Legal Beat: K-Pop Group EXO File Claim Against Label

On June 5, 2023 three members of South Korean K-Pop group EXO announced that they have filed a claim against their label and management company, SM Entertainment Group (“SM”) claiming they have issues with “slave contracts” they entered into with SM. The members stated that they had filed a “complaint of abuse” with the Fair Trade Commission in South Korea. 

The three members, Baekhyun, Chen and Xiumin, are members of EXO as well as performing for another trio called EXO-CBX.

The dispute involves alleged payment information not provided to the members under their contracts. They are also objecting to the length of their contracts with SM which were entered into on 2011 and 2012 (and extended in 2022) for a total contract term of 17 or 18 years. Their lawyer, Lee Jachak of the South Korean law firm Lin Law, said in a statement that SM has not provided all information about the payments as they have requested despite the fact that under South Korean law a company is required to provide updates on payments twice a year. The Lin attorney also stated that SM has used its power in the K-Pop market to compel artists to sign contracts with SM for longer than the seven year industry standard term. The law firm further asserts that SM automatically extends recording contracts for three more years if the artist works overseas, as the three members have.

On June 1, 2023 the group members released a statement that they were terminating their contracts with SM, contending that their contracts are “unfair” and much longer than the standard seven years that FTC guidelines recommend for artist contracts. The members also claim that SM has refused to provide reports which detail payments to the artists.

SM stated that it was told that another business was trying to steal the EXO members, and that the three have already signed contracts with the new company.

The issues raised in this dispute have come up in the past with regard to musical groups in the U.S.A. From the label's perspective, they usually claim they need long-term contracts in light of all the money they invest in a recording artist or group. They don’t want to invest millions in an unknown group and then have the group terminate their recording contract once they have achieved success. From the artist point of view, they may have signed unfair contracts with or without adequate legal advice and they may have valid claims that the label has breached the recording contract. Or sometimes a group just wants out of a contract to pursue other opportunities and uses alleged breaches of contract as a pretext to terminate a contract. And labels may enter into unfair contracts with artists who have unequal bargaining power.

Usually these types of conflicts are settled without a trial. Sometimes a settlement might involve the record company releasing the group and getting an override royalty if and when the group signs with a new label.