Title
GMA Network Inc. vs. ABS-CBN Broadcasting Corp.
Case
G.R. No. 160703
Decision Date
Sep 23, 2005
GMA sued ABS-CBN and cable firms for unfair competition over signal re-channeling; SC ruled NTC has primary jurisdiction, dismissing GMA's claims.
broadcast
complaint
cause of action

Case Summary (G.R. No. 160703)

Factual Background

GMA alleged that respondents committed unfair competition when the cable companies allegedly re-channeled petitioner’s television broadcast in a manner intended to arrest and destroy petitioner’s upswing performance in the television industry. GMA further alleged that respondents were able to execute this scheme through common ownership and interlocking businesses among the cable companies and related entities.

GMA described a complex ownership structure. SkyCable and Sun Cable were alleged to be wholly-owned subsidiaries of Sky Vision Corporation (“Sky Vision”), which was allegedly controlled by Lopez, Inc. Home Cable was alleged to be a wholly-owned subsidiary of Unilink Communications Corporation (“Unilink”), which was owned by Mediaquest Holdings, Inc., controlled by the Pension Trust Fund of the PLDT Employees (“PLDT Group”).

GMA also alleged that, under a Master Consolidation Agreement, the ownership, rights, and interests in Sky Vision and Unilink were placed under a holding company called “Beyond Cable.” GMA claimed that sixty-six and one-half percent (66.5%) of Beyond Cable belonged to the Benpres Group, which was composed of Lopez Inc., Benpres Holdings, and ABS-CBN, while thirty-three and one-half percent (33.5%) belonged to the PLDT Group. Based on this combination, GMA asserted that respondents cornered at least seventy-one percent (71%) of the cable television market in Mega Manila, giving them the ability to dictate signal transmission and channel positioning, including the airing of shows of non-cable companies like ABS-CBN and GMA, which GMA claimed the law requires cable operators to carry.

As to the alleged operational consequences, GMA claimed that the re-channeling involved the shifting of its broadcast cable position from “Channel 12” to “Channel 14.” It alleged that the cable companies then deliberately failed to transmit its signal in clear audio and visual quality, resulting in noticeable dropouts, spillover of extraneous sound, distorted and degraded visual presentation. GMA further alleged that subscribers filed complaints of distortions and degradations such as “snowy reception,” “no signal,” and “no audio,” which purportedly worsened during GMA’s top-rating programs. GMA added that such distortions did not occur in ABS-CBN’s cable broadcasts on the channels of the co-defendant cable companies.

GMA contended that the quality of signal and audio transmission and the established channel position of a non-cable network in cable television are crucial to television ratings, and that those ratings determine the decisions of advertisers, producers, and blocktimers to enter into contracts. GMA alleged that since fifty percent (50%) of “people meter” devices used by ratings suppliers are placed in cable television, any interference with signal quality would necessarily affect ratings and, in turn, its business judgment and contractual lifeblood.

On the basis of these allegations, GMA prayed for P10,000,000 as actual and compensatory damages, attributing liability to respondents’ alleged unfair competition, corporate combinations, manipulations, and oppressive and unlawful business practices.

Procedural History in the Trial Court

On July 15, 2003, SkyCable and Sun Cable moved to dismiss the complaint, invoking litis pendentia and forum-shopping. They claimed that a similar case was pending before the NTC entitled “GMA Network, Inc. v. Central CATV, Inc., Philippine Home Cable Holdings, Inc., and Pilipino Cable Corporation” docketed as NTC ADM Case No. 2003-085, involving the same cause of action and parties, except for ABS-CBN. They argued further that the NTC had primary jurisdiction over the issues raised and that GMA had no cause of action against them, including a failure to exhaust administrative remedies.

On July 17, 2003, Home Cable filed an Answer with Compulsory Counterclaims, raising as affirmative defenses the same grounds asserted in the dismissal motion of SkyCable and Sun Cable. ABS-CBN likewise filed an Answer with Compulsory Counterclaims, maintaining that GMA had no cause of action against it and that the complaint failed to state a cause of action.

GMA opposed the motion to dismiss and filed a Reply to the answer of Home Cable. A preliminary hearing was conducted on the motion to dismiss and the affirmative defenses.

