Preventing Talent Raids to Evade Merger Reviews... KFTC Announces Draft Revision of Guidelines for Reporting Business Combinations

Core Structured Personnel Also Defined as Business Transfer
Actual Value to Be Aggregated to Block Split-Contract Loopholes

As global Big Tech companies increasingly acquire promising artificial intelligence (AI) startups not through equity stakes, but by absorbing their key research and development (R&D) personnel in so-called “acqui-hire” deals, the Korea Fair Trade Commission (KFTC) has begun efforts to update its regulatory framework.

The KFTC announced on September 9 that it had released a draft revision to its “Guidelines for Reporting Business Combinations” for public consultation. The comment period will run for about 20 days, from the 9th to the 30th of this month. This measure aims to prevent violations of reporting obligations by clarifying that acqui-hire transactions, which are spreading in advanced technology sectors, are subject to business combination review and reporting requirements under current fair trade laws.

According to the revision, if in new industries, structured teams and the technology or expertise possessed by such personnel constitute a core function of business activities, these personnel will be expressly recognized under fair trade law as a component of “business.” In addition, new standards will specify that if core personnel move to the acquiring company, allowing it to conduct the same business activities previously carried out by the seller or causing a significant decrease in the seller’s revenue, this will be considered as a transfer of a “substantial part of the business.”

The KFTC also closed a loophole that allowed Big Tech companies to split contracts to avoid business combination review thresholds. The previous regulations largely focused on payment amounts specified in a single contract, making it difficult for authorities to detect deals split across a variety of terms, such as waivers of rights related to personnel migration or intellectual property (IP) licenses. The revised guideline now explicitly states that, regardless of how the payment is described, all monetary or property-like economic benefits provided to the seller must be included in the calculation of the acquisition amount.

Moreover, the standard for determining the “performance of obligations”—which triggers the business combination reporting requirement—has been clarified to state that, even before full payment is made, the reporting obligation arises when the structured personnel have moved and the transferor company suspends its original business operations.

The KFTC plans to review comments collected during the public consultation period and to finalize and implement the revised guideline following deliberation and resolution by the full committee.

This content was produced with the assistance of AI translation services.