[Exclusive] "Poaching Key Talent, Should It Be Seen as M&A?" Fair Trade Commission to Investigate

Major Countries Such as the UK Conduct Merger Reviews on Talent Recruitment
US FTC Also Examines Amazon's Hiring Practices

The Korea Fair Trade Commission (KFTC) is examining whether the new trend of strengthening corporate competitiveness by recruiting key talent can be considered a subject of merger review. This is because major overseas competition authorities view the expansion of corporate competitiveness through the hiring of superstar talent from startups as a form of merger, and proceed with approval procedures by assessing competition restrictions.

According to related ministries on the 25th, the KFTC is reviewing whether the act of recruiting key talent can also be considered a subject of merger review. Under the current Fair Trade Act, the KFTC only initiates merger reviews after receiving reports on limited types of corporate combinations such as ▲stock acquisition ▲holding executive positions in other companies ▲business transfers. Recruiting key talent is not currently subject to reporting, but the commission is comprehensively examining whether this should be added in the future.

Already, major competition authorities in other countries have recently regarded the hiring of key startup talent by major tech companies in the artificial intelligence (AI) sector as a merger and have begun reviewing competition restrictions. The UK Competition and Markets Authority (CMA) initiated a review last year after Microsoft (MS) hired key team members, including the former CEO of the AI startup Inflection. MS formed a new team within the company centered around engineers hired from Inflection. However, the CMA concluded that such hiring did not restrict competition in the market and approved the merger. Since Inflection is a small startup with limited influence in the AI market, the CMA judged that the merger would have a limited impact on market competition.

The U.S. Federal Trade Commission (FTC) is also known to have been reviewing Amazon’s hiring of the CEO and researchers from the AI startup Adept since last year. Amazon established a new internal organization to develop a new AI language model, forming a team composed of former Adept employees. A competition law expert explained, "Unlike Korea, the U.S. and UK competition authorities do not have a strictly enumerated list of merger review subjects. If an action can affect market competition, it can be immediately included in the review process, which differs from Korea." On the other hand, since the acts subject to merger review under Korea’s Fair Trade Act are limited and enumerated, an amendment to the Fair Trade Act will likely be necessary to initiate such reviews.

However, even if the KFTC decides to include the recruitment of key talent as a subject of merger reporting, determining the extent of competition restriction caused by the merger remains another challenge. It is not easy to establish criteria for proving market competition restrictions due to talent recruitment simply by changes in sales figures or similar metrics. Additionally, since this trend is not yet prominent in Korea, the KFTC plans to focus first on understanding the new industry trends and observing how competition authorities in other countries are intervening. Meanwhile, the Korea Development Institute (KDI), a government-funded research institute, is also recently examining the intervention trends of major competition authorities regarding this hiring trend.