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Dentsu quantifies overcharging

News, 26 September 2016

TOKYO: Following investigations in the wake of its admission of "inappropriate operations" in its digital trading arm, Dentsu has revealed the potential scale of what took place.

In a statement, agency president and CEO Tadashi Ishii, outlined the nature of the irregularities, which included "discrepancies in advertising placement periods either made consciously or by human error, failure of placement, and false reporting regarding performance results or achievements.

"Additionally, it has been detected that there were incidents where our invoices did not reflect actual results, resulting in unjust overcharged billing."

He confirmed that, as of September 22, "there are 633 suspicious transactions and the number of advertisers concerned is 111; the transactions corresponding to inappropriate operations amount to approximately JPY 230m (US$2.28m).

"Among those transactions, the number of cases where fees were charged while no placement had been made was found to be around 14."

The Financial Times observed, however, that "the findings could still be the tip of the iceberg" as the agency was investigating a total of 200,000 cases going back to November 2012 that could affect 1,810 clients.

Ishii added that the issue was confined to Dentsu in Japan and that a full report on progress on implementing necessary changes would be made by the end of the year.

Observers doubt that will be the end of the matter, with several calling attention to the unique nature of the market in Japan where Dentsu – and to a lesser extent its rival Hakuhodo – not only buys media but owns media outlets and production companies as well.

Greg Paull, principal and co-founder of marketing consultancy R3, called the scandal "a major wake up call for the industry" and said "this will likely be the start of a major shift" as the country's marketers look for the same levels of transparency that prevail in the US and Europe.

Denstu chief financial officer Shoichi Nakamoto said it wasn't normal for an agency in Japan to lose a client over such a matter and that no clients had yet stopped doing business with the agency because of the overbilling.

"But I wouldn't be surprised if a client pulls out entirely this time," he added.

Data sourced from Campaign Asia-Pacific, Financial Times, Wall Street Journal, Ad News; additional content by Warc staff