European Commission Opens New Front in Illumina-Grail Case by Investigating Possible Violation of Standstill Obligation under EU Merger Regulation
On 20 August 2021, the European Commission (the Commission) announced that it would investigate whether Illumina’s decision, made public on 18 August 2021, to acquire Grail pending the Commission’s review of that transaction under Regulation 139/2004 on the control of concentrations between undertakings (the Merger Regulation) is in breach of the “standstill obligation” provided for by Article 7, Merger Regulation (see, attached press release). Pursuant to this provision, a concentration notifiable under the Merger Regulation must not be implemented until after the Commission has approved it. “Implementing” a concentration implies taking steps that in whole or in part contribute to a change of control over the targeted business. In this case, Illumina insisted that it would keep Grail separate as an independent unit during the Commission’s review. However, it is doubtful whether that explanation will satisfy the Commission.
Illumina’s move to defy the Commission’s merger review process, while highly unusual, does not entirely come as a surprise. The Commission had started to review the acquisition of Grail by Illumina, even though the transaction did not meet any of the thresholds for review under the Merger Regulation or national merger control laws (see, Van Bael & Bellis Life Sciences News & Insights of 22 April 2021 and 7 May 2021). It relied on what it maintains are the broad powers conferred on it by Article 22, Merger Regulation. The Commission is concerned that large companies in the digital economy and the pharmaceutical industry are conducting “killer acquisitions” of new entrants or smaller competitors that fall below the revenue thresholds for merger review. Several national competition authorities share that concern. At stake is the acquisition of Grail, a healthcare company focused on the early detection of multiple cancers, by Illumina, the self-described global leader in DNA sequencing.
Illumina does not currently have business in Europe and considers that the Commission’s decision to apply its merger control rules to the transaction amounts to regulatory overreach. It accordingly challenged the Commission’s jurisdiction before the General Court of the European Union. This case is still pending.