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Danielle Case, KFTC (Korean Fait Trade Commission) Launches Investigation into HYBE/ADOR for Abuse of Market Dominance and Unfair Trade Practices!!!! m.blog.naver.com/peles1/2243224… The law firm I lead, Jeongbak Law Firm, acting on behalf of Danielle Marsh, filed a complaint with the Korea Fair Trade Commission alleging that HYBE and ADOR—who hold a monopsonistic dominant position in the K-pop exclusive artist management demand market—terminated only Danielle Marsh’s contract and sought enormous contractual penalties and damages against her, despite there being no particular difference between her and the other NewJeans members. Through this, they allegedly (i) sought to remove Danielle Marsh from the K-pop market, and (ii) demonstrate to the other NewJeans members and other K-pop artists under their management that anyone who opposes them will pay a devastating price. Accordingly, we reported them to the Korea Fair Trade Commission on allegations that they abused their superior bargaining position by imposing disadvantages on Danielle Marsh, while simultaneously sending a message of intimidation and warning to the other NewJeans members and other affiliated K-pop artists, thereby distorting the competitive order of the entire K-pop market and undermining its long-term market efficiency and innovation. ​ After a lengthy review, the Korea Fair Trade Commission has launched an investigation into HYBE and ADOR on suspicion of abuse of market dominance and unfair trade practices. ​ 1. HYBE is a dominant business operator in the global K-pop idol entertainment management market and, in relation to its artist Marsh Danielle, holds a superior bargaining position. 2. Danielle Marsh qualifies as a business operator engaged in the popular culture and arts industry (Seoul High Court Decision 2002Nu13613, rendered April 1, 2004). ※ This case involved the Fair Trade Commission sanctioning SM Entertainment after it sought excessive damages against one of its artists under an overly burdensome contract. The court held that the FTC’s action was lawful. Accordingly, this precedent recognizes idol singers as business operators and establishes that an entertainment agency’s exercise of its contractual rights may constitute a violation of the Fair Trade Act. 3. The key competition law issue in this case is not that ADOR is exercising its civil legal rights, but rather that it is treating Danielle differently from the other four members without any reasonable justification. By terminating Danielle’s contract and imposing contractual penalties estimated at around ₩100 billion, ADOR is effectively driving Danielle out of the K-pop market permanently. ※ Even accepting ADOR’s allegations in its contractual penalty lawsuit, Danielle Marsh’s alleged breach of the exclusive contract is fundamentally the same as that of the other four NewJeans members. Danielle’s mother was neither the leading figure among the members’ parents nor did she engage in conduct that damaged HYBE’s reputation or credibility any more than the parents of the other members. Although the NewJeans members did not fully accept the first-instance ruling declaring their exclusive contracts valid, they abandoned their appeal because they trusted ADOR’s statements in court that “the relationship of trust between the company and NewJeans has not broken down, and if NewJeans returns, we will support them as a complete group to the fullest.” ADOR’s subsequent termination of Danielle’s contract and lawsuit seeking contractual penalties directly contradict those courtroom statements, constituting self-contradictory conduct and a violation of the doctrine of estoppel. ※ The fact that Minji, not Danielle, serves as the executive representative of the NJZ2025 association formed by the NewJeans members, and that Hanni, not Danielle, testified at the National Assembly audit, clearly demonstrates that Danielle did nothing more wrong than the other members. ※ Even if ADOR obtains a judgment ordering Danielle to pay ₩33 billion, ADOR knows full well that Danielle lacks the financial ability to pay. A profit-maximizing company would not spend hundreds of millions of won on legal fees pursuing litigation that provides no economic benefit unless there were a hidden objective and expected benefit behind it. That objective is to keep NewJeans alive while permanently removing Danielle from the K-pop market, thereby ensuring the other NewJeans members never dare oppose HYBE again, while simultaneously making Danielle a test case to show other idol artists what punishment awaits those who challenge HYBE. This was a strategic decision based on HYBE’s conclusion that doing so would serve its long-term interests. ※ Unlike liquidated damages, contractual penalties generally cannot be reduced by the courts. Only in exceptional cases where they are so excessive as to violate public policy may they be declared wholly or partially invalid. Anticipating the possibility that a claim for approximately ₩100 billion in contractual penalties could be declared invalid, HYBE allegedly chose to file an explicit partial claim for only ₩30 billion out of the total contractual penalty, obtain a court ruling confirming its validity, thereby preventing Danielle’s return to the market, and, if another agency later attempts to assume her debt and sign her, pursue the remaining contractual penalties. Although a judgment on an explicit partial claim does not have res judicata effect over a subsequent lawsuit regarding the remaining amount, it carries significant evidentiary weight, making it extremely difficult for a later court to invalidate the contractual penalty provision contrary to the earlier judgment. This reflects a highly sophisticated legal strategy. ※ The exclusive contract provides that contractual penalties are calculated as “Revenue × Remaining Contract