General Court Confirms European Commission's Power to Review Illumina-Grail Even Though EU and National Turnover Thresholds Are Not Reached
Yesterday, the General Court of the European Union came down on the side of the European Commission (the Commission) in that agency’s dispute with genomics firm Illumina and held that the Commission has jurisdiction to examine Illumina's acquisition of cancer detection test start-up Grail, even though the transaction escapes the European and Member State turnover thresholds for review (case T-227/21, Illumina, Inc. v. European Commission – see, attachment).
The Commission had decided to start a merger control procedure on 19 April 2021 at the request of France, which was later joined by Belgium, Greece, The Netherlands and European Economic Area countries Iceland and Norway (see, Van Bael & Bellis Life Sciences News and Insights of 22 April 2021). The Commission considered to have that ability pursuant to Article 22 of the EU Merger Regulation which confers the power on the Commission to review proposed acquisitions and mergers that would normally escape its jurisdiction because the transactions do not satisfy the turnover thresholds specified by the EU Merger Regulation (Article 22). The application of Article 22 is predicated on the double condition that the proposed transaction (i) will affect trade between Member States; and (ii) threatens to have a significant impact on competition in the countries that seek the Commission’s intervention.
For its part, the Commission was concerned that the combination of Illumina and Grail might, following the transaction, restrict access to or increase prices of next generation sequencers and reagents to the detriment of the competitors of Grail active in genomic cancer tests. The Commission regarded the transaction as emblematic for a trend in high-technology industries that witnesses innovative and commercially promising firms with negligible turnover being snapped up by industry leaders. In Article 22 guidance published in March 2021, the Commission had signalled its desire to keep tabs on these developments and intervene when necessary.
The General Court endorsed the Commission’s approach. Based on a close reading of Article 22, the General Court entertained no doubts regarding the scope of the Commission’s review powers under that provision. According to the General Court, the Commission is entitled to review any concentration referred to it by a Member State and satisfying the conditions enunciated in Article 22. This is regardless of the fact whether or not the Member State itself has the powers to review that concentration under its own national merger control rules. The General Court added that it is the EU Merger Regulation’s objective to permit effective control of all concentrations with significant effects on the structure of competition in the EU. The Member State referral mechanism provided for by Article 22 should be seen as a corrective tool that forms part and parcel of that objective in that it allows transactions which are likely to impede competition but will escape scrutiny under both EU and national merger control rules still to be brought under the watchful eye of the Commission.
Once the General Court had disposed of Illumina’s principal ground for appeal in relation to the scope of Article 22, it made short shrift of the other grounds that rely on various general principles of law. Additionally, the General Court dismissed the allegation that the referral request by the French government had been submitted out of time. While the General Court found that this request had been made within the time period foreseen by Article 22, it also considered, paradoxically and ironically, that the Commission had waited for an unreasonable period of time before it started the Article 22 mechanism after it had received a complaint. This consideration offered Illumina little solace, because the General Court found that the time which it took the Commission to act on the complaint had not deprived Illumina of the capacity to defend itself.
Illumina has already announced that it will appeal the General Court’s judgment to the Court of Justice of the European Union. The Commission, on the other hand, will continue its “gun jumping” procedure against Illumina following that firm’s decision to implement the transaction and not wait for the outcome of the Commission’s review (see, Van Bael & Bellis Life Sciences News and Insights of 24 August 2021). The Commission is also expected to resume its substantive in-depth examination of the transaction which is currently suspended.