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On June 26, 2024, a representative from EXO's Chen, Baekhyun, and Xiumin's agency, INB100, shared with South Korean media outlet Herald Pop that they had sued SM Entertainment and filed a criminal complaint with Seongdong Police Station on the alleged breach of settlement terms regarding distribution fees and revenue generation. The INB100 stated, as translated by Soompi:
"Yesterday, the members and INB100 filed a complaint with the Seongdong Police Station in Seoul against SM Entertainment CAO (chief A&R officer) Lee Sung-soo and co-CEO Tak Young-jun for fraud in violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes.”
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The EXO members side representatives revealed the reason for filing a complaint against SM Entertainment to the media outlet Newsis on June 26, 2024, and stated:
"SM Entertainment stole property profits by earning a profit equivalent to 10% of the sales generated by CBX members' individual entertainment activities."
EXO's Chen, Baekhyun, and Xiumin claimed that SM Entertainment lied and promised a 5.5% distribution fee for their album distribution
According to a Newsis exclusive report, EXO members Chen, Baekhyun, and Xiumin have sued SM Entertainment for fraud. The artists and their agency, INB100, alleged that while working on the settlement agreement during an exclusive contract dispute, SM Entertainment lied and promised a 5.5% distribution fee for the music and album distribution.
As per the outlet, normally, for a new corporation to distribute music, they have to pay 15% of sales as a commission to a distributor. However, SM Entertainment apparently provided a discount to settle the contract dispute. EXO members claimed that SM Entertainment did not deliver on the mentioned guarantee, and thus, they were the victims of the agency's fraud.
They had to enter into an unfavorable agreement where EXO members Chen, Baekhyun, and Xiumin, reportedly had to pay 10% of their revenue generated at the end of each quarter from their individual activities during their exclusive contract with SM Entertainment.
Previously, on June 10, 2024, EXO members Chen, Baekhyun, and Xiumin organized a press conference to officially announce their dispute against SM Entertainment, where they claimed that their former agency violated the negotiated terms that were included in the agreement. Attorney Lee Jae-hak represented EXO-CBX's claims and shared the following allegations against SM Entertainment, as translated by Soompi:
"SM Entertainment is not fulfilling the 5.5 percent commission rate for albums and music guaranteed to INB100 as part of the settlement condition. They are engaging in unfair practices by demanding 10 percent of the artists’ revenue generated from individual activities such as individual album releases, concerts, and advertisements."
At the conference, Lee Jae-hak also explained that they delivered certification of contents to SM Entertainment regarding their unfair practices in April 2024. However, they have not received any response from the label. He further stated that members would terminate the agreement from their side as it has no leaning on the pretext of fraud and non-fulfillment of obligations.
In response, SM Entertainment released a lengthy statement, refuting the allegations regarding the breach of the agreement made by EXO members and their agency, INB100, at the press conference. They denied the claims made by INB100 regarding their alleged mishandling of the distribution commission rate.
SM Entertainment cited that rates were mentioned to empower Chen, Baekhyun, and Xiumin to negotiate better terms with the distribution company. They also claimed that the agency had no power to estimate the distribution commission rates of other distribution companies.
The agency stated, as translated by Soompi:
"Although the exclusive contract between us and CBX is still valid, we allowed them to conduct individual activities through their business, with CBX personally signing the agreement to pay 10 percent of the revenue from their independent business."
SM Entertainment added, as translated by Soompi:
"Regarding this, the 10 percent payment of the revenue of the individual business is the standard that was actually implemented through court mediation during the exclusive contract dispute with EXO’s Chinese members, and it is already being applied as a reasonable standard with precedent. The standard derived through court mediation was also applied to CBX’s case, and we want to convey that these rates were mutually discussed and finalized during the actual agreement process."
SM Entertainment has also filed civil complaints against Baekhyun, Chen, and Xiumin with the Seoul Eastern District Court, demanding the members fulfill the terms of their agreement with the agency.
