[Jasper Kim] Underbelly of the ‘Korean Wave’

Imagine a world where slavery, often involving underage and unsuspecting victims, is not only condoned, but legally enforced. This is not fiction, but fact, in one of Asia’ most prolific entertainment export-oriented country ― South Korea (Asia’s fourth largest economy and OECD member state) ― involving the so-called “Korean Wave.”

The term “Korean Wave,” (or “hallyu”), which began sweeping parts of Asia from the late 1990s, creating new possibilities for promising stars to gain fame and fortune (in a collectivist Confucian culture where what others think is a notable determinant of an individual’s self worth). Such new emerging industry ― Korea’s entertainment industry ― has led to the rise of a wave of girl and boy pop “idol” bands, such as Kara, Wonder Girls, Big Bang, Super Junior, and TVXQ.

However, with the rising phenomenon of the “Korean Wave,” we see signs that the underbelly of it may not be as pretty as seen from above. This is because a notable portion of such aspiring young talent are being forced into the signing of long-term “slave contracts” with little remuneration in which the bargaining power and terms and conditions of the contract are grossly and disproportionally in favor of the entertainment agency.

Often such slave contracts involve a so-called quid pro quo whereby the entertainment agency provides entertainer-related expenses (food, housing, singing and dancing lessons, sometimes with plastic surgery procedures) in exchange for dubious and over-the -top royalty schemes for the agency. Such contracts also often have embedded exclusivity provisions, which preclude the young artist from contracting with other competitor agencies. .

The economic benefits derived from the Korean Wave amount to those from exports to China, Japan and other in countries in Asia (according to the Korean Ministry of Culture, Sports, and Tourism). As a result, little economic incentive or national interest has existed to “pierce behind the corporate veil” (a legal term of art denoting the initial deference given to commercial actors in their business transactions) involving such contracts.

On July 31, 2009, three members of TVXQ (a highly popular five-member boy band) argued to terminate their earlier-agreed-to exclusive contract with SM Entertainment (one of South Korea’s largest and most prominent entertainment agencies). TVXQ’s claims revealed that they had agreed to a 13-year contract (which did not include time the two-year mandatory military service required of all male Korean citizens).

The contract also revealed that each member would receive 10 million won (slightly under $10,000) upon release of the band’s next album, but only if over 500,000 copies of the band’s previous album were sold (else, the members would receive nothing). In the contract, each member was entitled to a meager 0.4 percent to 1 percent of total sales revenue. The members also claimed that over the five years of overseas performances they were forced to follow intense performance schedules that included only three to four hours of sleep per night in addition to not being afforded proper health care.

Another dispute earlier this year involved members of Kara ― a popular five-member girl group ― when the band stated they would terminate their exclusive contract with their entertainment agency, DSP Media, on the grounds that the band members had been “personally insulted,” forced to sign contracts they did not fully understand and used as objects to secure the commercial interests of the agency. Further, the contract was written in Japanese (a language unfamiliar with the Korean band members), who allegedly had not received a copy of the contract for their reference.

Other disputes involved pop idols, such as Super Junior (against SM Entertainment) to break a 13-year exclusive contract and a member of U-Kiss (to break a 10-year exclusive contract).

A contract typically involves a “bargained for exchange” that reflects both parties’ intent. Normally, courts allow the parties to enter into whatever agreements suit them so long as there is mutual assent, consideration, contractual capacity and conformity to public policy. Undoubtedly, the Korean entertainment industry is a money maker and job creator, which generally, is a good thing. But such economic benefits should be weighed against competing concerns.

Here, because of such grossly unequal bargaining positions, mutual assent for a legally binding contract may not have existed. How is a teenager to know his or her contractual rights, especially where very few lawyers are available? Such grossly disproportionate terms smack of conditions where an individual is “excessively dependent upon or controlled by” the entertainment agency (the very definition of a “slave” according to the Oxford dictionary). Also, if the contracts were signed under the Korean age of 19, even if inducement was not involved, then the contract can and should be invalidated since the signing party would be a minor (deemed unable to understand the nature of the contract terms).

Although several attempts have been made to regulate Korea’s slave-contract problem, such efforts have not been unified and sufficiently narrowly tailored. A step in the right direction has appeared with both the Korean Supreme Court and Fair Trade Commission having issued separate guidelines restricting such contracts to certain durations (10 and seven years, respectively).

But given the opportunistic nature of the economic system, agencies will simply find ways to go around such guidelines and regulations (such as making a renewable contract for nine years and 364 days). Some solutions could be a case-by-case review of similar contracts involving underage parties as well as more unified, specific, and transparent regulations in terms of what types of “slave contracts” will and will not be tolerated ― regarding contract duration, living conditions, and royalty payout schemes ― in South Korea. Clearly, the vast majority of contracts can be left unfettered for market actors to do as they see fit, however, the recent examples of slave contracts in Korea’s entertainment industry requires an exception to the general “hands off” laissez-faire approach.

Until then, modern-day Korean Wave slave contracts will continue to exist in one of the most visible entertainment and media hubs in Asia.

By Jasper Kim 

Jasper Kim is author of “24 Hours with 24 Lawyers: Profiles of Traditional and Non-Traditional Careers” and “Korean Business Law: The Legal Landscape and Beyond (2010),” and has been selected as a 2011 visiting scholar at Harvard University. ― Ed.