This article was published on Feb. 13, 2025, at 2:41 p.m. on the ChosunBiz RM report site.
The content of the 'co-existence plan' proposed by five entertainment companies under investigation by the Fair Trade Commission for alleged 'abuse' of subcontractors has been confirmed. These five companies agreed to contribute a total of 1 billion won, or 200 million won each, as cooperation funds, but concerns have been raised among subcontractors about items that may not actually aid them. 'Support for viewing rights to affiliated artist performances' is a typical example.
According to the Fair Trade Commission on the 14th, HYBE, SM Entertainment, YG Entertainment, JYP Entertainment, and Starship have prepared a 'provisional' consent resolution, and the Fair Trade Commission is gathering opinions on this.
◇ Looking at the '1 billion won' co-existence plan for subcontractors in the provisional resolution
The five entertainment companies have been under investigation by the Fair Trade Commission since July 2023 for unfair practices such as not issuing subcontract agreements. They are accused of delegating tasks such as video and album production and merchandise production to subcontractors, only issuing written statements regarding payment and payment methods after the service execution began. Issuance of written statements should be done beforehand.
As the sanctions drew near, they applied for a consent resolution around April to May of last year. A consent resolution is a system that concludes a case based on the corrective measures proposed by the business operator without determining whether a violation occurred. The Fair Trade Commission initiated the consent resolution process last December, and after about two months of consultations between the entertainment companies and the Fair Trade Commission, a provisional consent resolution has been prepared.
To correct the violations related to the subcontract transactions in question, the entertainment companies decided to draft and distribute standard and provisional contracts and to provide 200 million won each (totaling 1 billion won) as grants for co-existence cooperation.
Most of the five entertainment companies allocated their contributions for support in purchasing equipment and supplies. HYBE designated 100 million won each for performance safety equipment and video production supplies. JYP decided to support 120 million won for general equipment and supplies.
Starship will support 50% of the cost, up to 20 million won, for those who complete online lectures on video production and MD production.
In addition, SM and JYP included health examination expenses (50 million won and 30 million won, respectively), while JYP and Starship included holiday gifts (30 million won each). YG allocated 50 million won each for cultural event support and legal and management services.
Some included 'support for viewing rights to affiliated artist performances' (40 million won). Starship stated that it would provide up to four tickets per subcontractor (limit of 500,000 won) for performances by IVE or MONSTA X. All support will continue until the limit is exhausted over the next three years.
◇ Stakeholder 'discrepancy' key… Is this the desired welfare?
This is not the final resolution. There are procedures left to finalize the resolution after gathering opinions from industry stakeholders and various agencies including the Office for Government Policy Coordination, the Ministry of SMEs and Startups, the Ministry of Culture, Sports and Tourism, the Korea Communications Commission, and the Ministry of Justice. If discrepancies arise and the Fair Trade Commission deems it valid, the relevant review will resume immediately, potentially leading to sanctions.
Broadcom, a U.S. semiconductor company under investigation for 'abuse' of Samsung Electronics, proposed a co-existence plan that included establishing a cooperation fund of 20 billion won to support small businesses in the semiconductor sector. However, due to rejection from Samsung Electronics, the final consent resolution was dismissed in June 2023.
For this provisional consent resolution to be finalized, stakeholders such as record and MD production companies and performance industry officials must accept it without disagreement. However, some have pointed out that numerous unnecessary items are included.
A representative of a subcontracting company, who requested anonymity, noted, "In the case of support for viewing rights to our artists' performances, it seems like the company is distributing leftover tickets rather than providing the welfare we want," and said, "We are already engaged in video production and are unsure what welfare it is to support the cost of related online lectures."
A Fair Trade Commission official said, "If there is a sharp debate during the opinion-gathering process, amendments to the provisional resolution may occur, and if not, it will proceed as is," and added, "The co-existence and cooperation support measures we have concretized this time are not related to the subcontracting abuse it was questioned for, but we believe they will help cover the expenses of the subcontracting businesses that actually occur."
The period for gathering stakeholder opinions regarding the provisional consent resolution related to this matter is until the 21st of next month. Any opinions can be submitted in writing or via email. The final consent resolution will be presented in a meeting within 14 days from the expiration of the opinion-gathering period for a decision on its 'adoption.'