[Press Statement] United Asia Management and KMP Holdings are 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. The International Consumers of the Korean Wave and Supporters of JYJ hereby alert the State actors of the Korean Government of these two open and high-profile disregard of the Korean laws and international standards of competition and urge 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 and KMP Holdings squarely meet the above definition. First, the agreement exists because the very structure of these transactions as understood by all parties, which bring direct competitors together to cooperate in capturing the common market, makes the restriction of competition inevitable. Indeed, an agreement need not be formal or written to be prosecuted, and is actually almost always tacit and not openly acknowledged. Second, the companies that make up UAM and KMP Holdings are clearly in direct competition. Third, aside from the structural restriction on competition discussed above, the open, publicized aims of these two ventures proclaim that they shall engage in at least one of the four categories of conduct of a “hard core cartel”: “to share or divide markets 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.

To prevent 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 and protection 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 be considered “dominant”. Both UAM and KMP Holdings far exceed that percentage and approach or exceed double that amount. These companies, along with the Korean Government, 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 and the industry. As Korea recognizes through KMRFTA, the restriction of competition by cartels hinder “the creativity in business activities, the protection of consumers, and the promotion of the balanced development of the national economy.” Accordingly, cartels are vigorously prosecuted in all countries that place a high value on market competition. In fact, the Justice Department of the United States of America, the nation-leader of free market, states that “because of the harm that cartel violations cause, [our] number one antitrust priority is criminal prosecution of those activities.”[iii]

As the ultimate arbiters of the success or failure of Hallyu, we the international consumers have been deeply concerned with 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’s popular media, which breeds mistrust in both Korean and International consumers. That Korea’s big entertainment companies and mainstream broadcasting stations collude to allocate consumers amongst themselves and to limit access to 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 and development which drive the progress of the Korean Wave. The lack of competition allows Korean entertainment companies to include provisions that violate basic norms of intellectual property rights protection in their standard contracts with their entertainers. The lack of competition also prevents the formation of organisations that represent the interests of entertainers’ basic rights. This is unacceptable given that Korea has ratified the 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 that will ultimately destroy Hallyu. We refuse to either endorse or become complicit in such an arrangement.

Therefore, we ask the Government of the Republic 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 even regress 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 actors and consumers before even dreaming of being taken seriously in the international market.

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[i] United Kingdom’s Office of Fair Trading website

[ii] In 1998, the OECD Council adopted the Recommendation Concerning Effective Action Against Hard Core Cartels (hereinafter “the Recommendation” or “the OECD Recommendation.”)

[iii] United States Department of Justice, Antitrust Division, Antitrust Enforcement and the Consumer

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