On June 1, the three idols legal rep issued a shocking statement announcing the news. Attorney Lee Jae-hak of the law firm Lin represents Baekhyun, Xiumin, and Chen.
They stated, “From March 21 until recently, we have sent seven requests for documentation to SM Entertainment, repeatedly requesting transparent settlement data and copies of settlement bases. However, SM Entertainment has maintained its position of being unable to provide the requested documents. As of today, June 1, we have notified SM Entertainment of the termination of the existing exclusive contracts.”
UPDATE: SM Entertainment Says ‘External Forces Are Approaching SM Artists’ In Response To EXO’s Baekhyun, Chen And Xiumin Contract Termination Notice + To Take Legal Action
They pointed out, “SM Entertainment, after signing exclusive contracts for 12 to 13 years, is now trying to claim a minimum contract period of 17 to 18 years by forcing the artists to sign subsequent exclusive contracts. This is a highly unfair act of aggression by SM Entertainment against the artists.”
Here is the full statement from Baekhyun, Xiumin, and Chen’s lawyer:
The attorney added,
<1>. Artists’ stance on the refusal of activity records and settlement data from SM:
- Artists have been faithfully engaged in entertainment activities as members of EXO under a long-term exclusive contract with SM for more than 12 to 13 years.
- During the long period of the exclusive contract, artists received settlement payments based solely on the data unilaterally provided by SM, without concrete and objective evidence. Despite numerous requests made through representatives, the artists have recently been unable to obtain copies of settlement data and supporting documents from SM.
- SM has the obligation, both under the existing exclusive contract and the Cultural Industry Promotion Act, to provide settlement data and supporting documents, including total income, deductible expenses, and deductible amounts. According to the terms of the exclusive contract, settlement cycles occur twice a year, and therefore, the aforementioned settlement data and supporting documents should be provided twice a year. However, during the 12 or 13 years of the exclusive contract, SM has never properly provided such settlement data and supporting documents to the artists.
- According to legal precedents, an exclusive contract is based on a high level of trust. When the agency fails to fulfill its obligation to provide settlement data, the artist is deprived of the right to review and raise objections regarding profit settlement, which is a contractual right. Failure to provide settlement data is grounds for termination of the exclusive contract (refer to Seoul High Court Decision 2019Na2034976, delivered on January 31, 2020). Despite multiple requests made through legal representatives, SM’s failure to fulfill its obligation to provide data has resulted in grounds for termination of the existing exclusive contract.
- Despite repeated requests and formal proof provided by the artists, urging SM to provide copies of settlement data by May 31, SM has not provided the supporting documents. Therefore, the artists have regrettably notified SM of the termination of the existing exclusive contract as of today, June 1.
- If SM had accurately paid the settlement amount to the artists, there would be no reason for them to withhold settlement data and supporting documents. The fact that SM cannot provide such settlement data and supporting documents ultimately serves as strong evidence that SM has not properly paid the settlement amount to the artists. In light of this, the artists intend to take all necessary legal actions, including filing lawsuits demanding accurate settlement records and payment, against SM.
- Furthermore, if SM has failed to provide settlement data and supporting documents to other artists under their agency, as in the case of Baekhyun, Xiumin, and Chen, this issue is not limited to them alone. It could become a problem for all artists under SM.
- In reality, engaging in legal litigation against a major corporation like SM, as Baekhyun, Xiumin, and Chen are doing, is a very challenging task. However, they have taken on this challenge with the intention and courage to represent the various doubts and concerns shared by many artists under SM.
<2> Artists’ Position on Unfair Long-Term Contracts and Additional Extensions
- Previously, the artists entered into exclusive contracts with SM that lasted for an astonishing 12 to 13 years. This greatly deviates from the standard exclusive contract period of 7 years set by the Fair Trade Commission’s standard contract for popular culture artists (centered around singers) and is unreasonably disadvantageous to the artists, exceeding the minimum rational limit.
- In the interim injunction decision of the TVXQ case, SM’s contract period of 13 years, including the extended period, was deemed to be a contract that violates the law by engaging in unilateral structured ultra-short-term exclusive contracts, exercising unfair dominance and imposing excessive burdens or opposition on the applicants (TVXQ members), thus excessively infringing upon their economic freedom and fundamental rights in violation of good morals and other social order related to the relevant legal acts (Seoul Central District Court, 2009.10.27, 2009kahap2869). Furthermore, in the injunction appeal case, the court once again pointed out that it is extremely difficult for idol stars, who have young fans as their main audience, to maintain their popularity in the same field beyond their 30s and that unfairly long-term exclusive contracts deprive them of the opportunity to obtain appropriate compensation for their continuous efforts and virtually perform functions similar to lifelong contracts (Seoul Central District Court, 2011.2.15, Case 2010kahap1245).
- Thus, the existing exclusive contracts, which excessively restrict personality rights due to their excessively long duration, fall under the “act of trading with the other party by unfairly utilizing the trading position” stipulated in Article 45, Paragraph 1, Clause 6 of the Monopoly Regulation and Fair Trade Act. Additionally, this also corresponds to the types of unfair trade practices listed in Annex 2 of the Enforcement Decree of the same Act, such as the compulsory provision of benefits or the setting of disadvantages (setting of trade conditions that become disadvantages).
- Furthermore, SM compelled the artists to sign exclusive contracts for 7 years from their debut date, with an additional 3 years for overseas activities. However, in the case of K-pop artists in Korea, it often takes several months to several years from the signing of the exclusive contract to debut, and overseas activities are considered a natural premise. Moreover, even though Xiumin and Chen were members who planned to focus on activities in China from the beginning, the addition of 3 years for overseas activities forced them into a long-term contract of over 10 years from the start based on the exclusive contract.
- In addition, SM, not satisfied with the 12 to 13-year contract period mentioned above, is now trying to assert contract periods of at least 17 to 18 years by having the artists sign subsequent exclusive contracts. This constitutes a highly unfair and oppressive act by SM towards the artists.
- During the signing process of subsequent exclusive contracts, the artists were unable to negotiate properly due to being bound by the existing exclusive contracts, making it difficult to determine contract conditions or reflect their own wishes on an equal footing. In the injunction appeal of the TVXQ case, the court pointed out that the applicants (TVXQ members) passively signed the exclusive contract form presented by SM and did not participate in negotiations or determine the contents of the contract. It also emphasized that as applicants (TVXQ members) bound by the existing exclusive contracts, they should have had the opportunity to negotiate with entities other than SM if no agreement could be reached, ensuring the choice of the contracting party. Therefore, it was determined that the subsequent contract was an unfair contract concluded due to the difference in negotiating power (Seoul Central
<3> Message to the Fans
- We deeply apologize and feel sorry for causing great concern and worry among our fans due to this recent incident. We have no way to undo the past.
- As we are in a situation where legal action is necessary due to differences in perspectives with SM, we will do our best to find wise solutions and resolve the dispute in a way that alleviates your worries.
- We, who have finally found the courage to speak up about the unfairness we have experienced, are actually feeling fearful and anxious at this moment.
- We hope that you can show your interest in our words and our difficult journey. Once again, we sincerely thank the fans who have supported us for a long time.
Stay tuned for more updates! SM has not addressed the situation yet!