SME’s claims their contracts are in line with KFTC, but EXO-CBX’s rebut this, explain the differences, and open up about negotiation process

Given that the lawyers of EXO-CBX and SM Entertainment seem intent on fighting this out in the media, the updates seem like they are going to keep coming, and there have already been two more official positions released to the media. —— After EXO-CBX’s side called on the Korea Fair Trade Commission (KFTC) to investigate SME’s contracts, SM has obviously responded to this, claiming the contract period has been validated by the Supreme Court already while explaining that the contracts were signed with counsel present. 1) The exclusive contract period that is the subject of complaint with the FTC has been deemed legitimate by the Supreme Court in 2018. Members are ignoring the Supreme Court ruling and falsely claiming that the length of the exclusive contract period is objectionable or that it is a slave contract.2) The exclusive contract was signed voluntarily with the counsel of a lawyer at a large law firm. We reviewed various amendments and counter proposals, exchanged revisions and discussed all details. The conditions for the automatic extension of the contract period based on the number of albums released were discussed with the members and the clause was set in order to continue activities based on a mutual trust as the company expects to (carry out) album activities. They then whined a bit about the EXO-CBX members, and made vague allusions to third-party issues not being resolved. —— Naturally, EXO-CBX’s side had a response to that as well. In particular, they cite that the 2018 ruling was regarding Tao and had differences from their situation. 1) This case was different from the beginning as it related to Tao, a Chinese trainee. He was expected to be active overseas when he signed an exclusive contract. CBX are all Korean and when they were trainees, it was not determined that they would work abroad at the time of the signing of the exclusive contract. While the members were trainees, SM uniformly had all three artists sign an annexation agreement to extend the contract by three years citing the intention of overseas expansion. The lawyers go on to say Baekhyun was in the domestic unit, so it was unfair that his contract was extended. Meanwhile, Xiumin and Chen weren’t assigned to unit activities prior to the contract, and were sent to China only after it was signed. Essentially, they’re arguing that it is unfair to add extension clauses to contracts of trainees when SME has the power to unilaterally extend those contracts via deciding everything about their careers. They also mention previous KFTC rulings against SME to reinforce their point. In 2011, the KFTC ordered SM to refrain from engaging in acts against its trainees by applying an extended contract period to all trainees uniformly without considering individual circumstances of the trainee. The continued behavior of SM after being ordered to correct themselves twice is baffling and is why KFTC should make a full investigation of all of SM’s trainee and artist contracts. The lawyers go on to say that despite SME claiming they’ll provide settlement documents, they have still not done so. 2) Contrary to SM’s press release, the lawyers and artists have not been provided with settlement documents. On 8 AM on 5 Jun, SM distributed a press release saying it would provide a copy of the settlement data. EXO-CBX’s side closed with a long explanation of the contract negotiations, which is dedicated to fans and is broken down into six points. Perhaps most relevantly, they explain how the activities of the group and individuals were held over their heads, that they tried to get changes but were refused, and that Baekhyun in particular was targeted. A) Signed agency contracts in June 2010 and May 2011, and around December of last year received a renewal letter from SM that added five years to the existing contracts, totaling 17-18 years. During the process, hired a lawyer and because the contract was unreasonable, requested adjustments 8 times but SM did not accept them. There was a steadfast refusal to accept any change, and in the end, almost none of the requests were included. We felt the contract was unfair but had no choice but to sign. We heard stories that refusal to re-sign could hurt the members or team as a whole. At the time, SM said that they wanted everyone to make the choice to renew together, but said to Baekhyun that “you need to sign so other members can get paid”. He was told he could cancel the contract at any time since the renewal hadn’t taken effect. At this time, Baekhyun was serving in the military. In order to keep EXO’s activities continuing without interruption, Baekhyun had no choice to renew even though he had a year left on his existing contract. Baekhyun signed the contract out of loyalty to his members and to protect the team EXO. So basically they’re saying SME saw Baekhyun as a weakness in that he was in the military and didn’t want to be res

SME’s claims their contracts are in line with KFTC, but EXO-CBX’s rebut this, explain the differences, and open up about negotiation process

Given that the lawyers of EXO-CBX and SM Entertainment seem intent on fighting this out in the media, the updates seem like they are going to keep coming, and there have already been two more official positions released to the media.

——

After EXO-CBX’s side called on the Korea Fair Trade Commission (KFTC) to investigate SME’s contracts, SM has obviously responded to this, claiming the contract period has been validated by the Supreme Court already while explaining that the contracts were signed with counsel present.

1) The exclusive contract period that is the subject of complaint with the FTC has been deemed legitimate by the Supreme Court in 2018. Members are ignoring the Supreme Court ruling and falsely claiming that the length of the exclusive contract period is objectionable or that it is a slave contract.
2) The exclusive contract was signed voluntarily with the counsel of a lawyer at a large law firm. We reviewed various amendments and counter proposals, exchanged revisions and discussed all details. The conditions for the automatic extension of the contract period based on the number of albums released were discussed with the members and the clause was set in order to continue activities based on a mutual trust as the company expects to (carry out) album activities.

