Shares in K Pop agencies fell on Wednesday after a report of an antitrust probe into power abuse by large entertainment companies. According to local media Yonhap, South Korea’s Fair Trade Commission began investigating any potential infractions of subcontracting rules when outsourcing the production of albums and merchandise. It sent investigators to the offices of HYBE (352820. KS), SM Entertainment (041510. KQ), and YG Entertainment (122870. KQ) on Tuesday, Yonhap news agency reported citing unnamed industry sources. The report said the investigation focuses on whether the agencies violated the country’s “subcontracting law” by using verbal contracts without issuing them in writing and delaying payment for producing albums and merchandise.
The Korean-American Institute of Business and Industry, which tracks the globalization of the music industry, warned that the alleged power abuse could have severe implications for the future of the multibillion-dollar K-pop industry. It called for the Fair Trade Commission to investigate the allegations thoroughly and ensure that fair practices are followed to protect artists’ rights and interests.
The report comes amid a national tragedy in South Korea, where dozens of people were killed and injured after being crushed in a crowd at a famous shopping street in Seoul’s Itaewon neighborhood on Oct. 30. In the wake of the tragedy, several K-pop events and new music releases were canceled or postponed. Among them, SM Entertainment — the label and management home to artists like Super Junior, Girls’ Generation, Red Velvet, and NCT — deleted all announcements regarding an upcoming Halloween party titled “SMTOWN WONDERLAND 2022.”
Similarly, Hybe, which manages the global phenomenon BTS, saw its shares drop by over 3% in early trading on Wednesday. YG Entertainment, which manages the girl group Blackpink, initially saw a minor loss but later reversed to trade 2.23% higher.
The K-Pop industry has seen unprecedented success recently, with groups like BTS and Blackpink garnering massive international fan followings. However, the rapid rise of these stars has led to growing concerns over how K-Pop agencies deal with their artists. The incident also highlights the need for transparency and accountability by K-Pop agencies. This is crucial for the industry’s continued growth, which needs to be supported by a strong and healthy business environment. The Korea Fair Trade Commission declined to comment on the reports, citing confidentiality. HYBE, SM, and YG have yet to respond to requests for comments.
