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This blog post is an updated and shortened version of an article first published in Competition Policy International.
Competition authorities worldwide have shown an increasing interest in labour markets in recent years. Historically, they have focused on three anti-competitive practices in labour markets: no-poach agreements, wage-fixing agreements, and information sharing. In the last few years, however, there has been increasing attention on “acqui-hiring” – the practice of acquiring companies with the primary aim of hiring their employees, or outright hires of multiple employees from the same firm. Competition authorities have recently considered the question of whether the latter form of acqui-hiring falls under merger control rules.
UK regulators are already tightening scrutiny in this area - read our analysis of how the bar for clearance is rising in UK merger clearance: a higher hurdle.
Microsoft’s 2024 deal with Inflection AI1 in which it hired much of Inflection AI’s team, including co-founders Mustafa Suleyman and Karén Simonyan, faced regulatory scrutiny from the US FTC and UK CMA. Similar deals (e.g. between Amazon and Adept AI,2 and Google and Character AI)3 also attracted scrutiny from the FTC and DOJ. Most recently, Meta’s $14.3bn investment in Scale AI – which will see Scale AI’s founder and CEO, Alexandr Wang, and other Scale AI employees join Meta – has also been characterised as an acqui-hire.4
This blog post discusses the role of competition law in relation to acqui-hires, the tools available to competition authorities and policy-makers, and the implications for businesses.
Acqui-hiring has been a long-time practice in the tech industry. For years, leading technology companies in Silicon Valley have been buying start-up companies with the primary intention of obtaining experience, expertise, and engineering talent, not necessarily an existing product or production assets. Mark Zuckerberg once acknowledged: “Facebook has not once bought a company for the company itself. We buy companies to get excellent people.”5
Competition authorities have raised several concerns related to acqui-hires – whether structured as a simple hire or an acquisition – which may point to potential gaps in the regulatory framework.
For a wider view of how competition authorities are responding to fast-changing markets, see APAC competition policy in 2025: when geopolitics meets antitrust.
First, it may be difficult to distinguish between the potential pro-competitive and anti-competitive effects of acqui-hires. Acqui-hires can be pro-competitive by allowing firms to bring in highly skilled employees, enhancing the acquiring company’s innovation capabilities. Firms can use acqui-hires to enter new markets quickly or boost their competitive position in existing ones, potentially increasing competition in those markets. But acqui-hires can also have anti-competitive effects, such as removing potential or nascent competitors from the market. Large firms with substantial resources can also engage in acqui-hires to hoard talent, making it difficult for new entrants to access the skilled labour necessary to compete effectively.
Second, acqui-hires structured as simple hires may fall outside of merger control rules, even in jurisdictions with relatively expansive merger control powers. For example, after CTS Eventim’s planned acquisition of Four Artists was prohibited by the German Federal Cartel Office (“FCO”) in 2017, the manager and more than half of the staff left Four Artists to join a new agency owned by CTS Eventim. The FCO said it was “unfortunate for competition that the effect of the prohibition order [...] was apparently able to be circumvented to some extent”. FCO President Andreas Mundt described the situation as “annoying” but claimed the FCO could not act as such hiring events did not fall under the merger regime.6 Similar concerns were raised regarding Microsoft’s hiring of Inflection AI’s staff,7 although the UK CMA found that it had jurisdiction to review the deal.8
Third, even acqui-hires structured as acquisitions may fall below merger control thresholds. Competition authorities are concerned that such deals may fly under the radar, allowing firms to acquire (potential) competitors to the detriment of consumers. In 2021, the FTC presented findings from its inquiry into past acquisitions by the largest technology platforms – Alphabet, Amazon, Apple, Meta (then Facebook), and Microsoft – that did not require reporting to the DOJ and FTC. The inquiry analysed 819 non-reportable transactions, including 101 “Hiring Events” (defined as instances where the company hired 25 percent or more non-sales employees of another entity within a one-year period).9 Then-FTC Chair Lina Khan said that the inquiry “captures the extent to which these firms have devoted tremendous resources to acquiring start-ups, patent portfolios, and entire teams of technologists—and how they were able to do so largely outside of [the FTC’s] purview.”10 Former FTC Commissioner Rohit Chopra called acqui-hires “a common way for dominant firms to take over potential innovators and competitors.”11
Finally, it may be difficult to distinguish between acqui-hires, where the primary aim is to hire talent, and killer acquisitions, where the primary aim is to prevent a competitor's potentially disruptive innovation or product from entering the market. Following an acqui-hire, acquiring firms often shutter acquired projects and redeploy the hired engineers to work on other projects, given their primary motivation is to hire talent and expertise. From the outside, it may therefore be difficult to determine the motivation for shuttering projects – whether it is a killer acquisition or simply an acqui-hire focused on talent acquisition. Indeed, both motivations could also be complementary – a firm may acquire another to eliminate a potential competitor and secure top engineering talent at the same time. On the other hand, acquired projects could also be shuttered for other reasons, e.g. due to commercial or technical post-acquisition failure.