They then whined a bit about the EXO-CBX members, and made vague allusions to third-party issues not being resolved.

——

Naturally, EXO-CBX’s side had a response to that as well. In particular, they cite that the 2018 ruling was regarding Tao and had differences from their situation.

1) This case was different from the beginning as it related to Tao, a Chinese trainee. He was expected to be active overseas when he signed an exclusive contract. CBX are all Korean and when they were trainees, it was not determined that they would work abroad at the time of the signing of the exclusive contract. While the members were trainees, SM uniformly had all three artists sign an annexation agreement to extend the contract by three years citing the intention of overseas expansion.

The lawyers go on to say Baekhyun was in the domestic unit, so it was unfair that his contract was extended. Meanwhile, Xiumin and Chen weren’t assigned to unit activities prior to the contract, and were sent to China only after it was signed.

Essentially, they’re arguing that it is unfair to add extension clauses to contracts of trainees when SME has the power to unilaterally extend those contracts via deciding everything about their careers. They also mention previous KFTC rulings against SME to reinforce their point.

In 2011, the KFTC ordered SM to refrain from engaging in acts against its trainees by applying an extended contract period to all trainees uniformly without considering individual circumstances of the trainee.

The continued behavior of SM after being ordered to correct themselves twice is baffling and is why KFTC should make a full investigation of all of SM’s trainee and artist contracts.

The lawyers go on to say that despite SME claiming they’ll provide settlement documents, they have still not done so.

2) Contrary to SM’s press release, the lawyers and artists have not been provided with settlement documents. On 8 AM on 5 Jun, SM distributed a press release saying it would provide a copy of the settlement data.

EXO-CBX’s side closed with a long explanation of the contract negotiations, which is dedicated to fans and is broken down into six points.

Perhaps most relevantly, they explain how the activities of the group and individuals were held over their heads, that they tried to get changes but were refused, and that Baekhyun in particular was targeted.

A) Signed agency contracts in June 2010 and May 2011, and around December of last year received a renewal letter from SM that added five years to the existing contracts, totaling 17-18 years. During the process, hired a lawyer and because the contract was unreasonable, requested adjustments 8 times but SM did not accept them. There was a steadfast refusal to accept any change, and in the end, almost none of the requests were included. We felt the contract was unfair but had no choice but to sign. We heard stories that refusal to re-sign could hurt the members or team as a whole. At the time, SM said that they wanted everyone to make the choice to renew together, but said to Baekhyun that “you need to sign so other members can get paid”. He was told he could cancel the contract at any time since the renewal hadn’t taken effect. At this time, Baekhyun was serving in the military. In order to keep EXO’s activities continuing without interruption, Baekhyun had no choice to renew even though he had a year left on his existing contract. Baekhyun signed the contract out of loyalty to his members and to protect the team EXO.

So basically they’re saying SME saw Baekhyun as a weakness in that he was in the military and didn’t want to be responsible for stopping group activities through his circumstances.

The rest of it read more like a general list of concerns of how things have unfolded, or were issues they’ve stated before.

EXO-CBX’s side questioned the suddenness of the renewal despite having a year left on their contracts and the delay in providing copies of the contracts, wondering whether it had to do with the internal takeover war at SME. They go on to describe themselves as feeling like a “cog in the wheel” due to the artists not being given any explanation in regards to the Kakao buyout. The lawyers also made a similar point to mine with regards to the Like Planning fiasco, in that while SME and shareholders were impacted and that made most of the financial news, the money mainly belonged to artists and staff at the company. Specifically they say that, “Over the past 12-13 years, it’s likely a significant portion of profits has been siphoned off inappropriately.” They call for a “reckoning” with that past, so that a fresh start can be made. At its core, it’s a lot of criticism about a lack of communication and transparency.

They also talk about the seven requests for settlement data that’s been brought up from the start, and say that there’s a big difference between access to the contract and providing the contract, likely due to experts needing to review it. And finally it ends with an appeal to fans to relate to their struggles, and talk about how much they love EXO and all that.

——

Maybe I’m reading too much into it, but it sure seems like SME’s responses are getting more general and shorter on details, while they are also at least acting like they’re ceding ground in regards to their policies on settlements already. To be fair, they seem confident they have the court ruling on their side, but them not going with a full-court press on every detail isn’t what I expected, honestly.

Of course, how things play out in the PR war is different from the legal battle, and waiting for things to be resolved in court is certainly understandable and seems inevitable at this point anyway. Obviously we don’t even have the contracts in front of us to evaluate them, much less the legal expertise to do so, and thus making any claim to know how this will go is foolish. But given how this is unfolding much like TVXQ‘s debacle over a decade ago, it’s also understandable that people who remember that certainly know that taking SME at their word is silly.