Virtual Mergers and Acquisitions Legal Guide: Key Points of the Virtual Mergers and Acquisitions Promotion Act and Enforcement Decree

On August 28, 2024, the Virtual Convergence Industry Promotion Act came into effect, along with the enforcement decree and enforcement rules that detail and present operational policies. With the Virtual Convergence Industry Promotion Act in effect, advanced technology industries such as the metaverse have officially entered the regulatory framework. This law legally defines the virtual convergence world (metaverse) for the first time in the world and focuses on establishing a legal foundation for the industry's sustained growth. Song Do-young, managing partner of Law firm Veat, participated in the drafting of the Virtual Convergence Industry Promotion Act and played a key role in designing the bill’s intent and direction from the outset.

The Virtual Convergence Industry Promotion Act
A law enacted to systematically support industries utilizing the metaverse and virtual convergence technology, and to promote innovation and growth.

Background for the Virtual Convergence Industry Promotion Act

• The Rise of the Metaverse and Digital Transformation

     As virtual reality (VR), augmented reality (AR), and mixed reality (MR) virtual convergence technologies emerge as the center of socio-economic activities, a legal system to systematically support and protect them has become necessary.

• Limitations of Existing Laws

     Existing laws had difficulty adequately encompassing the rapid development of digital technology, and there was particular legal uncertainty regarding new technologies such as the metaverse.

• Securing International Competitiveness

     South Korea needed to establish a legal foundation to become a global leader in virtual convergence technology and the metaverse.

Virtual Convergence Technology

"Refers to technology that expands a user's five senses to a virtual space or mixes them with a physical space to enable interaction between humans and digital information." This technology includes virtual reality (VR), augmented reality (AR), and mixed reality (MR), and is a key component of the virtual convergence world (metaverse) where various social, economic, and cultural activities are carried out based on this technology. It supports technological innovation and industrial convergence.

Examples of Virtual Convergence Technology Utilization by Industry

• Education: VR-based virtual classrooms, AR-enhanced science experiment simulations.
• Medical: Rehabilitation therapy using virtual reality, remote surgery.
• Manufacturing: Production line simulations using digital twin technology.
• Entertainment: Virtual concerts in the metaverse, immersive experiences in games.

Key Content of the Virtual Convergence Industry Promotion Act (Implementing Elements)

• Allow First/Post-Regulation Principle

     This approach allows innovative technologies to enter the market quickly without being constrained by existing regulations, and applies regulations when problems arise. The enforcement decree of the Virtual Convergence Industry Promotion Act clarifies the application procedure of the allow-first/post-regulation principle, and the enforcement rules provide specific criteria for post-management by technology.

• Temporary Guideline System

     If the scope of application of a law is unclear, a virtual convergence service provider can receive guidelines for launching and using services through temporary guidelines.

• Self-Regulatory System Centered on the Private Sector

    Encourages industrial growth and improves management efficiency by having companies comply with regulations themselves. The enforcement rules of the Virtual Convergence Industry Promotion Act provide for self-regulation and provide for a basis for operating businesses. Furthermore, it is necessary to actively utilize the temporary guidelines provided in the enforcement decree and enforcement rules of the Virtual Convergence Industry Promotion Act to resolve legal uncertainties in the early stages and operate businesses based on self-regulation. Also, in the metaverse environment, massive amounts of personal information, such as user behavior data and location information, are processed, so companies must strictly comply with laws related to personal information management, such as the Personal Information Protection Act. In particular, it is necessary to establish appropriate technical and administrative measures to ensure the safety of all users, including children and adolescents, and establish clear policies for user rights protection.

Expected Effects of the Virtual Convergence Industry Promotion Act Enforcement Decree and Enforcement Rules

The enforcement decree and enforcement rules of the Virtual Convergence Industry Promotion Act legally define the metaverse for the first time in the world and provide opportunities for companies by facilitating rapid technology commercialization and minimizing regulatory risks. In particular, the sandbox system allows new technologies to enter the market quickly beyond existing regulations, and standardization between technologies and data protection regulations contribute to stable growth. Based on this legal system, companies can receive financial and administrative support from the government and local governments to accelerate growth. The metaverse will create new business models by converging with industries such as education, medicine, finance, and games, and will contribute to the strengthening of competitiveness of domestic companies in the global market. Collaboration between the government and the private sector will also promote the activation of the industry ecosystem and technological innovation, leading to the overall development of the virtual convergence industry.

Law firm Veat, with managing partner Song Do-young, who has accumulated expertise by participating in the drafting process from the Virtual Convergence Economy Development Strategy announced in 2020 to the drafting of the Virtual Convergence Industry Promotion Act, provides professional advice to virtual convergence-related companies based on the enforcement decree and enforcement rules of the Virtual Convergence Industry Promotion Act, so that they can secure legal stability and develop innovative businesses. The firm provides systematic advice, utilization of temporary guidelines, introduction of self-regulation, and establishment of user protection policies to help companies develop innovative businesses from the early stages.

If you have any questions regarding the Virtual Convergence Industry Promotion Act and metaverse-related matters, please do not hesitate to contact Law firm Veat.

Thank you.
Law firm Veat