Opinion No. 12-16 RE : Marketing and Sale of Discount Coupons

Securities and Exchange Commission SEC Building, EDSA, Greenhills, Mandaluyong City Republic of the Philippines Office of the General Counsel Department of Finance

Re: Marketing and Sale of SEC Opinion No. 12-16 Discount Coupons 13 September 2012

1 Exchange Road, Ortigas Center, Pasig City : PUNO & PUNO LAW OFFICES Philippine Stock Exchange Center ATTYSMASELIZABETH E PERALTA-LORIEGA RANULFO GVaPAYOS,JR.and BRYAN ASANJUAN 12th Floor, East Tower

Madam and Sirs:

advertising, and is thus subject.to the thirty percent (30%) maximum foreign equity limit in advertising entities as mandated by the 1987 Constitution. and sale of discount coupons for goods and services through the internet constitutes This is in reply to your letter requesting :an opinion on whether the marketing

It appears that:

1. Your client intends to acquire an existing domestic corporation 2. The corporation displays vouchers of its merchant partners for a businesses in the leisure, catering and entertainment industry; certain number of days in its website and sells these to end-consumers who redeem the vouchers from the relevant merchant; internet through which new customers are acquired for selected ('corporation") engaged in the operation of a voucher platform on the

3. The merchant dictates the conditions and duration of the vouchers. while the design of the voucher placement is at the corporation's discretion; and

4. The corporation sells these vouchers at the offered price, as agreed with the merchant, and remits the necessary revenue to the merchant, deducting the agreed remuneration (commission) to the corporation.

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may, need to be collected in order to be redeemed against a future purchase or to promotion device which try to persuade buyers/customers to purchase. They may offer a discount on the first or subsequent purchase of a product/service, or they receive gifts or cash.i1 The Blackwell Encyclopedia of Management defines coupons as "x x x a sales

prepared and" through any form of mass medium,' subsequently, applied, advertising as "the business of conceptualizing, presenting or making available to the public, through any .form of mass media, fact, data," or information about the Inc.9, the United States District Court, S.D., New York, stated that: disseminated or circulated advertising matter." Article 4(b) of the same law defines attributes, features, quality or availability of consumer products, services or credit." price-sensitive customers.3 In the case of Home Shopping Network, Inc. vs. Coupco, Article 4(a) of Republic Act Number 73942 defines an advertisement' as ."the Coupons are deemed as a way of selectively discounting prices to the most

sale does not and thereby create: a purchasing of a 'temporary price reduction', which will cause or incentive! Coupons, even when unredeemed, advertise allow them to move a potentially greater volume of product than they would have moved with a price cut. They 'empower' the consumer. in a way that a simple products and their makers." "Coupbns provide manufacturers with the .benefits

couponing -- otherwise known' as electronic vouchers -- was considered to enhance certain of the attractive features of printout coupons while' repiacing the administrative costs of, paper handling with the presumably lower cost of electronic data transfer.s In the same case of Home Shopping Network, Inc.,: paperless electronic

for that matter, may be considered as advertisements. Based on the foregoing discussion, coupons, as well as electronic vouchers,

thus subject to the thirty percent (30%) maximum foreign equity limit in advertising coupons for goods and services through the internet constitute advertising, and is entities as mandated by the 1987 Constitution? Now, moving to the next issue: Does the marketing and sale of discount

The Blackwell Encycopedic Dictionary of MarketingThe Blackweli Encyclopedia of Management. 2nd Edition, (United 3 Jeffrey F. Rayport and Bemar&'j. Jaworski, Introduction to e-commerce (Boston: McGraw-Hill Irwin MarketspaceU, 2005). 2 The Consumer Act of the Philippines. Approved 13 April 1992. 4 No. 95 CIV. 5048 (LBS). 27 February 1998. $ Ibid. Kingdom: Blackwell Publishing Ltd." 2005), s.v. "Coupons". 203

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Article 4(at) of Republic Act Number 7394% provides:

billboards, posters, streamers, hand bilis, leaflets, mails and the like." used to convey advertising messages to the public such as television, radio, magazines," cinema, "Mass media' refers to any means' or methods

the operation of the voucher platform on. the internet,. and (2) it is the voucher/coupon merchant that dictates the conditions and duration of the vouchers, while the design of the voucher placement is at the corporation's discretion. In your letter, you informed us that (1) the subject corporation is engaged in

is necessary to ascertain whether the corporation is an advertising agency or a mass media entity. Thus: To determine the extent of foreign participation in the subject corporation, it

as agents or counselors of advertisers by writing. materials by advertisers in selling their goods and preparing, or producing the commercial messages or services, and by selecting and recommending the Advertising agencies do not actually disseminate the radio, television, etc., for this purpose. Advertising influence the masses, although the activities of such medium or media to be used as the vehicle for disseminating such messages to the public. materials they prepare as they have to utilize or avail of the facilities of mass media, i.e.,:newspapers, agencies falling within this concept are not mass agencies, by their nature, are closely related to those media, considering that they do not operate or control any medium of communication designed to reach or of mass media." "The function of advertising agencies is to serve

such advertising :agencies would fall within . the purview of the constitutional limitation."? specific example of which is an outdoor advertising firm which sells billboard space to. advertisers, then otherwise engages in the business of mass media, a. disseminates information, .or operates; controls or "However, where the advertising agency actually!

The Consumer Act of the Philippines, supra. SEC-Corporate Legal. Department Opinion."2:September 1988.

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service, it, in effect, disseminates information to the generai public through the internet. Hence, it may be considered as a mass media entity. Consequently, the the internet 'with the purpose of increasing the sales of a particular product or entity must be wholly owned by Filipino citizens, in compliance with the requirement of paragraph 1, Section 11, Article XVI of the 1987 Constitution& and List A(1) of Executive Order Number 8589. Thus, if the corporation is engaged in the operation of a voucher platform on

messages or materials and selecting and recommending the medium or media to be used as the vehicle for disseminating such messages to the public, it must comply with the thirty percent (30%) maximum foreign equity limit requirement of Section voucher placement, i.e., in writing, preparing, or producing the commercial 11, Article XVI of the 1987 Constitution1 and List A (16) of Executive Order Number 85811 On the other hand, if the corporation is merely involved in the design of the

raised therein and shall not be used in the nature of a standing rule binding upon solely on the facts disciosed in the query and relevant solely to the particular issues the Commission in other cases, whether of similar or dissimilar circumstances. Please be reminded, however, that the foregoing opinion is rendered based

By authority of the Commission: CAMIbaYs^cORREA General Counsel

Section 11, Article XVI, 1987 Constitution. "The ownership and management of mass.media shall be limited to citizens of the 9 Eighth Regular Foreign Investment Negative List. List A: Foreign Ownership is limited by mandate of the Constitution and 11 Eight Regular Foreign Investment Negative List. List A: Up to Thirty Percent (30%) Foreign Equity. 16. Advertising (Art XVI, Philippines, or to corporations. cooperatives or associations, wholly-owned and managed by such citizens. x x x" (Emphasis supplied) Specific Iaws. No foreign equity. 1. Mass media, except recording (Art."XVI," Sec. 11 of the Constitution; Presidential Memorandum dated 04 May 1994). Section 11, Article XvI, 1987 Constitution. "x x x Onty Filipino citizens or corporations or associations at least seventy per Sec. 11 of the Constitution). centum of the capital'of. which is owned by such ciizens shall. be allowed to engage in the advertising industry. x x x" (Emphasis supplied)