The Media and Entertainment Law Review: South Korea

Overview

i Overview of the Korean media and entertainment industry

The Korean media and entertainment industry comprises different branches that include print and visual media.

The Korean commercial broadcasting industry is broadly categorised into terrestrial broadcasters, cable TV broadcasters, internet TV provided by telecommunications operators and satellite broadcasting operators. In the past, terrestrial broadcasters and cable TV broadcasters held a dominant share of the Korean commercial broadcasting market, but this landscape is rapidly changing with the growth of internet TV broadcasters.

In the area of print media, the newspaper industry is considered to be the largest and most significant sector, although the size of this market continues to decrease with the development of visual broadcast media.

Finally, the Korean entertainment industry encompasses different forms of media, including films, videos and music, and it is currently thriving with the rise of K-pop and a growing interest in Korean films. Domestically, businesses involving Korean games and internet cartoons (or 'webtoons'2) have also seen substantial growth. The over-the-top (OTT) media market, led by global service providers such as Google's YouTube and Netflix, is also expanding dramatically in Korea. Furthermore, virtual reality and augmented reality services and Metaverse services are gaining more popularity in Korea.

ii Recent market trends and policy developments

With the prolonged covid-19 pandemic, remotely delivered services continue to gain popularity in Korea (e.g., revenue from OTT services has increased significantly along with that from podcast services).3

Growth in entertainment company mergers and acquisitions

Korean entertainment companies are raising funds to invest in new businesses through initial public offerings (IPOs) and entering into new businesses through mergers and acquisitions (M&A) transactions, especially outbound transactions, and through such M&A transactions they are growing into platforms that provide various combined services.

HYBE (the entertainment agency that manages the K-pop group BTS) is a prime example. Before its IPO on 15 October 2020, HYBE acquired a game production company and also various labels then, since the IPO, it has acquired Ithaca Holdings LLC (a major US entertainment agency).4 Kakao Entertainment has also been active, as it plans to merge with Melon Company (a music streaming service company previously split off from Kakao) by September 2021 and to commence its IPO in 2022.

Legal and regulatory framework

In Korea, the different forms of media are regulated by different laws and regulations.

i Newspapers

The Act on the Promotion of Newspapers, etc. (Newspaper Act), which is regulated by the Ministry of Culture, Sports and Tourism (MCST), governs newspapers. Among other things, the Newspaper Act regulates business registration for newspaper businesses and prohibits foreigners or foreign entities from publishing newspapers in Korea.

To publish and distribute newspapers (including online newspapers), a business must complete registration with the corresponding local government. Furthermore, foreign newspaper businesses are required to establish and register a local Korean office or branch.

The Newspaper Act prohibits the publishing of any newspapers by foreign governments, companies or organisations; companies or organisations whose representative executive officer is a foreigner; and companies or organisations whose shares or equities are held by foreigners or foreign entities in excess of a threshold rate. The Newspaper Act further prohibits the publishing of online newspapers by foreigners.

ii Broadcast communications

Broadcast communications are governed by the Broadcasting Act and the Internet Multimedia Broadcast Services Act, the latter of which governs businesses delivering broadcasts through internet protocols. Both Acts come within the purview of the Korea Communications Commission (KCC) and the Ministry of Science and ICT (MSIT). Among other things, the Acts regulate broadcasting operator licences and rating systems.

Broadcasting operators must either obtain a licence from the KCC or obtain a licence or an approval from, or file a registration with, the MSIT.

Korean television broadcasters are required to self-rate their programmes based on five elements that may be harmful to viewers (theme, violence, sexuality, imitation risk and language) before broadcasting the programmes and they must display the rating throughout the broadcast.

iii Online media

Although there are no laws that specifically govern OTT or online media, the Telecommunications Business Act (TBA), which is implemented and enforced by the KCC and the MSIT, generally governs services provided through telecommunications technology. Among other things, the TBA imposes restrictions on telecommunications business operators, which includes value-added service providers (VSPs). There are also laws that regulate the management of personal information relevant to online media, which are not covered in this chapter.

