Talent agencies ordered to alter unfair contract terms

SEOUL: South Korea’s leading talent management agencies have been ordered by the country’s Fair Trade Commission to stop forcing unfair contracts on their trainees.

With policies of grabbing prospective talent at young and then holding onto and exploiting them through onerous means, Korea’s famously aggressive agencies have sometimes been described as operating slavery contracts.

Agencies targeted by the ruling include the country’s top three: JYP Entertainment, SM Entertainment, and YG Entertainment.

Smaller firms, LOEN, FNC, Cube, Jellyfish Entertainments and DSP Media were also included.

The FTC said that it had inspected eight agencies and sought correction of six types of unfair contractual terms.

Penalties imposed by the agencies on early stage trainees typically teenagers who breached their contracts or decided to leave the business, were found to have been excessive – ranging from US$ 86,200 to US$ 129,000. Following the FTC intervention, agencies can now only seek repayment of the actual amount of their direct investment.

According to the FTC report, JYP, Cube, and DSP also prevented former trainees from signing with other agencies, even after termination of their initial contracts.

The three companies sought to recoup punitive amounts, typically double their investment cost. Following the FTC involvement, former representatives can now only have priority position in negotiations to extend training contracts or exclusive contracts.

Companies including SM, FNC, and DSP were told by the FTC to stop cancelling trainee contracts on dubious grounds, such as morality clauses. The FTC said that trainees are almost always incapable of proving their innocence under such clauses. Agencies are now also obliged to give their trainees at least a 30- day grace period before terminating a contract,

According to the FTC, all eight companies have voluntarily corrected their practices.