Competition authorities should be cautious of intervening in acqui-hires for three reasons.
First, intervention can limit labour mobility and the right of employees to choose where to work. To date, competition authorities have focused their efforts on increasing competition in labour markets (e.g. by enforcing against no-poach and wage-fixing agreements). Increasing scrutiny of acqui-hires – or in the extreme, prohibiting acqui-hires – goes against these efforts by preventing employees from changing employers. Acqui-hires, and employees switching jobs more generally, can reflect a competitive labour market – employees choose to switch employers in response to greater perceived professional rewards. Acquiring companies often structure acqui-hires by allocating the bulk of the purchase price to employee agreements (e.g. in the form of future stock grants and options) because the employees are where the value of the acquisition lies, not because they wish to “evade” merger control.12
Second, acqui-hires play an important role in maintaining a dynamic start-up and innovation ecosystem, by acting as a monetisation mechanism that induces venture capital investment and promotes start-up entry. By providing an exit for (struggling) start-ups, acqui-hires encourage risk-taking and therefore enable a cycle of innovation and exit. They also allow larger firms to access the specialised innovation capabilities and talent of smaller firms. For example, before Android was acquired by Google in 2005, it employed fewer than 10 people and had no actual product, and was close to shutting down entirely at one point.13 Android is now the world’s most widely used operating system for mobile devices, thanks to significant investment by Google following the acquisition.
Third, the fact that acqui-hires, whether structured as acquisitions or simple hires, do not fall under merger control rules should not be seen as a circumvention of merger control. There are advantages to structuring acqui-hires as acquisitions rather than simple hires, for both the acquiring firm and hired employees.14 This is particularly true in the technology industry, where acquisitions allow software engineers and start-up entrepreneurs to claim that their venture resulted in a successful exit. Structuring an acqui-hire as an acquisition also means that the acquired firm’s investors – and not just its employees – are compensated. Entrepreneurs and acquirers may wish to end the current venture on good terms that properly reflect the value of the initial investment in order to maintain good relationships with investors in the original venture.15 Acquiring firms may also prefer acquisitions as this allows them to hire in one go, avoiding the need to negotiate with individual employees. Acquisitions may be the most efficient way of hiring an existing, well-functioning team, as opposed to trying to assemble such a team from scratch.
