Experts predict new regulation will change K-Pop forever

The Korean Fair Trade Commission (KFTC) recently ordered changes to be made in trainee contracts to prevent unfair terms, but there may be some unintended consequences to the ruling. 

Immediate reactions by the public have been to support the new regulations passed against unfair trainee contracts. However, one reporter has brought up an argument that the regulation may be exploited and abused.

The situation they present is the following: 

MadeUp Entertainment sends their trainee to SM Entertainment‘s auditions undercover, as a regular person. They become a trainee under SM Entertainment and receive fantastic training using SM Entertainment’s funding. When their training is complete or they have received enough, MadeUp Entertainment calls back the trainee.

They will not only have saved thousands of dollars in training but their trainee will have undergone world-class training under SM Entertainment’s system.

In another situation, the reverse could happen. Large entertainment company could poach the best trainees from a smaller entertainment company. When the best trainee is spotted, larger companies could pay their small cancellation fees and steal the companies trump card for a new idol group.

The following op-ed, translated by Koreaboo, goes into detail on the possible abuse by agencies.

“Ace Trainees Could Be Poached: Concerns With The New KFTC Changes”
by Reporter Mihyun Lee

The Korean Fair Trade Commission (KFTC) recently amended the terms of contracts for various entertainment agencies. However, [some] industry experts have expressed their concerns about [tactics] some agencies may employ due to these changes.

On July 7, The KFTC began reviewing 6 clauses in contracts with their focus on revising unfair terms and conditions for trainees. The companies reviewed were SM Entertainment, YG Entertainment, JYP Entertainment, Loen Entertainment, FNC Entertainment, Cube Entertainment, Jellyfish Entertainment and DSP Media.

Some of these agencies had a clause that made it possible to charge 2-3 times the investment cost when a trainees contract was canceled. There were heavy penalties placed on the trainee in the past. The FTC has now placed regulations for only the direct investment amount to be repaid on cancellation.

One music industry insider has said these changes could be exploited to poach another agencies trainee.

The insider revealed that if a trainee can pay for the direct investment and terminate their contract, the “ace trainee” of a small and medium-sized company could easily be poached by another agency. They could pay the direct investment cost and leave if the trainee felt their agencies conditions weren’t good. The big extra fees could be considered as a safety device for the trainee to stay but these changes make it possible for big companies to easily pay the investment and take the “ace” members from any entertainment agency.

The previous large fees could previously be considered insurance for trainees to remain in their agencies. The new changes make it possible for large companies to easily pay the investment and take the “ace” members away from any entertainment agency.

On average, the contract terms of trainees are set to around three years. The agency supports the trainee with various training programs for this duration, so it’s a very large investment in money as well as in time.

Another industry insider added the following comment:

“The new contractual changes of the KFTC will cause trouble for agencies. An agency could train a trainee to high standards and if that trainee leaves easily [due to the new regulations], a new trainee has to be trained, which is resource straining for the agency.”

If the trainees hold a grudge or are disappointed with their current agency, they can easily leave for another agency, and it would be difficult for the agency to fully control the situation for a compromise.”

— Industry Insider

SM Entertainment responded to the KFTC’s changes with a statement on March 7, 2017, and have amended their contracts to follow the new regulations. The other agencies who received orders [from The KFTC] have also made the same contractual amendments.

“We would like to follow up to the Fair Trade Commission’s report of the improvement of unfair contract clauses between entertainment agencies and trainees. SM Entertainment was investigated as part of this report.

The corrective action is based off of Article 6, Section 3 of the ‘Standard Exclusive Contract for Popular Culture and Arts’ which is also given to trainees. Because the FTC opinion on this was that it was unfair, and the FTC wants to modify this clause as a whole, we will ultimately be deleting this provision.

The original clause stated that the person under contract should not engage in any activity that may harm the honor of the artist themselves, other artists within the company, or the company itself. After our amendment, this clause will be deleted.”

— SM Entertainment

The KFTC has not currently targeted other agencies besides the original eight mentioned above, but the Ministry of Culture plan for these new changes to be enforced for all existing agencies by 2017.

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