VSPs must obtain approval from or file a report with the MSIT before operation. Online media services are normally required to report to the MSIT as VSPs. It has yet to be determined which government agency will have regulatory authority for OTT service providers – the MSIT, the KCC or the MCST. Notwithstanding this, the KCC has announced that it plans to enact the Audiovisual Media Services Act to regulate OTT services along with broadcast communications currently subject to the Broadcast Communications Act and the Internet Multimedia Broadcast Services Act.

iv Films

Films are governed by the Promotion of Motion Pictures and Video Products Act. Among others, the Act regulates the film rating system and imposes a quota of Korean films on film theatres (called the screen quota system).

Film theatres are required to screen Korean films for at least 20 per cent of each business day.

Free speech and media freedom

i Protected forms of expression

Free speech

Freedom of expression is a right recognised by the Constitution of the Republic of Korea. In Korea, freedom of expression encompasses freedom of both speech and the press. The Constitutional Court has held that all forms and channels for communication and expression are protected by this right.5 Nevertheless, this right may be restricted depending on the content of the expression, including expressions that harm another party's reputation or infringe upon another party's rights.

Restrictions on freedom of expression

The Minju Party, the current ruling party, plans to partially amend the Press Arbitration Act so that media outlets and media personnel could potentially be liable for false and fabricated news, whether distributed through gross negligence or intentional misconduct, and subject to punitive fines of amounts up to five times higher than the cost of the actual damage. In response, opposition parties and media-related organisations are opposing the proposed amendment, arguing that it will be significantly infringe freedom of expression and the press. The ruling party and the opposition parties have agreed to discuss the details of the Press Arbitration Act through a separate consultative body, but as the ruling party has a majority among the members of the National Assembly (i.e., 180 seats out of 300), it is highly likely that the proposed amendment will be passed before the end of this year in the absence of any unforeseen circumstances.

Broadcast communications

The KCC publishes the Regulations on Broadcasting Standards, and reviews broadcast communications after they have aired. The KCC also publishes the Regulations on Broadcast Advertisement Standards for advertisements. After a review of the content that was aired, the KCC may impose sanctions on the relevant broadcasting companies, programme providers or production companies when the content is not compliant with the above regulations.

Ratings

The Korea Media Rating Board requires films and videos to be rated by the Board before they are distributed through various channels. Although there are broad exceptions to this requirement (e.g., free publicly available videos provided through telecommunications networks are exempt from this requirement), if a person screens films or videos without a rating, or provides these films or videos in a way that is not compliant with the stated rating, that person may be subject to criminal sanctions. In May 2021, the MCST announced an amendment to allow self-rating by private entities. However, it is unclear when the amendment will enter into effect.

Online regulations

The Act on Promotion of Information and Communications Network Utilisation and Information Protection, etc. (the Network Act) prohibits the distribution of illegal content, including content that is obscene, injures another's reputation or is greatly harmful to teenagers and juveniles. The KCC regulates accordingly by conducting an ex post review of the content. After the review, the KCC may issue a corrective order to the telecommunications service operator or the publisher of the content.

Regulations on hate speech

To date, there are no laws in Korea that regulate hate speech (i.e., speech that spurs animus towards a particular race, nationality or class of people).

General civil and criminal regulations

Any infringements of another party's rights, such as reputation, privacy or image, may be subject to criminal and civil liabilities.

ii Newsgathering

There are no laws that expressly provide immunity to liability for newsgathering. A recent lower court decision held that, notwithstanding the freedom of the press, any actions by the press in violation of specific laws are not protected and the legality of an investigative action by the press can only be determined after weighing up various circumstances.6 A person who trespasses, secretly records a third party's conversation or commits other violations of law (or causes another person to commit any of the foregoing violations) for the purpose of newsgathering may be criminally liable. Under current law, a party to a conversation may legally record a conversation without the other parties' consent.

iii Freedom of access to government information

There are no laws that provide the media with special access to information. However, under the Official Information Disclosure Act, any Korean citizen, company or entity can request disclosure of any information held or managed by national or state agencies, local governments and local public enterprises (together, public agencies). A foreign individual can request information held or managed by public agencies only if he or she is domiciled in Korea or is temporarily in Korea for academic research. A foreign company or entity can make the same request only if it has a domestic office or presence. Even then, in certain circumstances, such requests may be denied on the basis of eight exceptions specified by law (e.g., infringements on an individual's or company's trade secrets that may materially harm that entity),7 in which case, an administrative action must be filed to reverse the decision.

