Sipusote between EXO members and SM goes legal

A dispute between K-pop agency SM Entertainment and three members of the boy band EXO has exploded into a “full-on war”. The agency has now sued over claims made by Chen, Baekhyun and Xiumin – collectively known as EXO-CBX – with the singers saying that they will countersue and refer the agency to South Korea’s Fair Trade Commission.

SM accuses EXO-CBX of failing to pay a 10% intellectual property royalty fee, after leaving the company to set up their own agency to manage their solo careers. CBX say that SM has reneged on a promise to allow them to pay a reduced fee to distribute their music via SM’s majority shareholder Kakao.

Following some heated press statements from both sides last week, SM went legal on Thursday, saying that “CBX’s nonsensical actions cannot be tolerated anymore”. CBX responded by saying that they were ready to reveal “everything” about how the company has allegedly mistreated them.

This dispute dates back to last year, when Chen, Baekhyun and Xiumin reached a new agreement with SM, allowing them to manage their solo careers through their own agency INB100. The group is still managed by SM, although the semi-split came after CBX accused SM of mistreatment. 

Under the agreement they reached, EXO-CBX were reportedly required to pay a 10% royalty in order to use their stage names and the EXO name in relation to their solo activities. They are now refusing to pay this, as they claim that SM is not upholding the agreement on the distribution fee, which was why they agreed to the royalty.

At a press conference last week, President of the holding company that owns INB10, Cha -Ga-won, said that SM had breached the deal by failing to honour a 5.5% distribution fee – much lower than the usual 15-20% for acts operating outside SM. 

This fee was not mentioned in the written agreement but – said Ch Ga-won – it was “verbally promised by then-CEO Lee Sung-su of SM Entertainment”. They have a recording of this deal being offered, she said, adding that a verbal offer is “legally binding by the Korean legal system”.

“We declare a full-on war against SM Entertainment, which has made a promise that it could not keep and committed what could be perceived as fraud”, she said at the press conference on 10 Jun.

SM quickly responded with its own statement, saying that “what INB100 argues is an unfair act on our side is different from the truth”.

“The item was discussed as a gesture that we would help CBX negotiate with the distributor. We never had the power to decide the distributor’s fee rate”, it went on. “CBX did in fact ask that a clause regarding the distribution fee be put in the agreement, but we explained that it couldn’t be included because we just don’t have the power and took it out, which means that no such clause is included in the agreement”.

Instead, it said, it allowed Baekhyun to release his solo album through INB100, rather than SM as was originally planned, and paid a cancellation fee when he pulled out of a concert in Japan. As a result, the company said, “CBX never really suffered any damage”.

When it filed legal action the following day, it added claims that EXO-CBX had been “stolen” by Cha Ga-won and business partner MC Mong. This is something it claimed during last year’s dispute, but ultimately it retracted and apologised for that allegation. The key demand of the lawsuit is that EXO-CBX honour the 10% royalty clause in their contract. However, it is expected that a separate suit calling for damages is also likely to be filed.

EXO-CBX said on Friday that they plan to countersue and would reveal “everything” that led to their split from SM last year. They will also ask for the South Korean government’s Fair Trade Commission to investigate the company.

“We will prove, in court, that SM’s payment system is wrong”, they said in a statement. “We will also report the unfair exclusive contract [of SM Entertainment] to the FTC and have it judged by the justice system”.

There have been fears that this all puts an upcoming EXO album in jeopardy. In their statement last week, EXO-CBX said that they would “earnestly participate in EXO’s full group activities with SM in the future”. That was before everything went legal though.