Fair Trade Commission Republic of Korea ordered SM to correct its unfair contracts between its artists and trainees on December 23, 2010.

TVXQ fans’ (organized by DNBN) in Korea filed a complaint with Fair Trade Commission Republic of Korea(KFTC) against SM taking unfair contracts with TVXQ on September 9, 2010. They pointed out that SM’s contracts violate Article 23 (Control of Unfair Trading Practices), clause 4 of Fair Trade Law.

They also pointed out that many conditions (e.g., the term of contract, distribution of profits, penalty and unilaterally decided schedules to fulfill and etc.) in the contracts were made exclusively to SM’s advantage.

Below are summaries of some clauses from the contract between SM and TVXQ.


1. Long-term exclusive contract

The contract between TVXQ and SM Entertainment specifies that the exclusive contract lasts 13 years EXCLUDING military service and suspension of their activities. This means that TVXQ cannot revise their contract under changed circumstances leaving them no choice but to carry out the unfair contract to the end. This can be considered a life-long contract for an idol group in the entertainment business.


2. Excessive penalty provision – for a breach of contract

According to the contract, TVXQ were forced to pay 3 times the invested amount of money. Also they were forced to pay penalty even if the contract was cancelled by bilateral agreement. Cancellation of contract is realistically impossible because the penalty exceeds 100 billion KRW. (approx. 90 million USD) This clause is unacceptable under any circumstances, and anti-social as well, advantageous only to the employer. There was no choice but to fulfill the contract because the contract blocked every possible ways to cancel or terminate it.


3. Unilaterally decided schedules of activities

TVXQ released 45 albums, travelled the Earth 60 times and held 103 concerts in 68 months since their debut. These were extremely tight schedules, but they were allowed to have less than 2 weeks holiday off per year.


The fans called for KFTC to judge whether this contract is a ‘slave contract’ or not, according to the above unfair clauses of the contract. As a result, KFTC finally ordered SM to correct its contracts between its artists and trainees on December 23, 2010. Under this official order from a government institution, all artists (including TVXQ’s Yunho and Changmin, Super Junior, BoA, Girl’s Generation and more) at SM have signed a fairer, revised contract.


This decision is expected to be an advantage in the court for JYJ who is in a ligal dispute over the unrevised version of the exclusive contract.


Below is the official press release from KFTC and its English translation for international fans.


* Original Link (in Korean)

http://www.ftc.go.kr/news/ftc/reportView.jsp?report_data_no=4141&tribu;_type_cd=&report;_data_div_cd=&currpage=3&searchKey;=&searchVal;=&stdate;=&enddate;=


(English Translation)

* Press Release - Dec. 23rd, 2010

Title: KTFC order SM Entertainment to take corrective measures against unfair exclusive contract


The Fair Trade Commission Republic of Korea(KFTC) gave SM Entertainment(SM) a warning to voluntarily correct the unfair exclusive contracts between SM and its artists and trainees, and ordered to correct the voluntary revision in which SM extended all trainees' contract by 3 years.

(Note. trainee(s): person(s) who receives training programs offered by entertainment management company before debut.)





1. Unfair exclusive contract

1) Long-term exclusive contract

-Original contracts from SM run for 13 years starting from the day of signing‘ or ‘exceeding 10 years from the day of debut.’

-In compliance with the KFTC, SM changed their contracts to ‘seven years from the day of debut.’



2) Excessive penalty provision for a breach of contract

-Under the original contract, Artists under exclusive contract are forced to pay 3 times the investment amount including promotion and any other expenses, plus twice the amount the artist was to have made during the remaining period of the contract.

-In compliance with the KFTC, this clause was corrected to artists now paying average of monthly sales from prior 2 years to the day of contract termination, multiplied by the number of months in the remaining period.



3) Schedules of activities without the artist's consent

-The original contract includes clauses stating that artists under exclusive contract should appear in programs produced by SM whenever requested, and SM produced programs have a priority over everything.

-All of the clauses mentioned above have been removed. Newly added contract clauses state that all artists of SM could voice their opinion, ask SM for copies of documents relevant to their career if needed, and have the right to refuse the unjust request by SM.

*This new revision was based on Article 23, section 1, clause 4, Abuse of Business Position from Fair Trade Law.



2. Contract extension for overseas business activities regardless specific circumstances

-When SM revised the contract clauses voluntarily, SM made corrections without considerations of trainees' individual and specific circumstances and uniformly extended the contract by 3 years which placed the trainees at a disadvantage.

*This new revision was based on Article 23, section 1, clause 4, Abuse of Business Position from Fair-Trade Law.



1. Illegality of unfair exclusive contracts is examined; fair contract between artists and entertainment management companies will be encouraged.

2. KFTC will monitor unfair exclusive contracts of entertainment management companies continuously and promote self-purification of the entertainment business sector.

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