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EN BANC [G.R. No. 210885. August 26, 2014.] JAMES MARK TERRY L. RIDON AND JONAS JULIUS CAESAR N.AZURA , petitioners , vs . AXN NETWORKS PHILIPPINES, INC.,SECURITIES AND EXCHANGE COMMISSION, NATIONALTELECOMMUNICATIONS COMMISSION, AND MOVIE ANDTELEVISION REVIEW AND CLASSIFICATION BOARD , respondents .[G.R. No. 210886. August 26, 2014.] JAMES MARK TERRY L. RIDON AND JONAS JULIUS CAESAR N.AZURA , petitioners , vs . FOX INTERNATIONAL CHANNELSPHILIPPINES CORPORATION, SECURITIES AND EXCHANGECOMMISSION, NATIONAL TELECOMMUNICATIONSCOMMISSION AND MOVIE AND TELEVISION REVIEW ANDCLASSIFICATION BOARD , respondents . NOTICE Sirs/Mesdames : Please take notice that the Court en banc issued a Resolution dated August 26,2014 , which reads as follows : G.R. No. 210885 ( James Mark Terry L. Ridon and Jonas Julius Caesar N. Azura v. AXN Networks Philippines, Inc., Securities and ExchangeCommission, National Telecommunications Commission, and Movieand Television Review and Classification Board ); G.R. No. 210886( James Mark Terry L. Ridon and Jonas Julius Caesar N. Azura v. Fox International Channels Philippines Corporation, Securities and Exchange Commission, National Telecommunications Commission and Movie and Television Review and Classification Board ) . — In these two(2) consolidated petitions 1 filed under Rule 65 of the Rules of Court, the Court isbeing called to decide whether the Securities and Exchange Commission (SEC) failed in performing its statutory duty of enforcing the nationality requirements, 2 prescribed in Section 11, Article XVI of the Constitution, on the ownership andmanagement of mass media and those that are engaged in the advertisingagency when it granted franchises through the issuance of certificates of registration 3 in favor of AXN Networks Philippines, Inc. (AXN) and FoxInternational Channels Philippines Corporation (FOX) .Petitioners James Mark Terry L. Ridon (Rep. Ridon) , a member of the House of Representatives and the Integrated Bar of the Philippines (IBP) and Atty. Jonas Julius Caesar N. Azura (Atty. Azura) , also a member of the IBP, allege that the CD Technologies Asia, Inc. © 2016cdasiaonline.com SEC effectively allowed AXN and FOX to engage as mass media and advertisingentities despite being 99.99% controlled by aliens, thus, violating theconstitutionally prescribed foreign ownership restrictions on nationalizedindustries. The 1987 Constitution embodies the policy of Filipinization as a continuingexpression of the collective sense of nationalism that sprung in the early days of the Republic. 4 It prohibits and/or limits the participation of aliens in enterprisesconsidered sensitive and vital to both the national economy and national security. Thus, paragraph 1, Section 11 of Article XVI of the Constitution 5 restricts theownership and management of mass media to citizens of the Philippines, or tocorporations, cooperatives or associations, wholly-owned and managed by suchcitizens. Paragraph 2 6 of the same article likewise restricts engagement in theadvertising industry to Filipino citizens or corporations or associations with atleast seventy per centum of its capital owned by such citizens. The Factual Antecedents In his privilege speech, 7 labeled by the media as the State of Philippine Cable Television 8 and delivered on January 27, 2014 before the House of Representatives, petitioner Rep. Ridon accused foreign-dominated companies,specifically AXN and FOX, of encroaching upon protected industries includingthe mass media and the advertising . He said that based on the last documentssubmitted to the Securities and Exchange Commission (SEC), corporations, . . .including those abovementioned, have foreign shares which constitute 99.99 percent of ownership — a clear violation of the Constitution' [that] . . . thesecorporations cannot be allowed to engage in mass media by providing programming content to CATV operators or engaging in advertising pursuant tothe limitation under the 1987 Constitution and other statutes governing themass media industry. 9 Thus, he said that [t]he failure of government regulation over the activities of these corporations has allowed thesecorporations to directly compete with legally existing domestic corporationsengaged in similar activities in the mass media industry. Big cable operatorsmay not have any problem with this, but what about the hundreds of other smalllocal cable TV operators and local content providers and advertisers? 10 Fearing that the direct but unwarranted competition of these foreign-ownedcorporations with legally existing domestic corporations, engaged in similar activities poses threats to the continuing viability of constitutionally protecteddomestic industries and employment of their thousands of workers, Rep. Ridonurged the House of Representatives to investigate the state of compliance of the cable television industry, including CATV operators and programmingcontent providers, with the nationality restrictions of the 1987 Constitution andother existing statutes. 