HYBE

 

[Alpha Biz= Reporter Kim Sangjin] On December 11, the Fair Trade Commission (FTC) announced the initiation of a "consent decree" procedure concerning five major entertainment companies—HYBE, SM, YG, JYP, and Starship—who were found to have violated subcontracting laws by failing to issue subcontract agreements in advance. As part of their resolution, the companies have submitted corrective measures and pledged to contribute a total of 1 billion KRW (approximately 10 million USD) to a cooperative growth fund aimed at supporting subcontractors.

A consent decree is a process in which a business that is suspected of violating the law voluntarily proposes corrective actions and remedies for affected parties. If the FTC deems the proposed measures to be adequate, the investigation is closed without further penalties.

According to the FTC, these five entertainment companies had subcontracted various services, including music production, merchandise, video content, and performances, without issuing formal contracts beforehand. The companies applied for the consent decree in April 2023, before receiving the FTC’s investigative report, and finalized their submission in September.

In response to the violations, the companies have committed to creating and distributing standard and preliminary contracts, establishing an electronic contract system with digital signatures, posting guidelines for subcontract transactions on a dedicated website, and providing internal training on subcontracting laws. Additionally, they have agreed to allocate 2 billion KRW each for a total of 10 billion KRW to promote mutual growth with subcontractors.

The entertainment industry has faced challenges in adopting preemptive contracts due to the nature of the business, where contract terms can be difficult to finalize in advance and are subject to frequent changes. As a result, subcontractors often struggle to receive proper compensation when contracts are altered or terminated.

This case marks the first use of the FTC's consent decree process since it was introduced in 2022 under the subcontracting law, specifically targeting the manufacturing and service subcontracting sectors.

 

 

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