Breaking: EXO's Baekhyun, Xiumin, And Chen Notify SM Entertainment Of Contract Termination

EXO’s Baekhyun, Xiumin, and Chen have notified SM Entertainment regarding the termination of their exclusive contracts.

Baekhyun, Xiumin, and Chen delivered their official statement on June 1 through their legal representative and lawyer Lee Jae Hak from law firm LIN, announcing that they informed SM regarding the termination of their existing exclusive contracts as of June 1.

Read the full statement below:

This is lawyer Lee Jae Hak of the law firm LIN, representing EXO members Baekhyun, Xiumin, and Chen (Byun Baek Hyun, Kim Min Seok, Kim Jong Dae, hereafter “artists”). Hereinafter, our legal representative would like to express the position of the artists regarding the exclusive contracts between the artists and SM Entertainment (hereafter “SM”).

Previously, the artists sent certifications of contents to SM seven times through their legal representative from March 21 until recently, and through this, they repeatedly requested copies of transparent settlement reports and settlement grounds.

It is the bare minimum and legitimate right of the artists to request accurate and transparent basis for settlements that have not been clear until now, and SM is also obliged to comply in accordance with the exclusive contracts and the Popular Culture and Arts Industry Development Act. However, SM eventually maintained an unjust position stating that they cannot provide copies of the reports.

In addition, after SM signed long-term contracts with the artists that span over 12 to 13 years in the past, they pushed for the artists to sign subsequent exclusive contracts once again, resulting in long-term contracts that span over at least 17 to 18 years or more. SM has been repeatedly committing unjust use of power such as this.

Regarding this, the artists feel that SM is using their superior position to force artists to sign so-called slave contracts that span over almost 20 years including their training periods, which are also far from being short. The artists would like to convey the various injustices that they have not been able to speak of through the statement below.

1. The artists’ positions regarding their activities and SM’s refusal to provide settlement reports

1. The artists signed long-term exclusive contracts with SM for more than 12 to 13 years and have faithfully carried out entertainment activities as members of EXO.

2. During the period of long-term exclusive contracts mentioned above, the artists only believed SM’s explanation about the settlement amount and received their shares only by referring to the reports unilaterally made by SM, which had no specific and objective evidence. Regarding this, the artists have recently officially requested copies of the settlement reports and the basis for their settlement several times through the legal representative, but SM responded that they cannot provide copies of the reports in the end.

3. SM has an obligation to provide settlement reports and settlement basis including details of total income, details of expenses subject to deduction, and details of amount subject to deduction according to the existing exclusive contracts and the Popular Culture and Arts Industry Development Act. Moreover, since the above exclusive contracts state that the settlement cycle comes twice a year, the above settlement reports and settlement basis must also be provided twice a year. However, during those 12 to 13 years of the exclusive contract period, SM has not properly provided such settlement reports and settlement basis to the artists.

4. According to a judicial precedent, an exclusive contract is based on a high degree of trust. Thus, if the agency does not fulfill its obligation to provide settlement reports, the artists’ rights to review the settlement of profits and file an objection against the agency are not properly guaranteed, resulting in failure to provide settlement reports to be a reason for terminating the exclusive contract (refer to Seoul High Court order from 2019Na2034976 on January 31, 2020). Despite numerous requests made through the artists’ legal representative in the meantime, SM has failed to fulfill its obligation to provide reports, and as a result, grounds for termination of the existing exclusive contracts have arisen.

5. Although the artists earnestly requested that copies of the settlement reports be provided by May 31 through certifications of contents on several occasions, [SM] refused to provide the basis for their settlement, so it was inevitable that they have come to notify SM of the termination of the existing exclusive contracts as of June 1.

6. If SM had accurately paid the settlement to the artists, there would have been no reason why they could not provide the settlement reports and settlement basis. The fact that SM is unable to provide such settlement reports and settlement grounds is strong counter-evidence that SM did not properly pay the settlement to the artists. Thus, the artists plan to take all civil and criminal legal action including a lawsuit for settlement payment against SM in order to check the exact details of the settlement.

7. Furthermore, as in the case of the artists (Baekhyun, Xiumin, and Chen), if settlement reports and settlement basis have not been provided to other SM artists, this is not just a problem for Baekhyun, Xiumin, and Chen but a potential issue for all artists under SM.

8. In fact, it is very difficult for Baekhyun, Xiumin, and Chen to file a legal lawsuit against a large enterprise like SM, but they undertook it with the thought and courage that this is also for [clarifying] various doubts that many SM artists have.

2. Artists’ positions regarding the unjust long-term contracts and attempts to extend them further

1. The artists have signed exclusive contracts that are over 12 or 13 years with SM. This is far beyond the seven years determined by the Fair Trade Commission for the Standard Exclusive Contract Form for Entertainers, and it is unilaterally disadvantageous to the artists as it exceeds a reasonable limit at the very least.

