same way as other laws.” 

In the case of broadcast networks such as ABS-CBN or GMA, a franchise bill needs approval by the House of Representatives before it is forwarded to the Senate. A version of the bill approved by both the House and the Senate will still require presidential approval.

A Certificate of Public Convenience and Necessity (CPC) must then be authorized by the National Telecommunication Commission (NTC). 

While cable TV does not need a secondary franchise, it must obtain a certificate of authority from the NTC in order to operate. 

Radio frequencies, which are limited, are regulated by the NTC.  

Meanwhile, print and online media do not need the media-specific franchise from Congress to operate.  

What does it mean if a license is revoked? 

If the SEC revokes a license with finality, the company must cease its operations. Entities are given 15 days to appeal the commission’s decision at the Court of Appeals and address the SEC’s findings. 

In the case of SEC’s revocation of Rappler’s license, Rappler CEO Maria Ressa said in a press conference on January 15: “There was no due process. We got a show-cause from SEC in August, and in less than 5 months this ruling came out. The decision came out very quick.”

PRESS FREEDOM. Rappler CEO Maria Ressa and Acting Managing Editor Chay Hofileña hold a press conference on SEC registration. Photo by LeAnne Jazul/Rappler

In a statement to its readers and viewers, Rappler said, “The SEC’s kill order revoking Rappler’s license to operate is the first of its kind in history – both for the Commission and for Philippine media.” (READ: Stand with Rappler, defend press freedom) 

“What this means for you, and for us, is that the Commission is ordering us to close shop, to cease telling you stories, to stop speaking truth to power, and to let go of everything that we have built – and created – with you since 2012. All because they focused on one clause in one of our contracts which we submitted to – and was accepted by – the SEC in 2015, ” the statement added. 

Rappler’s lawyer, Francis Lim, said the SEC decision to nullify the PDRs issued by Rappler Holdings Corporation to Omidyar Network, and to revoke Rappler’s articles of incorporation, is too severe. 

Various local and international media and civic groups slammed the SEC decision as an attack on press freedom.

Rappler said it would continue to operate, and defend and uphold the freedom of the press, which is guaranteed by the Constitution, as it contests the SEC ruling in court. – Rappler.com

Sofia Tomacruz

Sofia Tomacruz covers foreign affairs and is the lead reporter on the coronavirus pandemic. She also writes stories on the treatment of women and children. Follow her on Twitter via @sofiatomacruz. Email her at sofia.tomacruz@rappler.com.