European Commission Issues Record-Breaking EUR 432 Million Gun Jumping Fine on Illumina for Acquisition of Grail
- 13/07/2023
- News
On 12 July 2023, the European Commission (the Commission) imposed its largest gun jumping fine ever on Illumina because that firm had closed its acquisition of Grail while the Commission’s merger control review was still pending (see, attached Commission press release). Due to what the Commission considered to be Illumina’s blatant and intentional defiance of the mandatory standstill provision of the EU Merger Regulation (EUMR), the Commission imposed the maximum fine allowed under the competition rules – 10% of Illumina’s global annual turnover. The Commission also fined Grail a symbolic fine of EUR 1,000, marking the first time a gun jumping fine was imposed on the target of an acquisition.
Although the Illumina/Grail case came before the Commission under unusual jurisdictional circumstances, the hefty fine is no surprise. The Commission accepted jurisdiction to review the Illumina/Grail case on referral from several EU Member States under a novel application of Article 22 EUMR (a decision which Illumina unsuccessfully challenged before the General Court (see, Van Bael & Bellis Life Sciences News and Insights of 14 July 2022)). Illumina begrudgingly complied with the Commission’s instruction to notify the transaction at EU level. However, while the deal was still under review, Illumina publicly announced its intention to close without waiting for the Commission’s approval, and then proceeded to do so. The Commission, which later described this disregard for its merger control procedures as “unprecedented,” immediately launched a gun jumping investigation (see, Van Bael & Bellis Life Sciences News and Insights of 24 August 2021).
In concluding this investigation by imposing the maximum fine allowed under the EUMR, the Commission is sending a clear signal that it will not tolerate violations of EU merger control rules, especially ones as flagrant as in this case. In particular, the Commission observed that Illumina appeared to have strategically weighed the risk of non-compliance against the potential commercial advantages of closing the deal (even if the acquisition were later to be prohibited) and the break-up fee that would result if it failed to close. The Commission indicated that a high fine is warranted to deter such deliberate gamesmanship. It seems that Illumina set aside such a sum early on in expectation of potentially receiving a high fine, thus it is questionable whether even a record-breaking penalty will deter future would-be gun jumpers under the same commercial circumstances.
This is the first time the Commission imposed the full statutorily allowed amount for a gun jumping fine. Before Illumina/Grail, the highest gun jumping fine the Commission had imposed was EUR 124.5 million on Altice for its acquisition of PT Portugal (see, VBB on Competition Law, Vol 2021, No. 8&9). Even though the Altice fine appeared staggeringly high at the time, it amounted to only roughly 1% of Altice’s considerable annual turnover. In this case, it appears that the Commission could find no mitigating factors to warrant a lower fine, and indeed appeared regretful that it was unable to impose more than the 10% cap.
Finally, this is also the first time the Commission issued a gun jumping fine against a target company. In imposing a symbolic fine, the Commission noted that Grail was aware of, and indeed played an active role in, the infringement.