Period.” However, ADOR’s actual damages from a contractual breach are its profits after settlement, not its gross revenue. Based on NewJeans’ settlement records, gross revenue amounts to approximately four to five times ADOR’s actual damages. Since ADOR may separately claim expectation damages in addition to contractual penalties, the settlement provision effectively allows ADOR to demand five to six times its actual losses from an idol artist. Accordingly, ADOR’s exclusive contract is a standard-form contract, and its contractual penalty clause constitutes an unfair standard term that imposes excessive liability on customers, violating Articles 8 and 6 of the Act on the Regulation of Terms and Conditions. The fact that the contract uses the standard form published by the Ministry of Culture, Sports and Tourism does not exempt it from liability under the Act. ※ The Seoul High Court’s April 1, 2004 decision (2002Nu13613) clearly held that even where an entertainment agency exercises contractual rights by seeking damages, doing so in an amount grossly disproportionate to its actual losses constitutes a violation of the Fair Trade Act. 4. The global K-pop idol entertainment management market is a classic platform market connecting idol artists, fandoms, various content production partners, and commercial clients (record distributors, advertisers, etc.). It possesses the characteristics of a multi-sided network effect and a cluster market. Direct network effects and cross-network effects arise, leading to a tipping effect that increasingly concentrates the market around large entertainment agencies, as well as a foreclosure effect that progressively raises barriers to entry for small agencies and new entrants. As major entertainment companies evolve into platforms, artists’ freedom of choice is fundamentally restricted. 5. ADOR and HYBE’s conduct permanently removes the talented K-pop star Danielle from the market, thereby (①) excluding competing businesses represented by affiliated idol artists from the market, (②) reducing the diversity and supply of K-pop goods and services available to consumers, and thus diminishing consumer welfare. (③) In particular, for Bunnies who wish to see NewJeans perform as a complete group, the reduction in consumer welfare caused by being offered an incomplete version of NewJeans as a K-pop product is especially significant. (④) ADOR and HYBE’s discriminatory retaliation against Danielle without reasonable justification sends a message of intimidation and warning to the entire K-pop idol industry. This creates a foreclosure effect against smaller agencies and new entrants seeking to recruit existing idols away from major entertainment companies, while suppressing and controlling what should be a free and creative K-pop ecosystem, thereby hindering long-term innovation in K-pop. Ultimately, this weakens the competitiveness of the K-pop industry. These anti-competitive effects and reductions in consumer welfare are amplified because the K-pop industry functions as a platform-based cluster market characterized by multi-sided network effects. —- Appendix 1. Q&A Session Q1. Exclusive contract disputes are usually resolved through civil litigation (such as injunctions suspending the contract’s effect). Why did you file a complaint with the Korea Fair Trade Commission? A: Because this case goes beyond a simple matter of contractual interpretation. HYBE, as a giant platform with market dominance, allegedly used its dominant position to remove a specific artist from her idol group and, beyond that, sought an enormous contractual penalty against her alone without any reasonable justification in order to permanently exclude her from the market. Such conduct undermines the fair competitive order of the entertainment industry, hinders innovation in the K-pop market, and restricts dynamic competition within the industry. Therefore, seeking the judgment of the Fair Trade Commission—the “watchdog of market competition”—is the approach that best addresses the essence of this matter. ⸻ Q2. If HYBE is seeking contractual penalties based on the exclusive contract provisions contained in the standard contract published by the Ministry of Culture, Sports and Tourism, isn’t that simply the legitimate exercise of its contractual rights? A: The fact that a contract is based on a standard form published by the Ministry of Culture, Sports and Tourism does not automatically guarantee that it is fair. Under the standard contract, contractual penalties are calculated by multiplying the artist’s revenue by the remaining contract period, rather than the agency’s actual loss, which would be its lost profit resulting from the artist’s departure. For a successful idol group such as NewJeans, the agency’s actual loss (its profit) is only about one-quarter to one-tenth of its gross revenue. These figures are my own calculations and estimates based on NewJeans’ settlement records from 2022 through 2024. Considering economies of scale—where the proportion of deductible costs decreases as revenue increases—the actual loss for idol groups less successful than NewJeans would be far less than one-tenth of their revenue. This contractual penalty provision originates from the Ministry’s standard contract and is therefore used not only by HYBE but by nearly every entertainment agency. A contractual penalty based on gross revenue rather than actual profit is a toxic provision that effectively imposes “unlimited liability” on artists. Furthermore, the Ministry’s standard contractual penalty clause does not even properly define what constitutes “revenue.” For multi-member idol groups such as NewJeans, the standard contract does not specify whether the relevant revenue is the group’s total revenue or the revenue attributable to each individual member. Nor does it explain how an individual member’s revenue should be calculated