EXO Baekhyun, Xiumin, and Chen have notified SM Entertainment of their intention to terminate exclusive “slave contracts”.
On June 1st, lawyer Lee Jae Hak, who is representing Baekhyun, Xiumin, and Chen, stated, that the artists have sent multiple requests for disclosure of transparent settlement data and supporting evidence to SM Entertainment seven times, from March 21st until recently, through their legal representative, demanding for transparent settlement data and supporting evidence. However, SM has consistently maintained an unfair position by refusing to provide copies of the requested documents.
In addition, it was stated that SM has engaged in highly unfair practices and continued to exercise their oppressive behavior.
Regarding this, Baekhyun, Xiumin, and Chen feel that SM is using their superior position to force artists to sign “slave contracts”
The following statement includes the wrongs committed by SM entertainment and Baekhyun, Xiumin, and Chen’s message to the fans.
<1> Artists’ stance on their activities and SM’s refusal to provide settlement data
1. The artists have faithfully carried out their entertainment activities as members of EXO under long-term exclusive contracts lasting more than 12 to 13 years with SM.
2. During these aforementioned long-term exclusive contracts, the artists have received settlement payments based solely on documents unilaterally prepared by SM, without concrete and objective evidence, relying only on SM’s explanations. Recently, the artists have formally requested their legal representative to demand settlement data and supporting evidence multiple times. However, SM’s response has been consistently refusing to provide copies of the requested documents.
3. According to the exclusive contract and the Cultural Industry Development Act, SM has an obligation to provide settlement data and supporting evidence, including the total income, deductible expenses, and amount subject to deduction, to the artists. Since the settlement cycle according to the above exclusive contract occurs twice a year, SM should provide settlement data and supporting evidence twice biannually. However, throughout the 12 to 13 years of the exclusive contract, SM has failed to provide such settlement data and supporting evidence to the artists.
4. According to legal precedents, an exclusive contract is based on a high level of trust. If the agency fails to fulfill its obligation to provide settlement data, the artist is not properly guaranteed the right to review and dispute the income settlement. In addition, despite several requests from representative lawyers, SM has already failed to comply with the obligation to provide data, constituting grounds for contract termination (Seoul High Court, Decision 2019Na2034976, January 31, 2020).
5. Although the artists earnestly requested that copies of the settlement data be provided by May 31st through proof of contents on several occasions, the existing exclusive contract was inevitably terminated as of June 1st as SM failed to provide supporting evidence. As a result, the artists have been compelled to notify SM of the termination of their existing exclusive contracts as of today, June 1st.
6. If SM Entertainment had accurately paid the settlement fees to the artists, there would be no reason for them not to provide the settlement data and evidence. The fact that SM has failed to provide such settlement data and evidence is strong evidence that they have not properly paid the artists. Therefore, the artists (Baekhyun, Xiumin, and Chen) plan to take all necessary legal actions, including filing lawsuits demanding accurate settlement details from SM.
7. Furthermore, if SM has also failed to provide settlement data and evidence to other artists under their management alongside Baekhyun, Xiumin, and Chen, this will become a mutual problem for all SM artists.
8. It is indeed a challenging task for Baekhyun, Xiumin, and Chen to pursue a legal lawsuit against a large corporation like SM. However, they have started this process with the intention and courage to represent the doubts and concerns shared by many other SM artists.
<2> Artists’ stance on unfair long-term contracts and further extension attempts
1. The artists have previously entered into exclusive contracts with SM that lasted for over 12 to 13 years. This significantly deviates from the standard exclusive contract term of 7 years set by the Fair Trade Commission’s Standard Exclusive Contract for Popular Culture and Arts Professionals (focused on singers), placing the artists at a disadvantageous position beyond a reasonable limit.
2. . Previously in the cast of TVXQ (also known as DBSK), SM already introduced a 13-year contract period, including an extended period. The above contract has already been concluded to be a one-sided, ultra-long-term one, where SM uses its superior position to exercise unfair control and to harm the applicants.
For (TVXQ members), it is a contract that excessively infringes on their economic freedom and basic rights by imposing excessive benefits in return or an undue burden, as well as violates good morals and other social orders. It has been judged that there is considerable room for it to be deemed invalid or that the effect has expired due to the expiration of the reasonable period of existence (Seoul Central Journal 2009.10.27, refer to 2009 Kahab 2869 decision).
