• by Steve McClellan  @mp_mcclellan, September 23, 2016

Dentsu reported today that its ad scandal, first reported to have overcharged client Toyota, is much broader than that, affecting at least 111 clients and involving some 633 “suspicious” digital ad transactions.

To date — an internal inquiry continues — the dollar volume associated with the improperly executed transactions amounts to 230 million Japanese yen (about $2.275 million at today’s exchange rate). 

So far, all the transgressions appear to have occurred at its Japan operations, the Tokyo-based holding company said. At least for now, they do not appear to have a “material impact” on company results. Its operations outside of Japan are managed by the Dentsu Aegis Network. 

"This is an issue confined to Dentsu in Japan. We are taking this matter extremely seriously and investigating the issue to fully understand the facts. All clients who may have been impacted have been communicated with already,” Dentsu said in a statement released Friday. 

But the firm noted that the problems went beyond overcharging clients.

“It has been found that there were multiple incidents where services were provided inappropriately. Types of irregularities involving inappropriate operations which we have detected to date include 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.” 

The firm began an internal investigation in August, which continues. In its statement Friday, it described the process: “We have initiated extensive investigations to grasp and verify the actual situations, including the root causes leading to the inappropriate operations, and we are vigorously continuing our investigations. More specifically, our investigations cover those digital advertising services rendered after November 2012 to date in Japan, during which time period billing data and other relevant data, which would be required to grasp the actual situations and for clarifying the root causes leading to the inappropriate operations, have been saved.

"We have been pursuing investigations through verifying and comparing various data and documents, conducting interviews of employees who were involved in the operations, verifying business flows related to the digital advertising services, and employing other feasible means.” 

All advertisers that may have been impacted have been notified, Dentsu said, along with undisclosed “relevant associations and organizations.” 

Dentsu indicated that the affected transactions seem to have come from a single “section” unit within the Japanese operation and “in early September, we transferred operations to verify the specifics of advertising placements, publications and billing to a separate section which is independent from the section previously responsible for such operations, and we have endeavored to strengthen our business system for such verifying operations.” 

The firm hopes to wrap its investigation and implement corrective measures by year's end, it said, also issuing an apology “to our esteemed advertisers, the parties concerned and our shareholders from the bottom of our hearts for causing concern and trouble.” 

The scandal was divulged earlier this week by AdNews, which first reported problems with ad transactions for client Toyota and then followed with a piece reporting that the problem could be a lot bigger. 

The scandal also comes amid heightened scrutiny of the digital-buying process and a demand from the Association of National Advertisers and others for greater "transparency" in the agency-advertiser relationship.

Earlier this year, the ANA released a report highlighting problems such as undisclosed rebates to agencies by media companies and recommendations that agencies and advertisers should take to make their relationship as transparent as possible.