Did Abs-Cbn Break The Law?

The shutdown of ABS-CBN broadcasting in the Philippines in 2020 was a result of the company's failure to renew its congressional broadcast franchise. The network was accused of violating the terms of its franchise, including allowing foreign investors and launching TV channels without the necessary approvals. The company also faced criticism for its political bias and tax avoidance schemes. ABS-CBN denied any wrongdoing and attributed the shutdown to a targeted effort to muzzle media outlets critical of the government. The incident sparked debates about press freedom and democracy in the country.

Non-compliance with franchise terms and conditions

The shutdown of ABS-CBN broadcasting arose from the non-renewal of the Philippine media network's congressional broadcast franchise. The dispute between the administrations of Presidents Benigno Aquino III and Rodrigo Duterte and the media conglomerate arose over the terms and conditions of the franchise renewal agreement.

ABS-CBN was accused of non-compliance with franchise terms and conditions, existing laws, and the country's Constitution. Deputy Speaker Rodante Marcoleta claimed that the network deliberately and with impunity violated the conditions of its legislative franchise. He cited the following:

• The network's previous franchise lasted longer than the constitutionally mandated 50-year period.
• The network's former president, Eugenio "Gabby" Lopez III, was an American citizen when he took the helm of the company in 1986.
• The network is foreign-owned because of its Philippine Depositary Receipts (PDR), which allowed foreign holders beneficial ownership and potential voting rights.
• The network committed unfair labor practices, with almost 8,500 out of 11,000 employees being contractual workers and talents who were not regularized and did not receive the benefits required by law.
• The network showed political bias for certain candidates in the 2010 and 2016 presidential elections, contrary to the terms of its franchise and in violation of the Omnibus Election Code.
• The network offered a pay-per-view service, Kapamilya Box Office (KBO) channel, through free-to-air signals.
• The network engaged in tax avoidance schemes, using its fully owned subsidiary, Big Dipper Digital Content and Design, as a tax shield.

ABS-CBN, however, denied any violation of laws and maintained that it had complied with all pertinent laws governing its franchise and had secured all necessary government and regulatory approvals for its business operations. The network also stated that the PDRs in question were approved by the Securities and Exchange Commission and the Philippine Stock Exchange.

Despite ABS-CBN's assertions, the Congress of the Philippines was unable to renew the franchise before its expiration on May 4, 2020. The National Telecommunications Commission (NTC) then issued a cease-and-desist order, demanding ABS-CBN to cease all its free TV and radio broadcasting operations immediately.

Foreign ownership and control

The shutdown of ABS-CBN broadcasting in 2020 arose from the non-renewal of the Philippine media network's congressional broadcast franchise. The controversy surrounding the non-renewal involved disputes between the administrations of Presidents Benigno Aquino III and Rodrigo Duterte and the media conglomerate, ABS-CBN, over the terms and conditions of the franchise renewal agreement.

One of the main issues cited by critics of the non-renewal was the alleged violation of the constitutional restriction on foreign ownership of mass media. The Office of the Solicitor General (OSG) asserted that ABS-CBN had breached this prohibition by issuing Philippine Depositary Receipts (PDRs) to foreigners.

Philippine law and the 1987 Constitution restrict ownership and management of mass media to citizens of the Philippines or corporations, cooperatives, or associations owned by such citizens. This restriction is intended to prevent foreign influence and control over the media, which plays a crucial role in shaping public opinion and can have a significant impact on the country's economic, political, and socio-cultural landscape.

ABS-CBN denied violating the foreign ownership restriction, arguing that the PDRs were evaluated and approved by the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE). They claimed that PDRs are not evidence of ownership and do not grant voting rights or representation on the company's board to foreign holders.

However, critics, including Deputy Speaker Rodante Marcoleta, argued that the PDRs gave foreign holders beneficial ownership and potential voting rights, effectively making ABS-CBN foreign-owned. Marcoleta also pointed out that the network's former president, Eugenio "Gabby" Lopez III, was an American citizen when he took helm of the company in 1986, only petitioning for recognition of Filipino residency in 2000.