In addition, in the case of provisional injunction in the above case, the court once again found that it is very difficult for idol stars, who have teenagers as their main fan base (such as TVXQ members), to maintain their existing popularity in the same field of activity until they are in their 30s.
It was also pointed out that an extremely long-term exclusive contract deprives the celebrity of the opportunity to acquire appropriate compensation for their talents and constant efforts to succeed in the entertainment industry, and in fact, may perform the same function as a lifelong contract (Seoul Central District Court, 2011. 2. 15. See 2010 Kahab 1245 decision).
3. Thus, the excessively long duration of the existing exclusive contracts severely restricts the artists’ personal rights and falls under the violation of Article 45, Paragraph 1, Clause 6 of the Monopoly Regulation and Fair Trade Act, which prohibits “engaging in transactions with the other party by unfairly utilizing the trading position.” It also corresponds to the types of unfair trade practices listed in Appendix 2 of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act, such as “imposing advantages” or “setting disadvantages (setting transaction conditions that become disadvantages).”
4. Moreover, SM made artists sign exclusive contracts for 7 years based on their debut date, and an additional 3 years extension in case of overseas activities. However, for Korean K-pop artists, it often takes several months to several years to debut, and overseas activities are considered a natural prerequisite.
Despite this, the exclusive contracts imposed by SM demand an excessively long-term commitment of at least 10 years from the date of the exclusive contract for artists like Xiumin and Chen, who were planned to work in China from the beginning.
5. Moreover, SM is trying to claim a minimum contract period of 17 years or 18 years by having artists sign a follow-up exclusive contract again, as if 12-13 years of contract period wasn’t enough. This is SM’s repeated and extremely unfair tyranny against its artists.
6. During the process of signing the subsequent exclusive contract, the artists were unable to negotiate properly or reflect their own desires due to being bound by the existing exclusive contract and unable to establish contract conditions or negotiate from an equal position.
In the case of TVXQ, the court acknowledged that the applicants (members of TVXQ) merely signed the exclusive contract form presented by SM Entertainment without actively participating in negotiations or determining the content of the contract through negotiation with SM. Therefore, as the applicants (members of TVXQ), they should have had the opportunity to choose another entertainment agency to negotiate with if no agreement could be reached, but such an opportunity to choose a contracting party was not guaranteed.
Thus, it was pointed out that a true negotiation of meaning could not take place between the applicants (members of TVXQ) and SM, and even if a supplementary agreement was made after they had established their position as entertainers, they could not use their increased status to strengthen their negotiation power due to being bound by the existing exclusive contract. Therefore, it was determined that the subsequent contract was an unfair agreement with defects due to differences in negotiation power (refer to Seoul Central District Court Decision 2011.2.15, Case No. 2010, Kahap1245).
7. Furthermore, the act of entering into subsequent exclusive contracts of this nature also falls under Article 45(1)(6) of the Monopoly Regulation and Fair Trade Act, which prohibits “conducting transactions with unfair use of one’s trading position.” The long-term duration enforced through such subsequent exclusive contracts is considered to be subject to the provisions of “requiring provision of benefits” or “imposing disadvantages (setting transaction conditions that lead to disadvantages)” as outlined in the Enforcement Decree of the said law.
8. It is also known that this extended duration of exclusive contracts applies not only to Baekhyun, Xiumin, and Chen but also to a majority of artists under SM Entertainment.
9. In light of the long-term existing exclusive contracts and subsequent exclusive contract agreements, Baekhyun, Xiumin, and Chen are seriously considering filing a complaint with the Fair Trade Commission.
To the Fans
We deeply apologize and regret for causing significant concerns and anxieties among our fans due to this incident.
While legal actions are being pursued due to differences in positions between SM and the artists, we will do our best to find wise solutions and resolve the dispute in a way that minimizes worries for our fans.
We, who finally dare to voice the unfairness that we haven’t been able to express before, are actually feeling scared and apprehensive at this very moment.
We sincerely hope that you can pay attention to our words and our courageous efforts. Once again, we sincerely thank the fans who have supported us for a long time.
Source: Daum
