Korean Fair Trade Commission Probes Kakao Entertainment Over Alleged Unfair Music Distribution Fees

By Madz Dizon

Jun 13, 2024 04:12 AM EDT

Korean Fair Trade Commission Probes Kakao Entertainment Over Alleged Unfair Music Distribution Fees(ANTHONY WALLACE/AFP via Getty Images) (Credit: Getty Image)

The Fair Trade Commission (FTC) of Korea has initiated an on-site investigation into Kakao Entertainment. The allegations suggest that the company may have imposed higher music distribution fees on rival K-pop agencies compared to its subsidiary music labels.

FTC Probes Kakao Entertainment: Allegations of Unfair Music Distribution Fees

Industry insiders reported that investigators from the FTC recently visited Kakao Entertainment's headquarters to gather information about the music distribution contract.

An investigation into the company has been ongoing since March, following allegations made by K-pop agency Big Planet Made earlier this year, Korea JungAng Daily reported. 

The allegations pertain to an alleged unfair fee scheme implemented by Kakao Entertainment in January. According to the agency, Melon, a subsidiary of Kakao Entertainment as well as Korea's largest music subscription service, offered reduced distribution fees for content produced under Kakao's labels.

On Monday (June 10), INB100, an affiliate of Big Planet Made along with agency of EXO-CBX, a subunit of boy band EXO, asserted that SM Entertainment had charged lower-than-average distribution fees during contract renewals with its artists.

During the press conference on the 10th, CBX made it clear that their main objective was to shed light on the issue of unjust music distribution fees. 

They also wanted to inform the public about the unfair tactics used by SM to pressure CBX into renewing their contracts.

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CBX Shares Evidence: SM Entertainment Pressured Artists with Distribution Fees

According to AMKStation, CBX's side made public the transcript of SM Entertainment's CAO Lee Sung-soo, which supports the statement made by the CAO during their press conference. 

The CAO has announced their intention to apply for a music commission rate of 5.5% through Kakao Entertainment. According to sources, Big Planet Made has shared this information with the KFTC.

The spokesperson from CBX expressed doubt regarding the statement made by Kakao Entertainment regarding the determination of distribution commission rates.In addition, it was mentioned that SM has also provided evidence of Kakao's alleged misconduct.

After a comprehensive review of the available information, CBX has made an announcement regarding the initiation of an investigation by the FTC. 

Additionally, an on-site examination was conducted on the 10th. This serves as a clear indication that the matter highlighted in our report should not be ignored. 

CBX further stated that during the press conference, they had already presented evidence of SM's alleged attempt to manipulate distribution fees as a means of pressuring artists to renew their contracts. Nevertheless, SM persists in diverting focus by misrepresenting the actual essence of the issue.

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