Official Press Statement of the International Consumers of the Korean Wave and Supporters of JYJ regarding United Asia Management and KMP Holdings as Cartels that Call for State Correction

Official Press Statement of the International Consumers of the Korean Wave and Supporters of JYJ

regarding United Asia Management and KMP Holdings as Cartels that Call for State Correction

The recently formed United Asia Management(hereafter, “UAM”) and its spiritual predecessor KMP Holdings are cartels. TheInternational Consumers of the Korean Wave and Supporters of JYJ hereby alertthe State actors of the Korean Government of these two open and high-profiledisregard of the Korean laws and international standards of competition andurge swift action.

A cartel is “an agreement between businesses not to compete with each other.”[i]There is international consensus on the basic statutory elements of a cartel:an (1) agreement (2) between competitors (3) that restrict competition. UAM andKMP Holdings squarely meet the above definition. First, the agreement existsbecause the very structure of these transactions as understood by all parties,which bring direct competitors together to cooperate in capturing the commonmarket, makes the restriction of competition inevitable. Indeed, an agreementneed not be formal or written to be prosecuted, and is actually almost alwaystacit and not openly acknowledged. Second, the companies that make up UAM andKMP Holdings are clearly in direct competition. Third, aside from thestructural restriction on competition discussed above, the open, publicizedaims of these two ventures proclaim that they shall engage in at least one ofthe four categories of conduct of a “hard core cartel”: “to share or dividemarkets by allocating customers, suppliers, territories, or lines of commerce.”[ii]The unpublicized aims of these companies may meet other categories, i.e.,price-fixing, output restriction, and bid-rigging.

Toprevent the formation of cartels, the OECD, of which Korea is a member State, recommends that enterprises refrain from engaging in mergers, takeovers, joint ventures or other acquisition of control whether of a horizontal, vertical, or a conglomerate nature. Further, the UN, of which Korea is again a member State, enumerates as priorities for all nations “the creation, encouragement andprotection of competition” which cartels by definition stymie. Additionally,Korea’s own Monopoly Regulation and Fair Trade Act (hereafter, “KMRFTA”)purports “to encourage fair and free economic competition by prohibiting the abuse of market-dominant positions and the excessive concentration of economic power.” In the EU, a firm with a market share of as low as 39% can beconsidered “dominant”. Both UAM and KMP Holdings far exceed that percentage andapproach or exceed double that amount. These companies, along with the KoreanGovernment, have an obligation to the Korean public and the international community to stop these public and gross violations of existing norms at once.

Cartels cause serious harm to society andthe industry. As Korea recognizes through KMRFTA, the restriction ofcompetition by cartels hinder “the creativity in business activities, theprotection of consumers, and the promotion of the balanced development of thenational economy.” Accordingly, cartels are vigorously prosecuted in all countries that place a high value on market competition. In fact, the JusticeDepartment of the United States of America, the nation-leader of free market,states that “because of the harm that cartel violations cause, [our] number oneantitrust priority is criminal prosecution of those activities.”[iii]

As the ultimate arbiters of the success orfailure of Hallyu, we the international consumers have been deeply concernedwith the damage caused by cartels in the Korean Entertainment industry over the years. We have already witnessed the degradation in quality of Hallyu products,in particular in the lack of choice and diminishing innovation in the Korean pop music industry, driven by the saturation of “idols” and the unchecked practice of slave contracts brought about by the lack of competition. We have also witnessed a disconcerting lack of transparency and fairness in Korea’spopular media, which breeds mistrust in both Korean and Internationalconsumers. That Korea’s big entertainment companies and mainstream broadcasting stations collude to allocate consumers amongst themselves and to limit accessto the market for other players at the expense of consumer freedom of choice has been obvious for years to all serious consumers of Korean Wave.

We are also deeply concerned about the harm that cartels like UAM and KMP Holdings inflict on the intellectual property rights protection of Korean artists, and ultimately, on their creativity anddevelopment which drive the progress of the Korean Wave. The lack ofcompetition allows Korean entertainment companies to include provisions that violate basic norms of intellectual property rights protection in theirstandard contracts with their entertainers. The lack of competition also prevents the formation of organisations that represent the interests ofentertainers’ basic rights. This is unacceptable given that Korea has ratifiedthe key international instruments in this area and that she is a member State of the International Labour Organisation. The restriction on competition by cartels like UAM and KMP Holdings only aggravate the exploitation of the creativity of Korea’s artists and make consumers accomplices in a pattern thatwill ultimately destroy Hallyu. We refuse to either endorse or become complicitin such an arrangement.

Therefore, we ask the Government of theRepublic of Korea to correct this unfortunate state of affairs at once by taking action against UAM and KMP Holdings. UAM and KMP Holdings openly and unashamedly restrict competition and violate Korea’s laws and the international standards she values. Such acts have, and will continue to, stall and evenregress the Korean Wave for the sake of profits by the few dominant established players. We advise the participants of cartels and the Republic of Korea: Korea must prove that she satisfies basic international standards of competition and free market and therefore earnestly protects the rights of vulnerable actorsand consumers before even dreaming of being taken seriously in the international market.

[i] United Kingdom’s Office of Fair Trading website
[ii] In 1998, the OECD Council adopted the Recommendation ConcerningEffective Action Against Hard Core Cartels (hereinafter “the Recommendation” or“the OECD Recommendation.”)
[iii] United States Department of Justice, Antitrust Division, AntitrustEnforcement and the Consumer
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