Kakao Entertainment was fined by the Fair Trade Commission (FTC) for signing unfair contracts that prevented web novel contest-winning authors from producing secondary works. Kakao Entertainment announced it would appeal, claiming the FTC’s sanctions are unjust.
On the 24th, the FTC stated that it had decided to impose corrective orders and a fine of 540 million KRW on Kakao Entertainment for abusing its superior bargaining position to restrict the rights of contest-winning authors to create secondary works, violating the Fair Trade Act. This is the first time the FTC has taken action related to copyrights from contests.
According to the FTC, Kakao Entertainment signed serial publication contracts with 28 authors who won five web novel contests held between 2018 and 2020, granting itself exclusive rights to create secondary works such as webtoons, dramas, and movies. While contest organizers typically contract with a right of first negotiation for secondary works, Kakao Entertainment demanded exclusive production rights. The FTC judged that these unfair contracts deprived authors of the opportunity to choose better terms. Even if Kakao Entertainment did not produce secondary works, it was not allowed to produce them directly or permit third parties to do so.
The FTC pointed out, "This case involves a major platform operator using its superior bargaining position to restrict creators’ rights in contests, which serve as gateways for new authors." It viewed the comprehensive transfer of secondary work creation rights as violating the intent of copyright laws that strictly limit such transfers, the Ministry of Culture, Sports and Tourism’s 'Creative Work Contest Guidelines,' and normal trade practices, deeming the conditions unfair.
Kakao Entertainment disagreed with the FTC’s decision. It stated that it regards creators as key partners in the domestic creative ecosystem and denied any cases of unfairly acquiring secondary work creation rights from creators. A Kakao Entertainment representative said, "We have received the FTC’s decision document and plan to appeal in court to contest the unfairness. We deeply regret the FTC’s decision to impose sanctions."
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