• Bloomberg

  • SHARE

Dentsu Inc. handled internet advertisements inappropriately and overcharged customers an estimated ¥230 million ($2.3 million) in a case that may stoke concern about the transparency of digital media transactions.

The country’s largest ad agency investigated transactions going back as far as November 2012 and uncovered 633 suspicious cases affecting 111 advertisers, including 14 examples where fees were charged when no ad placement had been made, Dentsu said in a statement Friday.

The company, which didn’t say whether it would repay advertisers, apologized and said its business results would probably not be affected.

“Immediately after finding out about the incidents, we organized an internal investigation team in the middle of August,” the company said. Advertising verification, placement, publication and billing were transferred to a separate section from the one involved in inappropriately handling ads, the company said, calling the step an “interim measure.”

Dentsu shares fell earlier in the day after a report in the Financial Times that the company had talks with more than 100 companies to discuss possible overcharging cases. The meetings come amid a simmering dispute in the $600 billion global ad market after an industrywide U.S. study that showed a lack of transparency in how media space is priced.

The irregularities included discrepancies in advertising placement periods, failure of placement and false reporting regarding performance of the advertising, according to Dentsu’s statement. Also, some invoices did not reflect actual results, resulting in overcharges. The company intends to clarify the causes leading to the inappropriate handling of ads and to report on the progress of its measures by the end of the year.

Dentsu is holding talks with more than 100 clients, including Toyota Motor Corp., related to more than 160 possible incidents of overcharging, the Financial Times reported on Wednesday, citing unnamed advertising executives in Tokyo. Thursday was a national holiday in Japan.

Toyota has been notified by Dentsu of irregularities in some digital media business transactions, a representative of the carmaker said by email, without further details.

The ad agency’s shares fell 4.8 percent to ¥5,170, the most since June 24 on a closing basis. The decline extends the stock’s slump to about 23 percent this year, compared with a 12 percent slide in the benchmark Nikkei 225 Stock Average.

Dentsu clients include LVMH Moet Hennessy Louis Vuitton SE, Diageo Plc, Nestle SA, SoftBank Group Corp. and Electronic Arts Inc., according to data compiled by Bloomberg.

A study released by a group representing U.S. advertisers earlier this year accused ad firms of essentially receiving kickbacks. Media buyers connected to ad agencies get rebates when they buy large blocks of ad space — many of which they neither disclose nor pass along to their clients, according to the study, commissioned by the New York-based Association of National Advertisers.

The 58-page study, performed by investigative firm K2 Intelligence, doesn’t identify ad agencies or clients or lay out the size of rebates the firms allegedly retained. But in general, it said, such rebates ranged from 1.67 percent to 20 percent of aggregate media spending.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.

SUBSCRIBE NOW