if that is the intended standard. If a contract is issued by the government as a standard contract, it should truly function as the market standard by providing completeness, consistency, and legal certainty for market participants. Instead, the Ministry’s standard contract—particularly its contractual penalty provision—is riddled with deficiencies. No matter how much effort the government and industry task forces invested in drafting it, such an incomplete and internally inconsistent standard contract cannot be regarded as a market standard deserving deference. Meanwhile, although our Constitution guarantees freedom of contract, it also contains provisions on economic democratization, and the Fair Trade Act was enacted and enforced to harmonize those two principles. Accordingly, the exercise of private contractual rights is not unlimited. In particular, even where a dominant business operator such as HYBE is exercising rights protected under the constitutional principle of freedom of contract, it is prohibited from exercising those civil rights with the intent or purpose of excluding competitors or restricting competition. In this case, unlike the other members who engaged in the same conduct, HYBE filed an explicit partial claim seeking approximately ₩33 billion in contractual penalties from Danielle alone—even though it knows it could never actually recover that amount—and further expressed its intention to continue pursuing the remainder of the contractual penalties. This constitutes a classic example of discriminatory treatment aimed at excluding a competing business operator, an abuse of market dominance that reduces the diversity and output of goods and services in the K-pop market, and an unfair trade practice involving abuse of a superior bargaining position. Judicial precedent (Seoul High Court Decision 2002Nu13613) likewise explicitly holds that where an entertainment agency’s exercise of civil rights—such as claims for contractual damages—is excessive, it violates the Fair Trade Act. ⸻ Q3. The term “monopsony” is unfamiliar. What does it mean? A: Whereas an ordinary monopoly (supply monopoly) refers to a situation where there is only one seller, a monopsony refers to a market where the buyer—in this case, the entertainment agency—holds overwhelming power. In the market for exclusive management contracts involving K-pop idol singers, agencies such as HYBE sign exclusive contracts with trainees before they debut, and those contracts generally last for seven years from debut. Accordingly, in the labor market for idol singers, the entertainment agency effectively occupies a monopsonistic position. When a giant agency such as HYBE monopolizes the purchase of artists’ labor, artists who are subjected to unreasonable treatment have great difficulty finding alternative agencies, resulting in market foreclosure. For that reason, exclusionary conduct in a monopsony market has a far more severe anti-competitive effect than exclusionary conduct occurring in an ordinary supply market. This complaint is intended to expose the monopsonistic position of giant agencies such as HYBE and highlight their abuse of power over affiliated artists. ⸻ Q4. If the Fair Trade Commission rules in Danielle’s favor, what changes do you expect for the K-pop industry? A: This case will serve as a warning against the longstanding practice whereby giant platform companies in Korea’s K-pop idol industry—now a source of national pride and a major pillar of economic growth—use their market power to prevent artists from moving freely between agencies and wield limitless litigation backed by enormous financial resources as a weapon capable of ending an artist’s career. In particular, it is expected to become an important milestone ensuring that, in the increasingly platformized K-pop entertainment market, artists’ rights are not buried beneath the empty pretext of enforcing contractual rights under exclusive contracts, but are instead evaluated from the rigorous perspective of competition law. ⸻ Q5. What is the specific basis for Danielle’s claim that she was subjected to “discriminatory treatment”? A: Although every NewJeans member issued the same notice terminating her exclusive contract and later pursued the same independent course of action, ADOR singled out Danielle by filing an explicit lawsuit seeking contractual penalties totaling ₩100 billion, while also issuing a notice of set-off expressing its intention to collect the remainder of those penalties in the future. ADOR filed its claim for approximately ₩33 billion against Danielle fully aware that, even if it prevailed, Danielle’s financial circumstances made recovery impossible. Although the litigation would require hundreds of millions of won in legal fees, it offers virtually no economic benefit. The fact that ADOR nevertheless chose to proceed demonstrates that there is a hidden purpose behind the lawsuit. That purpose is to preserve NewJeans while minimizing its own losses, make Danielle a test case, permanently remove her from the K-pop market, burden her with lifelong massive debt, and effectively destroy her life, thereby sending a deterrent effect (威嚇效果; Deterrent Effect, 嚇 meaning “to intimidate”) and warning signal to the other NewJeans members and affiliated artists in order to strengthen its control over them. As a result, Bunnies suffer a loss of consumer welfare by losing NewJeans as a complete group, while the K-pop market as a whole loses a competitive artist in Danielle, reducing both the diversity and supply of K-pop goods and services and distorting competition. Furthermore, by spreading an atmosphere of dark control and repression throughout what should be a free and creative music industry, such conduct hinders innovation across the K-pop industry and weakens its dynamic, long-term competitiveness. This clearly constitutes an abuse of market dominance, exclusion