iv Protection of sources

Any laws that expressly provided journalists with the right to remain silent to protect their sources have been abolished. Currently, there are no laws that expressly allow journalists to protect their sources and it is unclear whether source protection falls under the umbrella of the constitutional right of freedom of expression (which encompasses the freedom of the press and of publication).

v Private action against publication

Main claims filed against the press

Under the Act on Press Arbitration and Remedies, etc. for Damages Caused by Press Reports (Press Arbitration Act), injured parties can file a claim against a media company for correction, a counter statement or further reporting. Correction requests are made to correct untrue statements published by a company. Counter statements are available irrespective of the truthfulness of a report. Further reporting requests are claims that can be filed by a person that was suspected of or prosecuted for a crime on a fact that he or she was later deemed to be innocent of or had had his or her charges dropped. These claims can be resolved by direct claim against a media company, mediation through the Press Arbitration Commission or litigation. If a report is false or materially harms the reputation of the subject and does not promote public interest, the injured subject can file for a request to delete the report.

Mediation through the Press Arbitration Commission

The Press Arbitration Commission is an alternative dispute resolution body that specialises in disputes involving press reports. The arbitration department is composed of judges, attorneys and ex-media personnel. A successful agreement between an aggrieved party (the petitioner) and a media company (the respondent) is legally binding under Korean law.

Civil suits

If a media company acts illegally, an aggrieved party can file for damages for economic harm or emotional distress, which that party needs to prove. Unlike the Press Arbitration Act, these suits can be filed against individual reporters.

Criminal suits

In Korea, if an aggrieved party's reputation is injured because of a media report, a criminal suit can be filed against the publisher and individual reporter regardless of whether the report is false or not. Potential safe harbours may exist for the publisher and individual reporter if the report can be proven to be both truthful and in the service of the public interest (i.e., the publisher and the individual reporter may not be held criminally liable). For false reports, however, this safe harbour rule does not apply.

Defences for the press

Regardless of the truthfulness of a report, if a report harms an aggrieved party's reputation, the aggrieved party may take civil and criminal action against the publisher. The aggrieved party must prove that he or she was defamed by the report. However, if the report is found to be truthful and in the service of the public interest, then the publisher may not be criminally liable. Furthermore, even if some information in the report is false, if the publisher believed the information to be true (and had reasonable grounds to believe so), and the report was published for the public good (i.e., in the interest of society or large groups of members of society), the publisher may not be held criminally liable.8 However, the burden of proof lies with the publisher. Both the Constitutional Court and the Supreme Court have held that the level of protection is lower for a public figure or in a case involving social issues,9 which means that a report involving such a figure or case is likely to be recognised as serving the public good.

Intellectual property

i Copyright and related rights

Korean copyright law and the Berne Convention

Under the Korean Copyright Act, both Korean and foreign copyrighted works are protected upon their creation in accordance with treaties that Korea has acceded to, which include the Berne Convention for the Protection of Literary and Artistic Works, which was ratified by Korea on 2 August 1996.

The Copyright Act has since been amended several times and recent notable changes were intended to make the Act compliant with free trade agreements entered into with the European Union and with the United States respectively.

Korea is also a member of the World Intellectual Property Organization (WIPO) and is subject to the WIPO Copyright Treaty (WCT). Korea has complied with its duties under the WCT by reflecting necessary obligations in the Copyright Act.

Recent developments in copyright law

The MCST prepared a comprehensive amendment to the Copyright Act (the Proposed Amendment), which it proposed in January 2021 with a ruling party member as the sponsor. The Proposed Amendment contains provisions that may significantly alter the existing copyright regime in Korea (e.g., the introduction of publicity rights, an expanded collective management system for copyrighted works, and authors' right to claim additional remuneration10).

ii Publicity rights

Currently, there are no laws or regulations in Korea that expressly recognise publicity rights for public figures such as celebrities. Whether publicity rights should be recognised has been a frequently debated issue in Korea, but there are no Korean Supreme Court cases that provide clear guidance on this issue.

