Opinion No. 16-21 Re: Entities engaged in mass media and advertising.

Securities and Exchange Commission Republic of the Philippines Department of Finance

OFFICE OF THE GENERAL COUNSEL

31 August 2016

RE: Entities engaged in mass media and advertising. SEC-OGC Opinion No.16-21

ATTY. ROSARIO S. BERNALDO Managing Partner Bernaldo Directo & Po Law Offices Unit 1807 Cityland Condominium Ayala North, Makati City 10 Tower 1,H.V de la Costa Street

Dear Atty. Bernaldo

opinion that the proposed company of Phar Partnerships (Phar) does not fall within the scope of the citizenship requirements imposed on mass media and advertising under the Foreign Investment Act or Republic Act No. 7042 ("FIA"); hence, it may establish a 100% foreign-owned corporation here in the Philippines. This refers to your letter dated 08 June 2015 requesting for confirmation of your

a primary purpose of leasing and sub-leasing indoor, outdoor and digital advertising focused on an international media, marketing and sponsorship consultancy. express that Phar intends to establish a corporation called Phar Philippines, which will have materials, sites and spaces, and engaging in sponsorship consultancy. In addition, your letter includes a detailed description of the proposed activities: In your letter, you state that Phar is a privately-owned entrepreneurial company You also

1. 2. 3. "To lease fences, billboards, sign boards, buildings and other structures To lease digital space from media owners, invest in the technologies suitable for advertising purposes and consequently sub-lease them to To sell sponsorship and to provide services to clients by measuring the (e.g. video, search, banner display), and serve clients by sub-leasing the effectiveness of the sponsorship via research (e.g. Olympics, Asian Games)." third parties; digital space to post their advertisements

only be engaged as a media representation or brokerage company. that Phar Philippines should not be classified as a company engaged in "mass media" or advertising as provided in the Consumer Act of the Philippines or Republic Act No. 7394 "advertising." To support your position, you cite the definitions of mass media and ("Consumer Act"). Furthermore, you clarify that Phar Philippines will not own any media, hence, will Therefore, you claim

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media, fact, data, or information about the attributes, features, quality or availability of conceptualizing, presenting or making available to the public, through any form of mass consumer products,services or credit.i In Article 4 (b) of the Consumer Act, "advertising" is defined as, "the business of

methods used to convey advertising messages to the public such as television, radio, magazines, cinema, billboards, posters, streamers, hand bills, leaflets, nails, and the like."? On the other hand, "mass media" is referred to in Article 4 thereof as, "any means or

definitions since they do not include the creation of advertisements or messages, dissemination of information, or operation or control of the business of advertising and mass media; rather, they merely involve the sublease of advertising materials, sites and spaces. In addition, you also claim that the sponsorship consultancy is not covered by the definition of advertising.Hence, the proposed Phar Philippines should not be subjected to the pertinent Constitutional restrictions as provided under FIA. You argue that the proposed activities of Phar Philippines are not covered by the

We do not confirm your position.

first activity (i.e., "to lease fences, billboards, sign boards, buildings and other structures suitable for advertising purposes and consequently sub-lease them to third parties"), the same is covered under mass media, consistent with SEC-OGC Opinion No. 16-17, to wit: The proposed activities are covered by nationality restrictions. With respect to the

nationalized activities subject to the foreign equity limitations imposed by as waiting sheds, billboard structures, electronic LED displays and advertising messages to the public, hence is of a mass media entity the 1987 Constitution and other pertinent laws, the Commission is of the opinion that HDI, by leasing out or subleasing advertising spaces, such other fixed or movable structures where advertisements can be displayed, actually provides a medium to disseminate or convey subject to the requirement of paragraph 1, Section 11, Article XVI of the 1987 Constitution and List A(1) of Executive Order No. 184 series of 2015." 3 (Emphasis and underscoring supplied.) "Coming now to the issue as to whether or not HDI is engaged in

or structure to others is well within the activity of a mass media entity for it still provides a medium to disseminate or convey advertising messages to the public. To reiterate the stand of the Commission, the act of subleasing the advertising space

technologies and serve clients by subleasing the digital space to post their advertisements") also falls within the purview of mass media. The Commission already discussed in its previous opinions that platforms for mass media are not limited to the physical structures The second activity (i.e., "to lease digital space from media owners, invest in the

1 Article 4(b), Republic Act No. 7394, Consumer Act of the Philippines. 2 Ibid., Article 4 (at). 3 SEC-OGC Opinion No. 16-17,11 July 2016, addressed to Mr.Darmo N. Castillo.

