The Korea Fair Trade Commission announced on the 9th a plan to require merger review when one corporation tries to poach another corporation's core personnel wholesale. The measure is intended to prevent global big tech corporations from effectively acquiring advanced technology startups under the guise of scouting talent and attempting to evade review. Overseas, this has already become an issue under the term "acqui-hire," a portmanteau of acquisition and hire.
◇ Treat as a "business combination" if there is movement of personnel central to the business
On this day, the Korea Fair Trade Commission (FTC) issued a notice of administrative pre-announcement for a revision to the "Guidelines on Reporting Business Combinations." A new rule was added related to "transfer of business" among the five types of business combinations. It states, "If organized personnel and the technology and knowledge they possess perform core functions of a corporation's business activities, they are included as components of the business." Accordingly, if core personnel move to another company, it will be regarded as a transfer of business and be subject to business combination review.
According to this, for example, if an entire developer team responsible for program development at an artificial intelligence (AI) startup is scouted by another corporation, it could be subject to merger review. This is because if the corporation that scouted the personnel uses their technology and knowledge to conduct the program development and sales business previously done by the AI startup, it can be viewed as a transfer of business.
However, not all scouting of core personnel is subject to merger review. It becomes subject to a merger review filing only when the consideration for waiving rights related to the transferring personnel or the consideration for licenses to intellectual property necessary for business activities is 600 billion won or more.
◇ "Strengthening response to new types of business combinations by global big tech corporations"
Scouting core personnel wholesale has already been an issue overseas under "acqui-hire."
Microsoft in Mar. 2024 hired 70 people, including the founders and employees of Inflection, an artificial intelligence (AI) chatbot development startup. At the same time, it paid $650 million (about 870.5 billion won) to Inflection in exchange for a license granting the right to resell AI technology.
The U.K. Competition and Markets Authority (CMA) and Germany's Federal Cartel Office (FCO) investigated whether this effectively constituted a corporate acquisition. They ultimately determined it would not harm market competition to a degree warranting action, so there were no competition law sanctions.
A Korea Fair Trade Commission (FTC) official said, "This revision to the reporting guidelines was carried out based on close information exchange with overseas competition authorities, including the European Union, Germany and the United Kingdom," adding, "International cooperation and responses to new types of business combinations by global big tech corporations will be further strengthened going forward."