However, the Proposed Amendment explicitly establishes the commercial use of a person's portrait, name, voice and likeness (typically called 'publicity rights') as a right under the Copyright Act.

iii Unfair business practices

Lack of protection for 'hot news'

Coverage of hot news is not expressly protected under current copyright law or other relevant regulations. There are different views on whether hot news should be protected.

Current regulations regarding news articles

In Korea, news reports on current events are generally not protected under copyright law. However, in some exceptional circumstances, news articles may be recognised as work product protected by copyright law for their creativity or originality based upon their unique content, style and vocabulary. The Supreme Court has, therefore, held that the unauthorised publication of a news article by another third-party media company can be a violation of the Copyright Act.

Competition and consumer rights

i Overview

There are no laws or regulations that specifically govern competition and consumer protection in the media and entertainment industries. These industries are, however, subject to general competition and consumer rights laws and regulation, including the Monopoly Regulation and Fair Trade Law, which regulates trade among businesses, the Regulation on Standardised Contract Act (RSCA), which regulates standard contracts between consumers and business providers, and the Act on Consumer Protection in Electronic Commerce Transactions, which applies to online business providers and consumers.

ii Merger control

In May 2021, the KFTC approved the transaction between Werverse Company, a subsidiary of HYBE that operates a fan community platform, and Naver, a leading platform in Korea.11 Although the transaction merged two of the major fan community platforms in Korea, the KFTC ultimately approved the transaction, finding that it will not impact market competition because there are many other fan community platforms that provide similar services (e.g., SM Entertainment's Lysn and NC Soft's Universe). Also, to maximise revenues, fan community platforms need to secure diverse celebrity content, which makes it difficult for such platforms to gain a bargaining position superior to the entertainment agencies'.

According to the KFTC, business combination trends in the information and communications broadcasting sector has steadily increased – from 35 in the first half of 2020 to 38 in the second half, and to 52 in the first half of 2021. Business combinations increased in the first half of 2021 compared to the first half of 2020 and, in particular, 11 of the 17 combinations were game-related mergers. We expect that there will be further convergence between game, entertainment and platform companies going forward.

iii Consumer protection

As online subscription services have expanded since the covid-19 pandemic, various Korean government agencies have been establishing policies and taking enforcement actions to protect consumers. In January 2021, the KFTC announced the results of its investigation into the terms of use of major OTT service providers, including Netflix. Subsequently, many OTT service providers voluntarily implemented the following adjustments: (1) cancellation or refund to be allowed within seven days of the payment date if there is no history of use; (2) clearer disclosure at the time of subscription that the OTT service subscription is a paid service; (3) explanation of the criteria for cancellation or refund to be provided on the subscription page; and (4) notification to users is required before the end of the free trial.

In addition, the Financial Supervisory Commission has amended the Enforcement Decree of the Specialised Credit Finance Business Act and is currently working on amending the subordinate regulations. Consequently, a business providing regular payment services (e.g., subscription services) will now be required to (1) notify its customers of an increase in fee or the free-to-paid conversion at least seven days prior to this event, and (2) establish a fair standard for cancellation or refund that takes account of whether the customer used goods or services, the usage period and other factors.

iv Net neutrality and recent developments

In Korea, there are no laws or regulations that expressly mandate the net neutrality of online service providers (OSPs). However, several provisions in the TBA are known to be premised on the principle of net neutrality, and the MSIT has published two sets of guidelines related to net neutrality.

Views on net neutrality differ between internet service providers and content and application providers. The advent of 5G networks has fuelled this already heated discussion.

Notwithstanding the above, the MSIT amended its Guidelines on Network Neutrality and Internet Traffic Management, with effect from 11 January 2021. The amendment generally mirrors the relevant European regulations. The Guidelines have introduced the concept of 'specialised services' and clearly distinguish between the services subject to the principle of net neutrality (i.e., no blocking, no discrimination) and those that are not. This distinction will provide a basis for internet service providers to guarantee provision of a certain level of quality for services with a specific purpose, to be achieved by means of network slicing and other technologies. However, the Guidelines also suggest preconditions for these specialised services, one of which is that such services should be provided on condition that the quality of internet access services is maintained at an appropriate level.

