#295 More or (Even) Less Certainty in EU Merger Control? The European Court of Justice Judgment in Illumina/GRAIL
Oct 14, 2024
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Nicole Kar, a partner specializing in EU antitrust law at Paul, Weiss, joins to unravel the European Court of Justice's ruling on the Illumina-GRAIL merger. They discuss the Commission's failed attempt to assert jurisdiction under Article 22 and its implications for future merger reviews. Kar highlights the uncertainty for companies regarding 'killer acquisitions' and the challenges created by revised regulations. The conversation also touches on legal certainty's importance in maintaining Europe's competitiveness, wrapped up with a humorous legal anecdote.
The European Court of Justice ruling limited the Commission's jurisdiction over below-threshold mergers, impacting future merger control practices in the EU.
The case underscores the tension between promoting competition and ensuring innovation in rapidly evolving markets such as healthcare and technology.
Deep dives
Background on Illumina and Grail
Illumina, a leading provider of DNA sequencing systems, aimed to enhance cancer detection through its acquisition of Grail, a company focused on non-invasive blood tests for multi-cancer early detection. The acquisition, valued at approximately $8 billion, faced scrutiny from both U.S. and European antitrust authorities due to fears of reduced competition in an emerging market. Both the U.S. Federal Trade Commission and the European Commission expressed concerns that Illumina's dominance might enable it to press down its competitors in diagnostics by restricting their access to essential sequencing technology. This raised essential questions about how to maintain competition in industries where innovation is crucial, particularly regarding healthcare advancements.
Antitrust Process and EU Jurisdiction
The investigation into the merger began after a referral from various competition authorities in Europe, despite Grail having no sales in the region at the time. The European Commission's acceptance of this referral was controversial, as it suggested that transactions below national turnover thresholds could be evaluated under Article 22 of the EU merger regulation. Ultimately, the Commission opened an in-depth review of the deal, leading to the prohibition of the acquisition based on potential harm to innovation and consumer choice. This case highlighted the procedural complexities involved in international merger reviews, particularly when navigating legal jurisdictions and ensuring comprehensive competition assessments.
European Court of Justice Ruling
The European Court of Justice subsequently overturned the General Court's concurrence with the Commission's decision on jurisdiction, emphasizing legal certainty within the EU merger framework. The court asserted that Article 22 should not facilitate expansive reviews beyond national thresholds without legislative change, thus elevating the need for formal procedures to amend merger regulations. It indicated that such significant alterations in jurisdiction should be the domain of the EU legislature, thereby reinforcing institutional balance between the Commission and member states. This ruling significantly adjourns the Commission's ability to leverage Article 22 as a broad tool for addressing previously unreported acquisitions, leading to the nullification of the policy change instituted in 2021.
Future Implications for Merger Control
The ECJ's decision prompts discussions about the future of merger control in the EU, specifically the potential revision of merger regulations to address perceived gaps in enforcement. There are various avenues for the Commission, including advocating for member states to enhance domestic merger regulations or to modify the EU regulatory structures to capture acquisitions previously deemed below threshold. Concerns persist about the lack of legal certainty and investor confidence in the merger process, particularly in light of rising scrutiny over potential 'killer acquisitions' in the tech sector. Thus, while the court ruling clarified regulatory boundaries, the path forward requires balancing robust antitrust enforcement with maintaining a conducive environment for innovation and investment.
The European Commission's attempt to claim jurisdiction under the EU merger rules over Illumina's acquisition of GRAIL ultimately resulted in a stinging court defeat for the regulator. But why did it lose and what will happen now to merger reviews of "below threshold" transactions in the EU? Nicole Kar, partner at Paul, Weiss in London, joins Matthew Hall and James Hunsberger to discuss the Commission's 2021 re-interpretation of its powers under Article 22 of the EU Merger Regulation, the European Court of Justice judgment striking that down and the alternative avenues for the Commission or EU countries to claim jurisdiction over killer and reverse killer transactions. Listen to this episode to learn more about how to analyse the risk and practical steps to take in relation to these transactions.