of competitors, and abuse of a superior bargaining position, all of which are strictly prohibited under the Fair Trade Act. ⸻ Q6. HYBE argues that it is not a monopoly because it consists of multiple separate labels. Why should the revenues of those labels be combined in determining whether HYBE is a dominant market player? A: Under the Fair Trade Act, market power is assessed by treating affiliated companies operating in the same market as a single competitive unit, regardless of their separate corporate identities, where they function as one economic entity. HYBE owns numerous labels—including ADOR, Source Music, and BELIFT LAB—which operate under a unified decision-making structure and effectively dominate the market. Their combined market share approaches 50% of the K-pop market, giving them overwhelming influence. Moreover, HYBE has built a multi-sided platform encompassing fans, content production partners, record companies, concert promoters, merchandise distributors, idol IP licensors, advertisers and brands, broadcasters, and media companies throughout the K-pop ecosystem. Because this platform enables HYBE to control every stage of an artist’s career—from recruitment and training to debut and promotion—it qualifies as a dominant business operator in a classic multi-sided platform market. ⸻ Q7. What is the “Foreclosure Effect” referred to in this case? How can terminating one artist’s contract and filing a lawsuit create market foreclosure? A: By imposing contractual penalties that an artist can never realistically bear—or burdening the artist with astronomical liabilities—a giant entertainment agency effectively prevents the artist from transferring elsewhere while simultaneously discouraging other agencies and new entrants from entering or growing within the K-pop market. That is precisely what is meant by the Foreclosure Effect. Of course, entertainment agencies invest enormous sums in developing artists and are entitled to recover those investments through exclusive contracts. In that sense, contractual penalties and damage claims may legitimately serve a purpose. However, there must be reasonable limits. Excessive contractual penalties go beyond protecting an agency’s legitimate investment and instead become tools for exercising excessive control and dominance over artists, thereby reducing market dynamism. Under HYBE’s exclusive contract, contractual penalties are calculated by multiplying gross revenue by the remaining contract period, rather than by measuring the agency’s actual loss, which would be its lost profit resulting from the artist’s departure. For a successful idol group such as NewJeans, the agency’s actual loss amounts to only one-quarter to one-tenth of its revenue. These figures are my own calculations and estimates based on NewJeans’ settlement records from 2022 through 2024. Considering economies of scale, groups less successful than NewJeans would generate actual losses far below one-tenth of their revenue. Because this contractual penalty clause originates from the Ministry of Culture, Sports and Tourism’s standard contract, it is used not only by HYBE but by nearly every entertainment agency. A contractual penalty based on revenue rather than profit is a toxic provision that imposes “unlimited liability” on artists. Such profoundly unfair contractual penalty clauses have become a longstanding unfair practice hidden behind the appearance of a government-issued standard contract. That is why this issue extends far beyond the personal circumstances of a single artist—it is a structural problem affecting the market itself. Indeed, this contractual penalty clause is far more severe than the damages provision at issue in the SM Entertainment case, where the court held that excessive damages claims violated the Fair Trade Act. Accordingly, exercising rights under this contractual penalty provision can itself constitute a violation of the Fair Trade Act by producing a Foreclosure Effect. ⸻ Q8. Why did Danielle personally choose to begin this fight against a giant corporation like HYBE? A: This is not simply a fight to reclaim one individual’s freedom. If K-pop is to remain sustainable in the global market, a fair business culture must take root—one in which artists are treated not as accessories, but as equal partners. Through this complaint, Danielle hopes not only to vindicate her own rights, but also to help create a world where fellow artists, senior artists, and future generations of artists no longer have to live in fear of oppressive contracts and litigation threats backed by enormous capital. This is also my own personal conviction as attorney Jeong Jong-chae. ⸻ Q9. What does Danielle truly want? A: It may be nothing more than a hope like the coming spring, but Danielle simply wants to stand once again as a complete NewJeans together with Minji, Hanni, Haerin, and Hyein, singing and dancing before Bunnies and fans just as they used to. Even if that dream is realistically impossible, it is still the dream Danielle holds. If what HYBE truly wanted were compensation for damages, it would not spend years pursuing lawsuits seeking contractual penalties that would leave Danielle penniless after prolonged litigation and, because of ADOR’s actions, unable ever to work in the K-pop industry again—making recovery impossible even if it won. A far more financially rational choice would be to allow Danielle to return to NewJeans, promote again as a complete group, and offset any damages against the settlement payments she would receive through those activities. The fact that the HYBE Group chose instead to pursue litigation seeking astronomical contractual penalties that offer no meaningful economic benefit even if successful cannot reasonably be explained except as an attempt to use Danielle as a test case, send a warning signal to artists, and thereby strengthen its control over them.