Illumina Wins EU Court Battle, Dodges Fine, but Grail Deal Already Void

The European Union’s highest court ruled in favor of Illumina, stating that the European Commission (EC) lacked authority to review its acquisition of liquid biopsy company Grail. This decision saves Illumina from paying a $475 million fine. However, Illumina had already spun off Grail as a standalone company to resolve antitrust concerns. The court found that regulators had overstepped their jurisdiction in challenging the deal. As a result, while Illumina no longer owns Grail, it avoids the substantial financial penalty.

Court Rules Illumina-Grail Acquisition Should Never Have Been Reviewed

For more than four years, Illumina maintained that European regulators’ opposition to its acquisition of liquid biopsy company Grail had no legal basis. Now, Europe’s highest court agrees. Though Illumina has already spun off Grail, the ruling spares the company from a record fine.

The €432 million fine, roughly $476 million, represented about 10% of Illumina’s annual revenue. It was the maximum penalty the EC can impose under EU merger law. The commission issued the fine because Illumina completed the Grail acquisition before regulators finished their review, in breach of EU merger control rules. However, on Tuesday the Court of Justice of the EU ruled that the deal should never have been reviewed in the first place.

“Today’s judgment confirms Illumina’s longstanding view that the European Commission exceeded its authority by asserting jurisdiction over this merger,” Illumina said in a short statement.

Grail’s Lack of European Revenue Exempts Illumina Deal from EU Commission Review

Gene-sequencing leader Illumina, headquartered in San Diego, operates on a global scale. Grail, known for its multi-cancer early detection test, developed and commercialized Galleri, which analyzes blood samples for cancer signs. Currently, Galleri is only available for sale in the U.S.

EU regulations allow the EC to review business deals that lack a “European dimension” if they impact trade or competition within the EU. However, the high court determined that the Commission misapplied this rule. Grail does not generate revenue in Europe and does not meet the criteria for review. Consequently, the court ruled that the absence of a European dimension means the deal is outside the Commission’s regulatory scope.

Furthermore, the court’s ruling indicates that the commission’s decision to examine the proposed Grail acquisition was based on requests from six European Union member states. However, the court found this decision to be flawed because the national merger control laws of those member states do not grant them the authority to review such a business deal. In other words, the member states who requested the examination did not have the legal grounds under their own national laws to review or challenge the acquisition. Therefore, the commission’s action to consider their requests was incorrect.

Illumina Spins Off Grail, Keeps 14.5% Stake as FTC Drops $8B Antitrust Case

The Court of Justice’s decision cancels the EC’s fine. The ruling also requires the EC, as the losing party, to cover the court costs for Illumina and Grail. In a statement following the ruling, EC Executive Vice-President Margrethe Vestager said the regulator will closely examine the court’s judgment and its potential effects. However, she noted that even mergers involving companies with low turnover (revenue) can raise anti-competitive concerns. Vestager emphasized the need to continue reviewing deals that impact competition in Europe, citing a 2021 commission evaluation that found smaller mergers can still harm market competition.

“A company with limited turnover may still play a significant competitive role on the market, as a start-up with significant potential, or as an important innovator,” Vestager said. She added that so-called “killer acquisitions” can eliminate small, promising companies as potential competitors. Large corporations often acquire these smaller companies, which should be protected from the risk of elimination.

Illumina’s $8 billion acquisition of Grail faced antitrust litigation in both the U.S. and Europe. The Federal Trade Commission (FTC) raised concerns that Illumina, as a supplier of gene-sequencing equipment and reagents used in liquid biopsy, could control pricing for Grail’s competitors. Last year, Illumina chose to end further litigation and agreed to divest Grail. In June, Grail was spun out as an independent, publicly traded company. As a result, the FTC dismissed its case against Illumina and Grail in August. Illumina now holds a 14.5% stake in Grail and remains a supplier to the company.

Author

Bernice Lottering