Digital content

Under the Copyright Act, both civil liability and criminal penalties may result from copyright infringement. Separately, under the Network Act, anyone who distributes illegal content, such as obscene or defamatory content, through communications networks (such as the internet) may be subject to criminal liability. OSPs can be held secondarily liable for the aforementioned illegal activities of their users. However, OSPs will be exempt from such civil and criminal liability if a violation occurs without a website operator's knowledge and notice and takedown actions are implemented pursuant to the Copyright Act's safe harbour provision or the Network Act.

The former chief executive officer of leading SMS service provider Kakao was indicted on charges of failing to properly block 745 instances of child pornography distributed by Kakao Group (Kakao's mobile community service) to more than 7,000 people. In August 2020, the court found the defendant not guilty, but the fact that the OSP's representative was subject to a criminal trial was sensational news.

Contractual disputes

i Disputes between platforms and content providers

In the past, platforms held more bargaining power than content providers (CPs), but the emergence of internet protocol television (IPTV) and OTT has seen the influence of CPs increase continually.

Last year, there was a conflict between CJ ENM and D'LIVE, a cable TV operator, over programme fees. In September 2020, the MSIT convened an arbitration committee to resolve the matter and upheld the increased rate proposed by CJ ENM.

This year, CJ ENM demanded that IPTV service providers increase programme fees and it unilaterally suspended programme supply after negotiations broke down. The KCC is investigating whether CJ ENM's suspension of programme supply involved any prohibited conduct. In a concurrent development, CJ ENM recently filed a lawsuit against LG Uplus seeking damages of 500 million Korean won for copyright infringement.

ii Rights claims by music trust management organisations

In December 2020, music copyright collecting society the Korea Music Copyright Association (KOMCA) inserted a new 'video transmission service' clause in its Royalty Collection Regulation to collect music royalties from OTT services, with approval from the MCST. However, OTT service providers argue that the royalty rate is excessively high relative to other service types and certain service providers have even filed administrative lawsuits against the MCST. The MCST has responded promptly by forming the OTT Music Copyright Council, which includes the MCST, KOMCA and OTT service providers, and has attempted to settle the matter among the parties, but no settlement has been reached yet.

iii Idea protection

There has been a significant recent Supreme Court decision on idea protection. The issue was that the advertiser partially used the advertisement agency's creative content without paying the agency, having entered into a service agreement and receiving the service product in advance. The Supreme Court found that the advertiser's act was an 'act of stealing another person's technical or business ideas with economic value in the course of transaction negotiations such as business proposals', which is stipulated as an unfair competition practice under the Unfair Competition Prevention and Trade Secret Protection Act. This is the very first case in which the Supreme Court has invoked this provision.

iv Venues and resolutions

Petitioners generally seek damages and often challenge the validity of contracts in disputes involving the media and entertainment industry. In cases where copyright or trademark infringement is recognised, the infringing party may be held criminally liable. Although parties mainly seek help from the court system in situations of this kind, for minor disputes with consumers, another possible venue is the Dispute Resolution Committee of the Korea Creative Content Agency. If the issues are deemed confidential, the Korean Commercial Arbitration Board (KCAB) is another preferred venue. Parties have increasingly been using these two options in recent years; a decision from the KCAB is as effective as a court decision.

For entertainment work products, such as films or recordings, taking preventive measures is crucial because the timing of its release is often vital to the success of a product. As such, preliminary injunctions are frequently sought and during the development of the case for an injunction the merits of the case are often reviewed thoroughly, which often leads to settlement of the dispute.

In 2020, there was a significant preliminary injunction case involving a film titled Time to Hunt. As the covid-19 pandemic has rendered theatrical exhibition practically impossible, the Korean distributor of Time to Hunt intended to terminate the existing distribution agreement with the agency in charge of overseas distribution and enter into an agreement with Netflix to release the film. The agency filed an application for a preliminary injunction against the Korean distributor and the court granted the preliminary injunction by invalidating the termination. Ultimately, the parties settled and the movie was released on Netflix.

Year in review

Plagiarism has been one of the most discussed issues in the entertainment industry recently. For example, an entertainment agency was criticised for producing music videos, stage design and album teaser photos for its K-pop idol groups that were very similar to the copyrighted works of foreign artists. In addition, one broadcasting company was criticised for using the basic settings, stories and other formats of a popular Naver webtoon for its new TV show. One domestic game company even filed a lawsuit seeking an injunction and damages on the grounds that the defendant copied the profit structure, unique system and design of the claimant's game.

