Conflicting internet ownership rules

President Duterte has opened additional areas for foreign investments through the eleventh foreign investment negative list (FINL) he issued recently by way of Executive Order No. 65.

Among others, the internet business is now open for 100 percent equity or ownership by foreigners. It will not be considered mass media, which the Constitution requires to be fully owned by Filipinos.

The FINL cites a 1998 opinion of the Department of Justice, which says the internet business “refers to internet access providers that merely serve as carriers for transmitting messages, rather than being the creator of messages/information.

“It does not create the message/information to the general public, as mass media do, and the publication of the messages/information or stories carried by the internet and transmitted to the computer owner, thru the access provider, is decided by the sender or the inter-linked networks.”

Following this line of reasoning, therefore, if the internet facilities are used to produce and transmit materials or content, then they shall acquire the status of mass media.

The issue of whether the internet is a form of mass media was also the subject in 2014 of an opinion of the Securities and Exchange Commission (SEC).

A foreign-owned corporation asked the SEC if it can carry on the business, using the internet or mobile technology as its primary medium, of (a) wholesale marketing and sale of digital publications; (b) providing a digital platform to the client/merchant/marketers to reach out to their target audiences; and (c) providing a digital platform to the third-party website to sell and monetize their online inventory.

Citing Republic Act No. 7394, the SEC said mass media “refers to any means or methods used to convey advertising messages to the public such as television, radio, magazines, cinema, billboards, posters, streamers, hand bills, leaflets, mails and the like.”

It ruled 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 service, it, in effect, disseminates information to the general public through the internet and is thus considered a mass media entity.”

Based on those reasons, the SEC denied the corporation’s application to register and operate its internet business in the Philippines.

It’s not only the SEC that considers the internet as a form of mass media. The Tobacco Regulation Act of 2003 (TRA) states “mass media includes print media such as, but not limited to, newspapers, magazines, and publications; broadcast media such as, but not limited to, radio, television, cable television, and cinema; electronic media such as but not limited to the internet.”

In light of the apparent divergence of opinions, what nationality rule then should apply to the internet business?

Since the SEC is under the administrative supervision of the Department of Finance (DOF), the argument can be raised that the SEC opinion is deemed modified or set aside by the FINL because the latter was the product of the combined efforts of the DOF and National Economic and Development Authority, aside from the fact that it was issued through an executive order by the President.

But that argument cannot be invoked with regard to the TRA because it is a law and therefore only Congress, not the executive branch, can change or amend its description of the internet as mass media.

No doubt, the business community will be happy to see the relaxation of the nationality rules for the internet business. The existing restrictions on mass media have been rendered meaningless by the modern means of communications.

A definitive or categorical government ruling on the nature of the internet business will provide stability to this important, if not indispensable, aspect of daily living and trade and commerce.