SEC Opinion 21-07: Engaging in Mass Media and Advertising Activities thru the Offering of Space on Assets

In SEC-OGC Opinion No. 21-07, Metro Promo Concepts Corporation (“MPC”) sought clarification with the Securities and Exchange Commission (“SEC”) on whether its proposed new business of offering spaces in moving vehicles (the “assets”) for the purpose of advertising products and services, would constitute as being engaged in advertising and mass media activities.

MPC seeks to expand its business by offering a complete package of marketing services to its clients in exchange for a fixed fee. It will offer spaces on the assets as one medium of dissemination of the campaign advertisements. Considering that MPC currently does not own the assets, MPC intends to purchase space on said assets owned by individuals and/or corporations that are engaged in the logistics business for a consideration. It shall install an external structure in the form of a poster frame on the assets. The framework shall at all times expressly disclose via a clear physical manifestation that MPC is the sole owner and operator of the structure on the asset.

According to the SEC, MPC is engaged in advertising and mass media activities within the purview of the constitutional limitations while the owner of the assets is not.

It explained that the main function of an advertising agency is the creation and/or conceptualization of the commercial messages with the end goal of promoting the goods or services. On the other hand, mass media covers any medium of communication, the primary objective of which is to disseminate information to the public. However, an advertising company is said to be engaged in mass media activities when it not only creates and conceptualizes commercial messages but also disseminates information through any medium of communication. This was further affirmed by the Department of Justice (“DOJ”) in its Opinion No. 11-074 when it reiterated the same and cited a similar example.

Considering that MPC will offer a complete package of marketing services that includes conducting market research, creating marketing plan, and offering spaces in moving vehicles or assets among others, MPC clearly performs the functions of an advertising and mass media agency, and is therefore engaged in nationalized activities. Consequently, MPC is subject to foreign ownership restrictions on mass media and advertising entities under the 1987 Constitution, the Foreign Investment Act and Executive Order No. 65, and other pertinent laws.

With respect to the owner of the assets, the SEC opined that by procuring ownership over the space in the asset where the external structures will be installed, it is MPC which sells the advertising space within the external structure to its client, and not the third-party logistics company which retains ownership over the asset(s). Hence, as the owner of the spaces in the asset and the external structure on it, it is MPC which has the right to use, control and exercise other attributes of ownership over such medium. Therefore, the said asset owner shall not be deemed engaged in advertising and mass media activities.