The issue of foreign ownership and control of ABS-CBN was a significant factor in the debate surrounding the non-renewal of their broadcast franchise, with critics arguing that the network had deliberately violated the constitutional restriction.

Unfair labour practices

ABS-CBN has been accused of unfair labour practices, with Deputy Speaker Rodante Marcoleta claiming that the network did not comply with the terms and conditions of its franchise, existing laws, and the country's constitution. Marcoleta also stated that ABS-CBN violated the constitution by not ensuring 100% Filipino ownership and management of the company.

Marcoleta alleged that ABS-CBN had committed unfair labour practices, which denied its employees the benefits required by law. He claimed that of the 11,000 ABS-CBN employees, almost 8,500 are contractual workers and talents, and that the company had not regularised its contractual workers despite them performing the functions of regular workers. Marcoleta also accused ABS-CBN of not contributing to employee benefits.

Former ABS-CBN employees have also testified about the company's alleged unfair labour practices. Christian Mendoza, a former audio man for ABS-CBN, stated that he and his colleagues were made to work seven days a week, sometimes for a whole month, without being made into regular employees. Mendoza and others were among over 100 workers who filed illegal dismissal cases against ABS-CBN between 2009 and 2010. They claimed that they were threatened with losing their jobs if they did not drop their cases.

ABS-CBN has denied any wrongdoing, stating that they have fully complied with general labour standards, occupational health and safety standards, and measures to ensure the security of tenure of its employees. The company's lawyer, Atty. Josabeth Alonso, defended the hiring of non-regular employees, stating that it is legal under labour laws and recognised by the Department of Labor. Alonso also pointed out that employees in the broadcast industry usually work based on the duration of the program they are working on. ABS-CBN CEO Carlo Katigbak said that the company is open to reviewing positions where employees could be regularised.

Political bias

The Philippine media network ABS-CBN has been accused of political bias by various parties, including the country's president, Rodrigo Duterte, and Deputy Speaker Rodante Marcoleta. Duterte claimed that the network refused to air his political advertisements during the 2016 presidential campaign, instead favouring negative political ads by then-vice presidential candidate Antonio Trillanes, who was critical of Duterte. Duterte's ruling coalition also maintained that ABS-CBN's news coverage was biased and unfavourable towards him and his administration.

ABS-CBN has denied these accusations, with Ging Reyes, the Head of Integrated News and Current Affairs, stating that the network strives to "report on newsworthy events, persons and issues in an accurate, fair and balanced manner". Reyes acknowledged that the media network is not perfect, but that they have mechanisms in place to handle their mistakes.

Media Bias/Fact Check rates ABS-CBN as "Least Biased" based on balanced story selection and some opposition to the government. They also rate the network highly for factual reporting due to a clean fact-check record and the use of proper sources.

Tax avoidance

ABS-CBN was accused of tax avoidance by Deputy Speaker Rodante Marcoleta, who claimed that the network used its fully owned subsidiary, Big Dipper Digital Content and Design, as a tax shield. Marcoleta alleged that Big Dipper's main customer was a foreign Hungary-registered company, which was also a fully-owned subsidiary of ABS-CBN. This allowed ABS-CBN to engage in an "unconscionable tax avoidance scheme", resulting in an effective tax rate of -5% in 2018.

Marcoleta also claimed that ABS-CBN did not pay its rightful taxes in 2019 by entering into a compromise agreement with the Bureau of Internal Revenue (BIR). The BIR accepted a settlement of around PHP152 million, equivalent to 40% of its assessed deficiency in income tax, value-added tax, and documentary stamp tax payments.

ABS-CBN, however, denied these allegations, stating that they had complied with all pertinent laws governing their franchise and had secured all necessary government and regulatory approvals for their business operations. They added that the Bureau of Internal Revenue (BIR) confirmed that they had paid their taxes, and that the Department of Justice (DOJ) stated that their pay-per-view channel, Kapamilya Box Office (KBO), was not a violation of their franchise.

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