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EUROPEAN COMMISSION ASSERTS JURISDICTION TO REVIEW MERGER OF TWO US CORPORATIONS – ILLUMINA INC. FILES ANNULMENT SUIT IN RESPONSE.

Prospect Law Life Sciences – Article 22, EU Merger Regulation 139/2204

Illumina Inc’s proposed acquisition of Grail Inc, which it had spun out in 2016, has raised potential competition issues on both sides of the Atlantic and will also be of interest to companies in the life sciences sector.

Illumina, based in California, is a global genomics company and a leading supplier of next generation sequencing systems for genetic and genomic analysis. GRAIL, also based in the US, is a healthcare company which develops cancer detection tests relying on next generation sequencing systems.

The story begins on March 30, 2021 when the US Federal Trade Commission announced that it had “filed an administrative complaint and authorized a federal court lawsuit to block Illumina’s $7.1 billion proposed acquisition of Grail—a maker of a non-invasive, early detection liquid biopsy test that can screen for multiple types of cancer in asymptomatic patients at very early stages using DNA sequencing. Illumina is the only provider of DNA sequencing that is a viable option for these multi-cancers early detection, or MCED, tests in the United States”.

Then on April 20, 2021 the European Commission announced that it had accepted the requests submitted by Belgium, France, Greece, Iceland, the Netherlands, and Norway to assess the proposed acquisition of GRAIL by Illumina under the EU Merger Regulation (PDF).

The proposed acquisition did not reach the notification thresholds set out in the EU Merger Regulation, and it was not notified in any Member State.

France submitted a referral request to the Commission pursuant to Article 22(1) of the EU Merger Regulation. This provision allows Member States to request the Commission to examine a merger that does not meet national or EU thresholds and therefore does not have an EU dimension but affects trade within the single market and threatens to significantly affect competition within the territory of the Member States making the request.  

On the basis of the information provided by France and the other countries, and without prejudice to the outcome of its investigation, the Commission considers that the transaction meets the criteria for referral under the Article 22. In particular, the combined entity could restrict access to or increase prices of next generation sequencers and reagents to the detriment of GRAIL’s rivals active in genomic cancer tests following the transaction. A referral of this transaction is appropriate because GRAIL’s competitive significance is not reflected in its turnover, as notably evidenced by the USD 7.1 billion-dollar deal value. Genomic cancer tests, having the potential to identify a wide variety of cancers in asymptomatic patients, are expected to be game-changers in the fight against cancer. It is therefore important to ensure that patients get access to this technology as quickly as possible, from as wide sources as possible, and at a fair price.

Subsequently on April 29, 2021: SAN DIEGO–(BUSINESS WIRE) — Illumina, Inc. (NASDAQ: ILMN) announced today that it has filed an action in the General Court of the European Union asking for annulment of the European Commission’s decision asserting jurisdiction to review Illumina’s acquisition of GRAIL. The Commission asserted jurisdiction to review the acquisition under Article 22 of the EU Merger Regulation on April 19, 2021, seven months after the deal was announced.

“The European Commission’s unprecedented and untimely decision to review this procompetitive acquisition without proper engagement with the parties leaves businesses uncertain as to how the EU Merger Regulation will be applied,” said Charles Dadswell, Senior Vice President and General Counsel for Illumina. “The Commission’s actions will stifle innovation, fail patients and increase healthcare costs by needlessly delaying this transaction. The acquisition will allow Illumina to bring GRAIL’s lifesaving testing to more patients, more quickly and at a lower cost.”

While the Court process is ongoing, Illumina will continue to work with the European Commission’s Directorate-General for Competition to bring the review to a conclusion as quickly as possible”.

WHAT HAPPENS NEXT?

Actions for annulment enable the Court to review the legality of acts adopted by European institutions, including the Commission. The Court may annul the act concerned if it is judged to be contrary to European Union law based on the grounds of: (i) lack of competence; (ii) infringement of an essential procedural requirement; (iii) infringement of the Treaties or of any rule of law relating to their application, or misuse of powers.

Key to the outcome may involve an assessment of the Commission’s own Guidance on Article 22 and a consideration of the views of Executive Vice-President Margrethe Vestager in her speech on “The Future of merger control”.

Prospect Law will publish an update when the outcome of the annulment action is known.

About the Author

David McIntosh was admitted as a Solicitor in 1988 and is a highly experienced commercial projects lawyer who has advised clients in a number of different fields including intellectual property, data privacy, procurement law (both public and private), manufacturing, distribution, information governance and general regulatory matters covering both the nuclear and pharmaceutical sectors.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

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This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information and/or advice on the content of this article or impact on your business, please contact dmc@prospectlaw.co.uk or by phone on +44 (0)7483 300 132.

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