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Photo courtesy of HYBE |
[Alpha Biz= Paul Lee] South Korea’s Fair Trade Commission (KFTC) announced on June 24 that it has finalized a consent decision with five major entertainment companies—HYBE, SM Entertainment, YG Entertainment, JYP Entertainment, and Starship Entertainment—to improve subcontracting practices and support mutual growth with outsourcing partners.
Under the consent decree, the five companies will avoid regulatory sanctions related to previous verbal-only outsourcing agreements by committing to formalize contract processes and provide approximately KRW 1 billion (USD 7.2 million) in support funds for safety gear, health check-ups, and training for subcontractors.
The consent decision is a legal mechanism that allows companies under investigation to propose corrective measures, which, if accepted by the KFTC, results in the case being closed without a formal ruling on the legality of past actions—similar to a legal settlement.
The companies were found to have outsourced services such as album production, merchandise creation, video and content production, and stage setup without issuing written contracts in advance, in potential violation of Korea’s Subcontracting Act.
Going forward, the companies must submit standard and preliminary (tentative) contract templates to the KFTC within six months for review and implement them across their operations. The preliminary contracts must clearly state the reasons for their use and the expected date by which contract terms will be finalized—reflecting the dynamic nature of the entertainment industry.
Additionally, they are required to introduce an electronic contract system based on digital signatures within one year. Within two years of implementation, at least 70% of all contracts must be executed through this system.
The companies must also submit a plan to the KFTC within three months to improve their contract management systems—ensuring contract dates, terms, payment amounts, and deadlines are searchable and organized. Full system improvements must be completed within one year of plan approval.
Furthermore, they are obligated to publish a publicly accessible guideline outlining the rights and responsibilities of both parties and mutual cooperation measures, following KFTC review. Over the next three years, at least 80% of staff responsible for contract management must undergo a minimum of four hours of annual subcontracting law training, taught by KFTC-approved professionals.
This decision marks a significant step toward improving transparency and fairness in the entertainment industry’s contracting practices.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