2. Previously, regarding the 13-year contract period, which includes the extended period from the provisional injunction decision at TVXQ’s case, SM received the judgment that it is an excessively long-term exclusive contract that is unilateral in structure and that it is a contract that excessively infringes on the economic freedom and basic rights of the applicants (TVXQ members) by imposing excessive quid pro quo (benefit in return) or an unreasonable burden on them, exercising unfair control using their superior position. As it is a legal act that violates good moral and other social order, it was judged that there is considerable room to consider that all or part of the contents of the contract are invalid or that its validity has expired due to the expiration of the reasonable duration (refer to the Seoul Central District Court order from 2009KaHap2869 on October 27, 2009). In addition, in the case of provisional injunction in the above case, the court once again pointed out that it is very difficult for idol stars such as the applicants (TVXQ members) who have teenagers as their main fanbase to maintain their existing popularity in the same field until or after they are in their 30s. Thus the exclusive contracts with unreasonably long contract periods deprive the artists of the opportunity to acquire appropriate compensation for their exceptional talent and constant efforts they put in to succeed in the entertainment industry, and in fact, they may perform the same function as lifelong contracts (refer to the Seoul Central District Court order from 2010KaHap1245 on February 15, 2011).

3. The existing exclusive contracts have contract validity periods that severely bind personal rights for a long period of time, which is applicable to “making transactions with the other party to the transaction by unfairly taking advantage of the bargaining position of the business entity itself” from Article 45 Paragraph 1 (6) of the Monopoly Regulation And Fair Trade Act. In addition, according to the types of unfair trade practices from Table 2 of this act’s decree, enforcement of a long time period like this applies to “coercive provision of benefits” or “provision of disadvantages.”

4. Moreover, SM made the artists sign exclusive contracts for seven years based on their debut date and an extension of additional three years in the case [they do] overseas activities. However, in the case of K-pop artists, it takes at least a few months and up to several years to debut after signing an exclusive contract, and overseas activities are presupposed. Furthermore, even though Xiumin and Chen are the members who [SM] planned from the start to be active in China, they were forced from the beginning to sign long-term contracts which span over 10 years or more from the date of their exclusive contracts.

5. Meanwhile, as if a 12 to 13-year-long contract period is not enough for them, SM is trying to claim a contract period of at least 17 to 18 years by having the artists sign the subsequent exclusive contracts again. This is SM repeatedly perpetrating extremely unjust use of power against their artists.

6. In the process of sealing the subsequent exclusive contracts, the artists were unable to negotiate properly, and it was difficult to reflect their wishes or set the terms of the contract on equal footing. Even in the case of the provisional disposition for TVXQ, the court determined that the applicants (TVXQ members) only passively signed a fixed exclusive contract presented by SM, and they were not involved in determining the contents of the contract through negotiations with SM. In the case that an agreement was not drawn between the applicants (TVXQ members), it should have been possible to stop existing negotiations and start negotiations with entertainment agencies other than SM, but no choices were guaranteed, and therefore, no negotiations in the true sense of the word could occur between the applicants (TVXQ members) and SM. Even if there was an annex agreement after the applicants (TVXQ members) became established as celebrities, as applicants who were already bound to the pre-existing contract, they could not link their elevated status to strengthening their negotiating power. It was determined by the court that subsequent contracts are unfairly signed contracts with defects due to the difference in bargaining power (refer to the Seoul Central District Court order from 2010KaHap1245 on February 15, 2011).

7. Furthermore, regarding the act of signing a subsequent exclusive contract, we criticize that it falls under Article 45 Paragraph 1 (6) of the Monopoly Regulation and Fair Trade Act under “making transactions with the other party to the transaction by unfairly taking advantage of the bargaining position of the business entity itself.” Compulsory long-term periods such as this using subsequent exclusive contracts applies separately to the “coercive provision of benefits” or “provision of disadvantages” of attachment 2 of Table 2 of the act’s decree.

8. Furthermore, we are aware that long-term exclusive contracts such as these are the similar cases for the majority of SM artists and not only just Baekhyun, Xiumin, and Chen.

9. Regarding the act of signing a long-term existing exclusive contract as well as a subsequent exclusive contract, Baekhyun, Xiumin, and Chen are sincerely considering filing a complaint to the Korea Fair Trade Commission.

3. Words to fans

1. We apologize for causing great concern to fans through this issue, and there is no way to fully express our apology.

2. Although legal action is inevitable due to a difference in our position with SM, we will do our best to find a wise way to resolve this dispute so that we do not cause fans too much concern.

3. As we try to speak up with our small voices regarding the unfairness we couldn’t speak of until now, we are actually very frightened and fearful of this moment right now.

4. We hope that you take interest in what we are saying as well as our difficult courage. We once again sincerely thank our fans who have supported us for a long time.

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