Five Major Entertainment Companies Including HYBE, SM, YG, JYP, and Starship Reach Settlement with Fair Trade Commission Over Subcontracting Violations

Five major entertainment companies in South Korea have reached settlements with the Fair Trade Commission (FTC) regarding allegations of subcontracting contract violations. The companies involved are the K-pop giants HYBE, SM Entertainment, YG Entertainment, JYP Entertainment, and Starship Entertainment. This is the first application of the settlement system introduced in July 2022 to the manufacturing and service subcontracting sector. The FTC’s settlement system allows companies under investigation to propose voluntary corrective actions instead of being found guilty of violations. The five entertainment firms applied for the settlement process between April and May 2024, and the FTC approved it in December. The final settlement was finalized on June 9. The FTC’s investigation began in July 2023 and uncovered violations where written contracts were not issued in advance or were issued delayed when outsourcing the production of music records, products such as light sticks and figurines, video content, and performance services including stage setup, lighting installation, and audio equipment operation. South Korea’s “Law on the Fairness of Subcontracting Transactions” requires written contracts containing statutory information to be provided before work begins. Under the settlement, each company agreed to contribute 200 million won to a mutual cooperation fund totaling 1 billion won to support subcontractors, in exchange for avoiding fines from the government. The fund is intended to provide tangible support to subcontractors, with each company planning various assistance programs such as health checkup subsidies, safety equipment purchases, and training course vouchers. HYBE, which produced BTS, allocated 100 million won over the next three years to support the purchase of protective equipment for subcontractor employees. It also set aside an additional 100 million won to assist with the purchase of video production consumables like memory cards and batteries. SM Entertainment, which manages groups such as aespa and NCT, allocated 50 million won for health checkup expenses or holiday gifts for subcontractor employees. It also designated 50 million won to support video editing software and filming equipment. Before finalizing the settlements with the five companies, the FTC gathered opinions from stakeholders including the Ministry of Culture, Sports and Tourism and the Ministry of Small and Medium Enterprises and Startups over a 49-day period from February to March 2025. Key improvement measures included introducing temporary contracts that can be converted into formal contracts, adopting electronic contract systems, strengthening internal contract management systems, and improving education on subcontracting laws. The FTC stated it hopes that through these regulatory actions, fair and “mutually beneficial” subcontracting practices can be established in the entertainment industry.