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Chicago Sun-Times Overcharged Commercial Advertisers [06/29/2006]
Two related class actions have been filed against Hollinger International, Inc., and its subsidiary Chicago Sun-Times, Inc., on behalf of all commercial advertising customers of the Sun-Times who paid for any advertising in that newspaper at rates which were based upon the defendants' representations as to the newspaper's circulation. The action alleges that the daily newspaper misrepresented its circulation figures over a period of years, so that advertising rates charged to commercial advertisers were artificially inflated, in violation of the Illinois Consumer Fraud and Deceptive Trade Practices Act. The action seeks unspecified compensatory and punitive damages.

On June 15, 2004, the Sun-Times announced that the newspaper's circulation numbers have been "significantly overstated" -- actual circulation numbers in the past several years were approximately 25% less than that which had been previously represented. Since advertisers are charged a rate based upon the newspaper's circulation, they allege that they have been overcharged throughout the time that circulation numbers have been inflated.

Hollinger, which also owns London's Daily Telegraph and the Jerusalem Post, has been considering a sale of some of its newspapers. The company announced the overstatement was discovered when new leadership team took over after Conrad Black stepped down as CEO of Hollinger International in November 2003. Hollinger said an audit committee of its board of directors, along with in-house and outside lawyers, was reviewing the matter and that Hollinger had “discontinued the practices believed to have led to the overstated circulation.” Hollinger stated that it had conducted a similar investigation at The Telegraph and Sunday Telegraph of London and found none of the practices used by the Sun-Times at those publications.

On June 18, Newsday, a New York-area paper owned by Chicago-based Tribune Company, admitted that it had overstated its circulation in the period ended September, 2003. Newsday's circulation figures of 580,000 on weekdays and 672,000 on weekends were inflated by about 40,000 and 60,000 respectively, according to the paper's statement. Lawsuits alleging the overstatement were filed as early as February 2004. In its press release, the Tribune Company also admitted overstatement of circulation of its Spanish-language paper, Hoy, and stated that it is currently auditing circulation divisions in 12 other papers.


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