Image courtesy of Focus News
It has just been announced that the Fair Trade Commission is stepping in to regulate contracts between Korea’s biggest entertainment companies (including SM Entertainment, YG Entertainment, and JYP Entertainment) and their trainees.
After carefully examining multiple trainee contracts, the FTC has identified six different categories of unfair terms and conditions that are included in standard trainee contracts issued by entertainment companies with assets exceeding 12 billion KRW (about $10 million USD) or more.
The companies specifically identified by the FTC as having these unfair terms are SM Entertainment, LOEN Entertainment, FNC Entertainment, YG Entertainment, Cube Entertainment, JYP Entertainment, Jellyfish Entertainment, and DSP Media.
According to the FTC, all of the companies mentioned above have six types of unfair terms built in their trainee contracts, including excessive penalty charges, forced entry into exclusive contracts, exclusion of basic rights guaranteed by law, and unfair termination clauses.
The original purpose of a trainee contract is to guarantee that the company will ensure the education of and care for their trainees.
However, according to the FTC’s findings, SM, YG, JYP and all of the above listed entertainment companies charge trainees 2-3 times the amount of the company’s investment per person when a trainee is at fault in terminating their contract. On average, an entertainment company invests between 100-150 million KRW ($87-130K USD) per trainee over the course of three years, which means that trainees can incur penalty fees of anywhere from 200 – 450 million KRW ($174-392K USD) if they cancel their contract on any grounds other than those they agreed upon in the contract.
Furthermore, it was discovered that JYP, Cube, and DSP Media’s contracts require each trainee to pay double the company’s investment in them after they complete their contract term, [even if they don’t debut].
For most entertainment companies it is also the case that if a trainee completes their contract, they cannot sign on with any other entertainment company for at least 3 years, or they’ll get hit with a penalty fine from their original agency.
Today, the FTC ruled that these fees are extremely excessive, and that moving forward should they cancel their contracts, individual trainees would only pay fees equal to the amount of money that their company invests in them directly. In other words, from now on trainees will only have to pay off their debt to the entertainment companies, rather than incurring extra penalties for ending their contracts.
The FTC has also ruled that upon the completion of a trainee contract, the trainee may proceed to negotiate the terms of their exclusive contract with the agency based upon mutual agreement by both the trainee and their agency.
Furthermore, the FTC has directly revised the standard trainee contracts at LOEN, YG, Cube, JYP, and DSP Media which formerly allowed the companies to immediately terminate trainee contracts without any grace period or prior notice given to the trainees.
The Fair Trade Commission has requested the amendment of the grace period so that during that time, if the entertainment company does not fix the issue brought forth by the trainee as grounds for termination, the trainee can move ahead with the termination of their contract.
The FTC has also removed the clauses included in SM, FNC, and DSP contracts that allow the entertainment companies to terminate trainee contracts for vague or arbitrary reasons, such as damage to the company’s honor or image.
Lastly, the FTC has amended provisions in the contracts that unfairly exclude the basic human rights of the trainees granted to them by law.
The commissioner of the FTC made a statement on these many extensive changes, saying, “These amendments to the unfair contracts will further strengthen the rights of entertainment trainees.”
“Slave contracts” have always been a hot button issue in the Korean entertainment industry, with multiple idols leaving their groups and suing for termination of their contacts on the grounds that their companies stripped them of their basic human rights. It seems that efforts announced by the FTC today may go a long way in giving trainees more leverage when negotiating their contracts with entertainment companies.
Source: Focus News