South Korea to curb 'acqui-hires' to protect tech startups

The Fair Trade Commission (KFTC) is taking a crucial step to safeguard South Korea's burgeoning tech ecosystem by proposing to regulate 'acqui-hires.' This strategy, where large corporations poach key talent from smaller, innovative companies, effectively amounts to an acquisition without triggering traditional merger reviews. KFTC Chairman Joo Sung-wook announced plans to include such practices under corporate merger scrutiny by the end of the year, a move that Hankyoreh views as essential for fostering a competitive market.

“

We plan to clearly include new types of corporate combinations, such as acqui-hires, which bypass corporate combination reviews, as subjects for corporate combination reporting and review.

Currently, South Korean law defines corporate mergers narrowly, focusing on stock acquisition, executive appointments, mergers, business sales, and company formation. This leaves a loophole for 'acqui-hires,' a tactic increasingly employed by global tech giants. By absorbing a smaller company's core personnel, these giants can neutralize potential future competitors and consolidate their market dominance, often in nascent fields like artificial intelligence and semiconductors. The KFTC's initiative directly addresses this by broadening the definition of a reportable merger to encompass significant talent transfers that yield similar market effects.

Chairman Joo emphasized that this regulatory enhancement is designed to prevent South Korean venture firms, potentially the next 'K-Nvidia,' from becoming casualties of aggressive M&A tactics. The KFTC's research and upcoming revision of its guidelines aim to ensure that such talent-driven acquisitions are subject to the same rigorous review as traditional mergers. This proactive stance is critical for nurturing domestic innovation and preventing the stifling of competition before it can fully develop.

“

We intend to strengthen corporate combination reviews to prevent our venture companies from becoming victims of large corporations' aggressive and hostile corporate combination strategies.

While some might anticipate potential trade friction with other nations over these new regulations, Chairman Joo expressed confidence that this is unlikely. He noted that similar considerations are being discussed in the European Union, the UK, and Japan, suggesting a global trend towards addressing these evolving M&A practices. Hankyoreh supports this initiative, framing it as a necessary measure to protect the dynamism of Korea's technology sector and ensure a level playing field for its innovative companies.

“

This is because other major countries such as the European Union (EU), the United Kingdom, and Japan are also considering introducing similar measures, so we do not think it will escalate into a trade issue.