Excerpts from SM’s exclusive contract with EXO Baekhyun, Chen, and Xiumin have been released through a recent official statement.
The legal representative of the group EXO’s Chen, Baekhyun, and Xiumin (EXO-CBX) revealed that they have filed a lawsuit with the Fair Trade Commission (hereinafter referred to as “FTC”) against SM (hereinafter referred to as “SM”), citing “abuse of dominant market position.”
In particular, attorney Lee Jae Hak, who is representing Chen, Baekhyun, and Xiumin, stated on June 5th, “As the legal representative, I filed a complaint with the FTC through the National Petition Portal, on behalf of my client regarding SM’s ‘abuse of dominant market position.'”
He further stated, “We reported the fact that despite the FTC issuing corrective orders to SM twice in October 2007 and January 2011, unfair contract practices that disregard these corrective orders have been persistently conducted by SM”, adding, “We have requested a thorough investigation of SM’s violations by the FTC, prompt corrective measures to rectify these issues, and a comprehensive investigation into the exclusive contracts of artists under SM.”
He also emphasized the reason for the lawsuit, stating, “The three artists have suffered continuous damages due to SM’s abuse of dominant market position, as they have entered into unfair contracts that do not reflect the corrective measures ordered by the FTC”.
In the full statement, which includes excerpts from Baekhyun’s contract, it was mentioned SM’s exclusive contracts with its artists include a contract period of “5 years from the debut date”, instead of from the contract date.
It was also stated that SM included periods of “7 years” in the main body of the exclusive contract and “3 years” in the additional agreement, which comes into effect in case of oversea activities.
Furthermore, there is a clause that states that the contract will be automatically extended until the album sales and album releases reach a certain threshold, and that there is no minimum upper limit for the duration.
As a result, in 2007 and 2011, the FTC judged that clauses in SM’s exclusive contracts “excessively disadvantageous” to artists compared to similar contracts of other entertainment agencies in the industry. In addition, the FTC emphasized that actions which extend the contract period for trainees due to reasons such as overseas activities and album release targets, should not be repeated.
With SM’s numerous clauses, including the trainee period and military service, artists’ contractual relationship with the agency will span over 12 to 13 years. In addition, SM also insists on contract periods of at least 17 to 18 years by making artists sign subsequent exclusive contracts, whilst not paying artists any fees for these subsequent contracts.
This is a significant difference compared to the FTC’s standardized exclusive contract for popular culture artists (centered on singers), which established a contract period of 7 years as a standard.
Therefore, SM’s repetition of unfair provisions and its failure to comply with the corrective measures since the 2011 FTC’s ruling constitutes a separate criminal offense, in addition to the violation of the 2007 corrective order, falling under Article 125, Paragraph 1, Subparagraph 1 of the Monopoly Regulation and Fair Trade Act, which entails a punishment of imprisonment for up to 2 years or a fine of up to 150 million won.
Source: Naver