RE: Entities engaged in mass media SEC-OGC Opinion No. 16-21 and advertising Page 3 of 4

and printed materials. It covers other forms of communication and platforms such as the internet. In SEC-OGC Opinion No.14-06, the Commission opined

"With the continuing evolution and proliferation of digital communication technology, i.e. internet and mobile technology, individuals now are exposed to information that are previously restricted to a select group, such as advertising and propaganda. Thus, the internet and mobile technology have become a recognized platform for mass media. In our jurisdiction, the Tobacco Regulation Act of 2003 specifically includes the internet in the definition of "mass media."4 (Emphasis and underscoring making them susceptible to the influence of modern mass media techniques supplied.)

The Commission further provided that:

"Moreoever your letter states that Komli intends to provide a digital platform to third-party websites to sell and monetize online inventory. Although Komli will not own or operate any online media outlet nor will affiliate with any internet service provider. online retailer or social networking site and will merely act as a middleman by bringing together the product manufacturers and third-party websites, it will provide an online platform intended to increase the sale of a particular product. In SEC Opinion No. 12-16, this Commission opines that if the corporation is engaged in the operation of a voucher platform on the internet with the purpose of increasing the sales of a particular product or services, it, in effect disseminates information to the general public through the internet and is thus considered a mass media entity subject to the requirement of paragraph 1, Section 11. Article XVI of the 1987 Constitution and List A(1) of Executive Order No. 858."5 (Emphasis and underscoring supplied.)

owners and will subsequently sublease such space to clients who will in turn post their advertisements therein. As previously discussed, subleasing the space is also considered as providing a medium to disseminate the advertisements and messages, thus engaging in mass media. In this case, it is proposed that Phar Philippines will lease digital space from media

clients by measuring the effectiveness of the sponsorship via research [e.g. Olympics, Asian Games]"), on the other hand, can be classified under advertising. The third proposed activity (i.e., "to sell sponsorship, and to provide services to

Id., citing SEC Opinion No. 12-16, 13 September 2012, addressed to Attys. Ma. Elizabeth E. Peralta-Loriega, Ranulfo + SEC-OGC Opinion No. 14-06, 2 June 2014, addressed to Navarro Amper & Co. G.V. Payos, Jr., and Bryan A. San Juan.

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advertising agency, to wit: In a previous opinion, the Commission further explained the functions of an

commercial messages or materials used by advertisers in selling their media to be used as the vehicle for disseminating such messages to the public._Advertising agencies do not actually disseminate the materials they prepare as they have utilized or avail of the facilities of mass media, i.e., newspapers, radio, television, etc, for this purpose."6 (Emphasis and underscoring provided). counselors of advertisers goods and services and by selecting and recommending the medium or "Essentially, the function of advertising agencies is to serve as agents or bywriting preparingorproducingthe

measuring the effectivity of sponsorship activity of any event and selling opportunity to interested parties. By advising their clients as to the effectivity of a sponsorship in marketing and promotion of their product, Phar Philippines is actually doing an activity of an advertising agency. In your letter, you explain that Phar Philippines will render services to clients by

restrictions imposed by the Constitution as to mass media (i.e., 100% Filipino-owned) and advertising (i.e., at least 70% Filipino-owned) will apply to it. activities of entities engaged in mass media and/or advertising. Based on the foregoing, the activities of the proposed Phar Philippines are under the Hence, the foreign

other cases or upon the courts whether of similar or dissimilar circumstances. If, upon further inquiry or investigation, it will be disclosed that the facts relied upon are different, on the facts and circumstances disclosed and relevant solely to the particular issue raised therein. It shall not be used in the nature of a standing rule binding upon the Commission in this opinion shall be rendered void. It shall be understood, however, that the foregoing opinion is rendered based solely

Please be guided accordingly.

CAMLOS.CORREA General Counsel

6 SEC-OGC Opinion No. 16-17 citing DOJ Opinion No. 22 s. 1975. Sec 111, ArticleXVI,1987 Constitution of the Republic of the Philippines. Sec 11 (2), Article XVI, 1987 Constitution of the Republic of the Philippines. 9 SEC Memorandum Circular 2003-15, No.7