Until recently, several business operators in Korea had attempted to release games through blockchain technology. However, the Game Rating and Administration Committee (GRAC) has rescinded ratings or refused to issue new ratings with respect to games that (1) use cryptocurrencies (e.g., cryptocurrencies issued or delivered to the game users by the exchanges within the game system or issued as a reward for using the game or for certain gift events) or (2) allow game items to be converted into tradable non-fungible tokens. Thus, neither domestic nor foreign game companies can offer such games in Korea at present. Companies are constantly requesting clearer rating standards for blockchain games, but the GRAC has yet to provide any clear standards.

Again, in 2021, one of the important issues was the network fee dispute between CPs and telecommunications companies. Netflix filed a court action against SK Broadband in 2020, claiming that there was no obligation to pay network fees. However, in June 2021, the Seoul Central District Court ruled that Netflix should pay network usage fees to SK Broadband for 'connecting' to the latter's internet network. This is the world's first known court ruling that a CP should pay fees of a certain amount to a telecommunications company for using its internet network. As Netflix has appealed, however, the final result remains to be determined. In addition, there is legislation pending that seeks to regulate foreign CPs' non-payment of network fees.

Outlook

For 2022, we expect active discussions on game and Metaverse services.

Earlier this year, there was controversy over large domestic game companies not accurately disclosing the probability rates that relate to the randomised items obtained in loot boxes. Some users have filed civil suits against game companies and the KFTC has an investigation under way. Previously, loot boxes have been subject to self-regulation, but because of the level of controversy, National Assembly members have proposed several bills to define loot boxes and impose disclosure requirements, whereas industry participants have come up with enhanced self-regulation policies and claim that these policies are sufficient.

The abolishment of mandatory gaming shutdowns will be a hot issue. Since 2011, Korea has had a mandatory shutdown system in place, blocking juveniles under the age of 16 from accessing games between 12 midnight and 6am. The decision by Microsoft to block juveniles under the age of 18 from accessing its game Minecraft sparked a controversy about abolition of the mandatory shutdown system, as this game is popular among children. In response, the relevant government authorities have officially announced that the mandatory shutdown system is to be abolished and they will support the National Assembly in amending the law.

In addition, the application of gaming regulations to Metaverse services will be debated. Although some Metaverse services have been rated as social networking services in Korea, many have instead been rated as games and there is controversy over whether certain other services should also be rated as games.

Finally, there have also been increased demands to regulate hate speech, stalking and illegal distribution of adult materials in virtual reality environments.

Footnotes

1 Hyun Ho Eun is a senior attorney, Jung-Chull Lee is a senior foreign attorney and Dukjoong Na is a junior attorney at Kim & Chang.

2 'Webtoon' is a combination of the words 'web' and 'cartoon', and refers to cartoons published on web media platforms.

3 Apple added a channel designated for Korean users to its podcast service, and Spotify decided to launch its music service in Korea in 2021.

4 The deal is valued at approximately US$1.05 billion (https://www.reuters.com/article/hybe-ma-ithaca- idUSL4N2LV13C).

5 Constitutional Court decision, 29 January 2004, 2001 Heon-Ma 894.

6 Uijeongbu District Court, 20 October 2011, 2011 Na 6848.

7 Information Subject to Non-Disclosure, Article 9(1) of Official Information Disclosure Act, Korea Legislation Research Institute (https://elaw.klri.re.kr/kor_service/lawView.do?hseq=47127&lang=ENG).

8 Supreme Court decision, 23 August 1996, 94 Do 3191.

9 Constitutional Court decision, 24 June 1999, 97 Heon-Ma 265; Supreme Court decision, 27 February 2004, 2001 Da 53387.

10 In particular, the right to claim additional remuneration guarantees the author's right to claim additional remuneration in the event of any significant imbalance in profit after the transfer of the author's economic rights, where the imbalance could not have been predicted at the time of transfer.

11 Naver transferred its V-LIVE platform business to HYBE for consideration in the form of a 49 per cent stake in Werverse. Following the transaction, the parties will operate the fan community platform jointly.

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