The Securities and Exchange Commission has asked several media companies to provide information about how they calculate paid circulation, an industry-wide inquiry that comes after circulation-inflation scandals at four large newspapers this year, the companies confirmed yesterday.
The probe, reported in yesterday's editions of the New York Times, includes the Times Co.; The Washington Post Co.; Gannett Co., publishers of USA Today and 100 other papers; Dow Jones & Co., publisher of the Wall Street Journal and Barron's; and Knight Ridder, publisher of the Miami Herald, Philadelphia Inquirer and 29 other papers.
The investigation is an SEC "sweep," a relatively recent tactic designed to find out if problems at one company are localized to that company or are systemic throughout the industry. It aims to stanch activity that could be harmful to shareholders. Previous SEC sweeps have focused on the food service industry, prompted by the 2003 accounting fraud at Royal Ahold NV, and on Internet service providers, prompted by complaints that subscribers who canceled their service had been billed for months after they requested a cutoff.
Four large newspapers admitteed that they provided inflated sales data to the Audit Bureau of Circulations (ABC), which monitors and publishes newspaper circulation figures that are used to set advertising rates. The Tribune Co.'s Newsday and Hoy papers, Hollinger International Inc.'s Chicago Sun-Times and Belo Corp.'s Dallas Morning News are taking earnings write-downs in the tens of millions of dollars to repay advertisers for overpriced ads based on the phony figures.
The SEC already is investigating the Tribune papers.
"As part of the inquiry, the SEC asked The Washington Post Company voluntarily to provide certain information, and The Post newspaper has done so," Post spokesman Eric Grant said in a written statement. "The SEC made clear that the inquiry is an industry review and should not be taken to suggest that The Post has engaged in any wrongdoing."
Most other newspaper chains issued similar statements.
"The SEC is taking an industrywide look at circulation practices," Times Co. spokeswoman Catherine Mathis said in a written statement. "We welcome the SEC's action because we believe it will help to put to rest any lingering doubts created by the improper actions of a few."
The SEC had no comment.