Rappler asks CA to nullify SEC ruling

Rappler on Monday asked the Court of Appeals (CA) to nullify the Securities and Exchange Commission's (SEC) decision to void its incorporation papers for supposedly violating the constitutional prohibition on foreign ownership of mass media.

Rappler questioned the January 11 decision, which the news site and its supporters view as an attack on press freedom.

“Our petition raises legal issues that have far-reaching implications on business and press freedom. We have our own legal position on these issues and the SEC will most likely take the opposite view,” said Rappler’s counsel Francis Lim in a statement.

“Fortunately, there is jurisprudence that can guide the Court of Appeals in deciding the case. We fervently hope that the case will ultimately be decided for the broader interest of the country,” he added.

Rappler: Omidyar has no control over site

The SEC said that Rappler violated the Constitution and laws by allowing Omidyar Network, one of the holders of Philippine Depositary Receipts (PDRs) issued by Rappler, to exercise control over its corporate affairs as provided for in their internal agreement, in exchange for a fund infusion of $1 million.

Rappler, however, maintained that Omidyar does not exercise control over the news site and that there was no declaration made by the SEC on this matter.

"A reading of Clause 12.2.2 of the Omidyar PDR shows that any action by Omidyar only takes place after RHC has made a decision to alter, modify, change, or take any action, with respect to the Articles of Incorporation or by-laws of Rappler and only 'where such alteration, modification, change or action will prejudice the rights in relation to the ON PDRs.'  Omidyar is not, therefore, involved in the decision making with respect to the Articles of Incorporation or by-laws of Rappler, and cannot have been granted control of Rappler or influence over it," the petition read.

"To be clear, this clause does not give Omidyar the power to decide when and how the Articles of Incorporation or by-laws of Rappler, or any other corporate matter, are to be made.  Therefore, Omidyar has no control over the actions of RHC, and also Rappler."

Burden of proof

The petition also claims that the SEC violated Rappler Inc. and Rappler Holdings Corporation's (RHC) right to due process and equal protection under the Constitution when the corporate regulator issued the decision to put Rappler and RHC "out of business."

"Rappler and RHC, being respondents in this case, were already found to have violated the law and the [SEC] Special Panel shifted the burden of proof on them to explain why they are not liable. This is contravention of the established rule the burden of proof is on the complainant," the petition read.

"Worse, the Special Panel recommended the imposition of revocation on Rappler and RHC directly to the Commission En Banc. No formal charge was filed against Rappler and RHC as required by the SEC Rules. There was also no formal administrative action filed against Rappler and RHC before the SEC. Without an administrative action, surely, no administrative sanction, including the suspension or revocation of the corporation's franchise, could have been imposed by the SEC En Banc," it added.

Revoking the incorporation papers is a penalty that "is too severe and grossly disproportionate to the supposed wrong committed," the petition stated.

The petition added Rappler and RHC cannot be made liable for violation of the foreign ownership ban because the news site "is not engaged in the business of mass media."

"Rather, Rappler provides platforms or online venues for everyone, i.e., journalists, government, public at large (people from all over the world) to share information about various topics. It then elicits feelings, thoughts and ideas from those who access these platforms through its mood meter and various other forms of crowdsourcing," it said.

"Indeed, the activities of Rappler are more akin to the way Facebook, Twitter, YouTube and blogs operate."

The National Bureau of Investigation (NBI) is already looking into the possibility of filing criminal charges against Rappler in light of the SEC decision.

Government agents are also conducting a fact-finding probe into the cybercrime complaint filed by businessman Wilfredo Keng in relation to an article the news site published in May 2012. —ALG/BM, GMA News