[Invest&Law] NewJeans·Adore, Inevitable Legal Disputes

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Group NewJeans has drawn attention by notifying their agency ADOR of the termination of their exclusive contract while stating that they will not pursue legal action. This marks a departure from the usual practice, choosing a 'no-litigation strategy.' HYBE and ADOR now face the dilemma of having to file a lawsuit against NewJeans to prove the validity of the exclusive contract.

According to the legal community on the 2nd, NewJeans' no-litigation strategy is expected to prompt a reevaluation of industry-wide practices and legal standards in the entertainment sector. An industry insider commented, "This case goes beyond a simple contract dispute involving one team," adding, "It could bring fundamental changes in defining the relationship between agencies and artists."

The general consensus is that the no-litigation strategy is legally sound. Lawyer Jo Myeon-sik, head of Gate Law Firm, explained, "The contract termination notice by NewJeans does not take immediate effect," adding, "A correction period is granted for contract violations, and if the issues are not remedied within that period, a legal right to terminate arises." In fact, NewJeans sent a certified letter to ADOR requesting correction of contract violations and declared contract termination after the 14-day correction period elapsed.

Lawyer Jo analyzed that NewJeans' no-litigation strategy appears intended to prompt ADOR to initiate litigation first, thereby securing the upper hand in negotiations. He said, "Even if the court does not fully recognize NewJeans' contract termination, the benefits ADOR could gain through a damages lawsuit are likely to be limited."

Lawyer Lee Hyun-gon of Saeol Law Office pointed out, "The exclusive contract termination notice takes effect the moment it is delivered to the other party, and to prevent this, ADOR must file a lawsuit." HYBE stated, "We maintain that the exclusive contract with NewJeans is valid until 2029," adding, "It is not yet the stage to comment on whether litigation will be pursued."

Currently, NewJeans is continuing activities independently. Although the exclusive contract has been terminated, they intend to proceed with scheduled advertising shoots. However, considering issues such as revenue distribution, legal disputes between both parties seem inevitable.

If the legal battle between NewJeans and ADOR intensifies, the issue of penalty fees is likely to become a central point of contention. According to the Fair Trade Commission's standard exclusive contract, penalty fees are calculated by multiplying the average monthly sales over the two years prior to contract termination by the remaining contract months. Industry insiders have suggested that NewJeans could face penalty fees as high as 600 billion KRW.

NewJeans argues that since the exclusive contract was terminated due to the agency's fault, they have no obligation to pay penalty fees. However, experts predict that if a legal dispute ensues, it is unlikely that the penalty fees will be completely waived. An industry insider said, "Courts also consider that debuting an artist group typically involves costs exceeding several billion KRW," adding, "The amount of penalty fees is likely to be adjusted based on the degree of fault of both the agency and the artists."

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