The advent of today’s technology, such as the Internet, has clearly changed the way businesses offer their products and services, as well as the way consumers avail themselves of them. Back then, we usually become aware of new products only after watching television commercials. But now, most, if not everything, that you need to know about a particular product can be searched online. Online shopping is the new trend.
This has paved the way for the development of many online platforms or applications that serve as a “market” where these businesses could sell and the consumers could, in turn, buy. But you might encounter a problem on equity restrictions if you are found to be using your platform for advertising or for mass media activities.
For you not to be deemed as engaged in advertising activities, (a) you must not write or prepare commercial messages or materials for the products of your third-party clients to be posted in the platform or mobile app and (b) you must not select for or advise your third-party-clients what medium or vehicle to use to disseminate the advertising materials and commercial messages (SEC-OGC Opinion No. 18-21).
The Securities Exchange Commission (SEC) also opined that
for an online or mobile app platform operator not to be deemed as engaging in
mass media activities, (a) there must be no pervasive or indiscriminate display
to the general public of any promotional materials or advertisements on the
products or services being offered by the third-party clients or even the
platform or mobile app itself; (b) only the following information must be made
available in the app, web site or platform: (i) enumeration of the services
offered by the platform itself, (ii) instruction on how to use the said
platform, (iii) enumeration of third-party partner, and this shall only be
limited to the listing of the name or logo of the third-party client and (iv)
any other information on the platform
required to be disclosed by any law or regulatory measures; and (c) the
disclosure of the products and services offered by its third-party clients must
only be for the purpose of completing the transaction enabled by the app, web
site or platform. (SEC-OGC Opinion No. 18-21).
Note that in the said opinion issued by the SEC, the entity involved is a software developer of a digital loans origination and management platform, which provides the following services to financial institutions (a) providing information about their loan products in the “marketplace” feature of the application; (b) accepting, processing and approving applications for such loan products; and (c) monitoring the status of loan products availed of. Information about the loan products featured there are accessible and can be availed only by a registered consumer who must have to create an account first before it can use the application and avail himself/herself of the said loan products.
It must be emphasized that although information about the loan products are not disseminated to the public and cannot be seen by the public and only the registered users can view the said information, the SEC still laid out the aforesaid specific guidelines just to ensure that the platform operator is not engaged in any form of advertising or mass media activities. Otherwise, the entity will be subject to the 70 percent/100 percent equity restriction of the Philippine Constitution.
The problem with these guidelines is on its enforcement. The Internet is capable of generating infinite applications and web sites. But the government is finding it hard to build the infrastructure to catch up with the Internet world. With all its vast powers, who knows the government might develop its own app or platform to enforce these guidelines.
****
The author is a senior associate of Du-Baladad and Associates Law Offices (BDB Law), a member-firm of WTS Global.
The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at mabel.buted@bdblaw.com.ph or call 403-2001 local 312.