11 On February 7, 2014, Rep. Ridon and Atty. Azura formally brought the issue tothe attention of the Court through the filing of these consolidated petitions. Thepetitioners believe that the failure of AXN and FOX to fulfill the minimumnationality requirements should have prevented the SEC from issuing thepertinent certificates of registration for being contrary to the Constitution.According to the petitioners, AXN and FOX were given by the SEC theauthorization to engage in mass media and advertising despite being 99.99% CD Technologies Asia, Inc. © 2016cdasiaonline.com controlled by aliens. As the pertinent General Information Sheets 12 would show,AXN is 99.99 % owned by South Asian Regional Investments, Inc., an entityorganized under the laws of the State of Delaware, U.S.A.; and FOX is 99.99%owned by Star Television Advertising Ltd., an entity organized under the laws of the British Virgin Islands.Under AXN's Amended Articles of Incorporation (AOI) , 13 which was approved bythe SEC on January 20, 2012, its primary purpose was [t]o buy or sell for itsown account or as agent, television advertising time for television companiesand to conduct promotional and other similar activities for that purpose. 14 One of its secondary purposes was [t]o deal and engage in, for its own account,on commission or for such fees as may be proper and legal, any lawfularrangements and agreements involving the use of television airtime bytelevision operators such as but not limited to carriage agreements, and toprovide marketing, promotional, support, and other similar services forthis purpose. 15 On the other hand, FOX, based on its Amended AOI 16 which was approved by theSEC on November 17, 2010, was organized primarily [t]o provide consulting,liaison, marketing and promotional , after-sales, technical and trainingservices to cable and television operators. Secondary to that purpose, Fox was toprovide advertising, sponsorship and related activities . 17 HDAECI To the petitioners, the authority conferred under the issued AOIs to AXN and FOXshould not have been given in the first place, as it runs afoul of theConstitutional proscription on alien domination of mass media and advertising.Hence, as taxpayers and Filipino citizens, the petitioners pray that the Court: [1] Declare null and void the SEC issuance of the certificates of registration to AXN and FOX for being patentlyunconstitutional; [2] Order the SEC to suspend or revoke the said certificates; [3] Enjoin and prohibit AXN and FOX from continuing to operateunder the said certificates; [4] Enjoin and prohibit the SEC from issuing any further certificatesto applicants that fail to comply with the requirements onownership provided under the Constitution; and [5] Enjoin and prohibit the National TelecommunicationsCommission (NTC) and the Movie and Television Review andClassification Board (MTRCB) from allowing the airing of allcable channels bearing content illegally distributed and/orproduced by AXN and FOX. 18 In their consolidated Comment, 19 the SEC, the NTC and the MTRCB, throughtheir counsel, the Office of the Solicitor General (OSG) , disagree and pray for thedismissal of the petitions. AXN and FOX, in their Opposition 20 andComment/Opposition, 21 similarly pray that the petitions be dismissed for thefollowing reasons: [1] The petitioners failed to first exhaust all available administrative CD Technologies Asia, Inc. © 2016cdasiaonline.com remedies before the SEC, the NTC and the MTRCB; [2] Assuming that the failure to exhaust remedies may be excused,the petitioners still palpably disregarded the principle of hierarchy of courts; [3] There is no justiciable controversy that is ripe for judicialadjudication in the present case; [4] The petitioners lack the requisite legal standing to file thepetitions; [5] The petitioners are not entitled to an injunction, as they haveno right in esse that warrants immediate protection from thecourts; there will be no irreparable injury that will result evenif injunction is denied; if the injunction is granted, it would betantamount to prejudgment on the merits of the case; if it isthe government that is being enjoined from implementing anissuance that enjoys the presumption of validity, the discretionin granting or denying applications for injunctive writs must beexercised with utmost caution; and [6] Lastly, the nationality requirements under the Constitution donot apply, because AXN and FOX are not engaged in massmedia or the advertising business. 22 In addition, the respondents insist that the ownership restriction under theConstitution does not apply to them, as they do not broadcast signals to thepublic. Thus, they cannot be considered as mass media entities.Furthermore, they assert the inapplicability of the 70:30 nationality rule as theyare not engaged in the business of advertising. The Issue In issuing the pertinent certificates of registration, did the SEC effectively allowAXN and FOX to engage in mass media and advertising despite being 99.99%controlled by aliens and, thus, violate the foreign ownership restrictions underSection 11 Article XVI of the 1987 Constitution? To properly resolve the issue, the Court must first rule on the propriety of thepetitioners' direct recourse via Rule 65. The Court's Ruling The primary relief being prayed for by the petitioners is for the Court to declareas unconstitutional the issuance by the SEC of the certificates of registration infavor of AXN and FOX. This essentially means that the SEC is being accused of violating the Constitution — an allegation of grave abuse of discretion, 23 although not as precisely worded as that, for having allegedly committed an actin utter and blatant disregard of the constitutionally mandated foreign ownershiprestrictions in protected industries. IADaSE The success of these petitions and of all the other reliefs prayed for depends onthe Court's exercise of its extraordinary power of judicial review. It is a review CD Technologies Asia, Inc. © 2016cdasiaonline.com
