Quo warranto on ABS-CBN (Part 1: Questions)

The petition for quo warranto (67 pages plus over 1,000 pages of annexes) filed by Solicitor General Jose C. Calida asked the Supreme Court for a judgment “forfeiting” or “revoking” the legislative franchises of ABS-CBN Corp. (ABS-CBN) and ABS-CBN Convergence.

Allegedly, ABS-CBN violated its franchise when it: (1) “operated a pay-per-view channel through free-to-air signals” via the Kapamilya Box Office (KBO) without “any permit from the (government) and guidelines on conditional access” thereby “illegally exact(ing) money from the Filipino people”; and (2) sold Philippine Deposit Receipts or PDRs to foreigners in violation of the Constitution which requires 100 percent Filipino ownership of mass media companies.

Under item 1, Calida argued that the broadcast franchise of ABS-CBN authorized it to air its programs free of charge and to recover its costs via advertising only. Thus, it “abused or misused” this “free-to-air” privilege by charging fees for KBO programs.

Under item 2, ABS-CBN Holdings, a sister company of ABS-CBN, purchased shares of stock of ABS-CBN. Then, it issued and sold PDRs, which enabled the purchasers to receive the dividends accruing to each ABS-CBN share underlying each PDR. By selling PDRs to foreigners, ABS-CBN allegedly granted the purchasers beneficial ownership in violation of the Charter.

The petition also alleged that ABS-CBN Convergence purchased, under suspicious “corporate layering,” the controlling shareholdings in Multi-Media Telephony, a grantee of a telecommunication franchise. It explained that Republic Act No. 7908, as amended by RA 8332, specifically barred the “transfer” of such “controlling interest… without the approval of Congress.”

Moreover, the petition asserted that ABS-CBN Convergence failed to list at least 30 percent of its capital stock in the Philippine Stock Exchange (PSE) “within five years from the commencement of its operations” in violation of said two laws.

The petition raises interesting legal questions, some of which are: (1) The Constitution vested Congress with the exclusive power to grant, amend, alter or repeal franchises. Does this exclusivity imply that only Congress, to the exclusion of the Supreme Court, may “revoke or forfeit” the franchises it had granted? At the very least, by comity and courtesy to a coequal branch, should the Supreme Court defer to Congress, given that various bills have been filed on the subject?

(2) Quo warranto allows the solicitor general to challenge “a person who usurps, intrudes into, or unlawfully holds or exercises a… franchise.” Does it apply against a corporation with an existing valid franchise which it allegedly “abused or misused”?

(3) Does ABS-CBN’s “free-to-air” franchise prohibit it from offering “pay-per-view” KBO programs?

(4) A big telecommunications player took over the telecommunication franchise of a transferor which itself acquired it from another company without the prior consent of Congress and without the required public listing. Yet, this multiple transfers were recently approved post facto by Congress. Is this liberality a precedent for this requirement?

(5) Do PDRs grant their holders ownership rights? Are PDRs equivalent to shares of stock? Or, are they equivalent merely to bonds and other forms of indebtedness?

(6) Assuming that the KBO is an abuse or misuse, is forfeiture of the franchise the proper penalty? Is it not merely a refund? Or a fine? Or a halt of the service?

By annexing over 1,000 documents, the petitioner probably hoped to prove all the facts needed to decide the case. However, some of the annexes refer to private documents that need to be authenticated.

And some of the cited legal questions need factual bases, like: (1) How did ABS-CBN use its free-to-air channel to broadcast KBO? (2) How do PDRs grant ownership privileges? (3) How did respondents employ suspicious “corporate layering?” and (4) Why did ABS-CBN Convergence fail to list its shares in the PSE?

To be fair, I will await the respondent’s “Comment” to the petition which is due tomorrow before answering the foregoing questions. On the answers, I think, will depend whether the petition (1) should be dismissed outright, (2) remanded to a lower court for factual determination, or (3) given due course and resolved on its merits.

Abangan ang Part 2: Answers.

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