That said, there are genuine concerns about companies structuring non-acqui-hire acquisitions in a way to evade merger control where the real aim is the acquisition of a business rather than simply to hire employees. This is where competition law can play a role. Competition authorities have raised concerns about “killer acquisitions”, particularly in innovative sectors such as pharmaceuticals and technology. This has led to calls to re-examine existing merger reporting requirements,16 reform merger control regimes (e.g. in Australia), and use new or existing merger control laws to review smaller transactions (e.g. at least 15 EU Member States are expected to introduce or enhance ‘call-in powers’ in 2025, which would allow them to review below-threshold transactions).17
Given these concerns, it is right that competition authorities continue to examine transactions to determine whether they are acqui-hires (aimed at hiring talent) or anti-competitive ‘killer acquisitions’. For example, competition authorities can examine the start-ups’ projects and products to check for overlaps with the acquiring firm’s (planned) products. They can also assess how innovative and potentially disruptive the start-up’s projects are, analyse the financial terms of the deal (e.g. if the purchase price is higher than what might be expected for hiring talent, this might indicate that the acquisition price includes a premium for eliminating a competitive threat), and examine internal documents to assess the intent of the acquisition.
At the same time, tougher merger control may have the unintended effect of encouraging firms to structure acqui-hires as simple hires rather than acquisitions due to the higher regulatory burden attached to acquisitions. Given that there are good reasons for structuring acqui-hires as acquisitions, as explained above, companies that seek to hire employees will need to balance these considerations when choosing between acquisitions and simple hires.
Acqui-hires, which are about hiring talent, play a critical role in sustaining the start-up ecosystem. They support the continued influx of venture capital by providing viable exit strategies for start-ups, thereby encouraging innovation and risk-taking. Competition authorities should be cautious in their scrutiny of acqui-hires to avoid unintended consequences. While there are concerns about "killer acquisitions" disguised as acqui-hires, genuine acqui-hires should not be unduly hindered as they are fundamental to a competitive labour market where employees have the freedom to choose their employers. Given these developments, businesses should expect greater scrutiny of acqui-hire deals, but be prepared to demonstrate the underlying hiring intent.
This blog post was written by Director Kah Loon Tham, Partner Karla Perca Lopez and Senior Adviser Stephen Kinsella. Kah Loon is a competition and regulatory economist who has experience advising clients on complex transactions, including European and UK Phase 2 mergers. Karla advises clients on a wide range of competition and regulatory issues, with a particular focus on digital regulation; she previously worked at the UK’s Competition and Markets Authority (CMA). Stephen is an experienced antitrust expert with over 40 years experience of advising clients on all aspects of EU competition law.
Footnotes:
1 Microsoft pays Inflection $650 mln in licensing deal while poaching top talents, source says
2 https://www.theverge.com/2024/7/1/24190060/amazon-adept-ai-acquisition-playbook-microsoft-inflection
3 Google hires top talent from startup Character.AI, signs licensing deal
4 Scale AI’s Alexandr Wang confirms departure for Meta as part of $14.3 billion deal
5 Mark Zuckerberg: 'We Buy Companies To Get Excellent People'
6 Unterhaltungskonzern Eventim: Expansion am Kartellamt vorbei | tagesschau.de
7 For example, then-EC Competition Commissioner Margrethe Vestager said the EC was keeping an eye on these developments, but “since it is not a merger it is not caught by merger rules.” She added that there could be concerns if “things become a trend.”
9 Non-HSR Reported Acquisitions by Select Technology Platforms, 2010–2019: An FTC Study
10 Remarks of Chair Lina M. Khan Regarding Non-HSR Reported Acquisitions by Select Technology Platforms
12 This is further reflected in the fact that non-competes entered into in connection with the acquisition of a business are routinely subjected to less scrutiny; even in U.S. states like California where non-competes are generally banned, there is a limited exception where restrictive covenants against founders and other key employees of the acquired team who own a material portion of the business are allowed. This indicates a recognition that such acqui-hires are about hiring talent and non-competes may be a valid way of protecting acquiring firms’ investments.
13 Google made its best acquisition nearly 17 years ago: Can you guess what it was?
14 John F. Coyle & Gregg D. Polsky, Acqui-hiring, 63 Duke Law Journal 281-346 (2013)
15 Ibid.
16 Remarks of Chair Lina M. Khan Regarding Non-HSR Reported Acquisitions by Select Technology Platforms