Thereafter, the RTC issued the assailed resolution dismissing the complaint. The RTC held that the resolution of the legal issues required determination of highly technical, factual matters that fell under the primary jurisdiction of the NTC. It also held that GMA had no cause of action against ABS-CBN, emphasizing that GMA failed to allege sufficient ultimate facts showing ABS-CBN’s participation in the re-channeling, and that the allegation that the same people behind ABS-CBN were allegedly also at the helm of the cable companies was treated as a conclusion of law rather than pleaded ultimate facts.

Issues Raised in the Petition

GMA then filed a petition anchored on Section 2(c), Rule 41 in relation to Rule 45 of the Rules of Court, assigning two errors: first, that the trial court erred in ruling that the NTC had primary jurisdiction and in dismissing for lack of jurisdiction; and second, that the trial court erred in finding that the complaint stated no cause of action against ABS-CBN.

GMA insisted that the issues did not require highly technical matters within NTC expertise. It argued that the complaint involved wrongful acts of unfair competition and/or unfair trade practices resulting in damages, matters within the competence of regular courts.

The Parties’ Contentions Before the Supreme Court

GMA maintained that the determination of the complaint for damages did not entail the kind of technical and specialized factual evaluation that would require referral to the NTC. It treated its complaint as primarily one for damages based on allegedly unlawful acts, and thus within the general jurisdiction of regular courts.

SkyCable and Sun Cable, and in support thereof Home Cable and ABS-CBN, maintained that the NTC had primary jurisdiction. They argued that the allegations required the resolution of factual issues concerning the operation and ownership of cable television systems, which they asserted were within the NTC’s regulatory and specialized competence. They also leaned on the existence of a pending NTC case involving overlapping factual questions.

Legal Basis and Reasoning

The Court held that GMA’s complaint for damages was predicated on the alleged arbitrary re-channeling of its broadcast over cable television systems, which allegedly distorted and degraded its video and audio signals. The Court reasoned that the re-channeling was allegedly enabled by the common ownership and interlocking businesses among respondents and was allegedly designed to thwart GMA’s upswing in television ratings. In that sense, the wrongful acts invoked by GMA were tied to the operations and ownership of the cable companies.

The Court concluded that these factual matters fell within the NTC’s domain rather than the regular courts’. It anchored its conclusion on the NTC’s statutory mandate. Under Section 15 of Executive Order No. 546, the NTC was empowered to issue certificates for communications utilities and broadcast systems; prescribe and regulate areas of operation; determine and prescribe charges or rates; promulgate rules and regulations; and maintain effective competition among private entities where feasible.

The Court further noted that in Executive Order No. 205 the NTC was empowered to grant certificates of authority for cable antenna television systems subject to limitations regarding infringement on the television and broadcast markets. Then, Executive Order No. 436 (issued in 1997) was invoked for its grant of the sole power of regulation and supervision over the cable television industry to the NTC.

In applying the NTC’s competence, the Court cited Batangas CATV, Inc. v. Court of Appeals, where it recognized that the NTC’s regulatory power extends to matters peculiarly within its competence, including rates, certificates of authority, areas of operation, examination and assessment of legal, technical, and financial qualifications, permits for frequencies, regulation of ownership and operation, adjudication of issues arising from its functions, and similar matters. From these authorities, the Court stated that the NTC exercises exclusive, original and primary jurisdiction over such matters to the exclusion of regular courts.

The Court then tied the jurisdictional inquiry to the mechanics of GMA’s claim. It reasoned that before a court could determine whether GMA was entitled to damages, it would have to ascertain whether the alleged arbitrary re-channeling occurred and whether it distorted or downgraded GMA’s signal. The Court characterized the ascertainment of those facts as requiring the application of NTC technical standards, including determinations of signal quality within limitations imposed by the technical state of the art. It held that such inquiries would entail specialized knowledge in communications technology and engineering beyond the courts’ general competence.

The Court further treated GMA’s allegations of unlawful business combination and unjust business practices as also within the NTC’s exclusive concern. The Court invoked the NTC’s duty to ensure and promote a larger and more effective use of communications facilities in the public interest, to maintain effective competition among private entities, and to grant certificates of authority subject to non-infringement on the television and broadcast markets. The Court added that the NTC, being presumed to have unparalleled understanding of the market and commercial conditions, was also in the best position to evaluate allegations of market control and manipulation.

To support resort to administrative adjudication before judicial action, the Court

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