HP to Pay $6 Million to Settle SEC Charges on Sales Practices

HP Inc. agreed to pay $6 million as part of a settlement with the U.S. Securities and Exchange Commission on charges the printer maker violated antifraud law in its effort to boost sales of ink supplies.

The technology company misled investors about the impact of sales practices that were meant to help reach revenue and earnings targets in 2015 and 2016, the SEC said Wednesday in a statement. Besides paying the penalty, HP consented to a cease-and-desist order but neither admitted nor denied the SEC’s findings.

“We are pleased to have resolved this matter, which involves historical disclosures from nearly five years ago,” an HP spokeswoman said in an email.

HP regional managers used incentives to accelerate ink sales that the company had expected to materialize in subsequent quarters, the SEC said. In one region, their tactics included selling printing supplies at significant discounts to resellers known to sell outside of their designated territories, which violated HP’s policy and distributor agreements. The company didn’t disclose uncertainties related to these practices.

The company also didn’t fully disclose product inventory among some of its channel partners, which gave investors an incomplete picture of the company’s market performance. The SEC said HP changed its go-to-market model in part to address these undisclosed sales practices and undertook a channel inventory reduction that lowered its net revenue by about $450 million during the third and fourth quarters of 2016.

HP’s alleged practices in 2015 and 2016 underscore its long attempt to protect its printing franchise, which provides the lion’s share of the company’s profit. HP has struggled with declining demand for printed pages as the world grows more digital. The company has tried to solidify sales by offering ink subscription services, relying more on corporate customers and making counterfeit ink products incompatible with some of its printers, so that consumers have no choice but to buy genuine HP products.

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