Background Info: Back in 2002, the Korea Fair Trade Commission called out SM Entertainment for the content of its exclusive contracts–notably, the Commission had issues with the excessive penalty for breach of contract and damage compensation in SM’s contracts–and ordered the management company to amend its contract to comply with national fair trade law and civil law relevant to contracts. (At this time, SM’s contracts weren’t 10-13 years long as they had become by the time TVXQ debuted, but in every other way it resembled JYJ’s contract.) SM not only refused to listen to the Fair Trade Commission’s orders, it brought the Fair Trade Commission to court in a lawsuit, claiming that its contracts, including the clauses on damage compensation to the company in cases where the company deems that the artist has breached the contract, were perfectly fair and reasonable. At the stage of the Seoul High Court, the Court ruled in favor of the Fair Trade Commission and admonished SM. This is the text of the judgment that was issued. Readers are to keep in mind that this is almost 10 years old, but the issues of the contract in contention are eerily similar to the current JYJ v. SM case, which begs the question, how does a company like SM get away with disobeying the law for almost 10 years without any consequences? Who and in which high places are shielding this company from the rule of law and the consequences of its disobedience?
[Seoul High Court, 2004.4.1, 2002누13613]
【Points under consideration】
 Whether or not the high risk and investment costs involved in nurturing and training news singers justifies music productions companies imposing on the singer the responsibility of repaying the investment costs once s/he achieves success or imposing a heavy penalty for breach of contract on the grounds that there is an increased risk of the singer neglecting his/her responsibilities under the contract and seek to abandon the business partnership once s/he attains success (minor point)
 Whether the Korea Fair Trade Commission overstepped its jurisdiction in invoking cartel regulations and fair trade laws [in issuing orders to SM] when this situation could have been resolved through cooperative dialogue (minor point)
 Whether the the penalty for breach of contract that music disk production companies regularly include in their singers’ contracts violates cartel regulations and fair trade law Article 23 Section 1 Sub-section4 Read More →