On April 19, 2021, the Commission accepted a referral request by the French competition authority of genomic sequencing company Illumina’s planned acquisition of biotech company Grail under Article 22 EUMR.[1] This marks the first effective upward referral of a ‘below threshold’ transaction, i.e., a transaction that neither meets national nor EU merger control thresholds.[2]
Breaking with its long-standing approach, the Commission now encourages NCAs to refer transactions to the Commission, even if those do not meet EU or national notification thresholds, and even where these have already been implemented.[3] With this significant policy change, the Commission hopes to fill a perceived enforcement gap regarding so-called “killer acquisitions,” usually in the tech and pharmaceutical sectors.
Illumina markets next generation genomic sequencers which are widely used in the biotech sector, in particular by research laboratories and other healthcare companies, including Grail and its competitors. Grail uses genomic sequencing and data science tools to develop blood tests for early cancer detection based on genomic sequencing technology. Following a preliminary analysis, the French competition authority voiced concerns around a potential input foreclosure theory of harm. The authority considered that Illumina could be led to increase the price or lower the quality of its sequencers sold to competitors of Grail post-transaction.
The referral was supported by several NCA’s, including Belgium, Greece, Iceland, the Netherlands and Norway.[4]
The parties challenged the referral request given the lack of activities of the target in the EU. But the French Administrative Supreme Court (Conseil d’État) refused to oppose the request. The Conseil d’État ruled that the referral request could not be separated from the overall merger control investigation and could therefore only be challenged before the EU courts once the Commission reaches its final decision on the substance of the transaction.[5]
The Commission accepted the referral on April 19 and asked Illumina to notify the transaction.[6] On April 28, Illumina appealed the Commission’s decision arguing its illegality on the basis that (i) the Commission has never previously accepted a ‘below threshold’ referral; and (ii) Illumina was not informed of the investigation in a timely manner.[7] The General Court’s decision is pending. Since the appeal has no suspensory effect, the transaction will now be reviewed by the Commission within the merger control deadlines.
[1] Illumina/Grail (Case COMP/M.10188), decision not yet published. The French competition authority was one of the most vocal proponents for a revival of the Article 22 EUMR referral mechanism, advocating for its use to close the perceived loophole in EU merger control for “killer acquisitions” since 2017, see, e.g., Autorité de la Concurrence Press Release “The Autorité welcomes the announcement by the European Commission, which will henceforth allow national competition authorities to refer sensitive merger transactions to it for examination, including when they are not subject to national merger control,” September 15, 2020.
[2] Another transaction was also referred to the Commission under Article 22 EUMR, on April 6, namely Facebook’s proposed acquisition of customer-services startup Kustomer. This Transaction was reportable in Austria and was referred following its formal notification to the Austrian NCA, confirming the increased scrutiny of “killer acquisitions,” in the tech sector. See Austrian Federal Competition Agency Press Release of March 31, 2021, available at: https://www.bwb. gv.at/en/merger_control/merger/id/5343/.
[3] For reporting on the broader application of Article 22 EUMR, see our March 2021 EU Competition Law Newsletter.
[4] See GCR article of April 9, 2021, available at: https://globalcompetitionreview.com/european-commission/french-court-declines-block-illuminagrail-merger- referral-eu.
[5] Autorité de la Concurrence Press Release, “The European Commission opens a review of Illumina’s acquisition of Grail under the procedure of Article 22 of the 2004 Merger Regulation,” April 20, 2021. For further details on the competence of the Conseil d’État under Article 22 EUMR, see our April 2021 French Competition Law Newsletter.
[6] Commission Press Release MEX/21/1846.
[7] Illumina v. Commission (Case T-227/21), case pending.