Illumina’s European Court Victory Can’t Salvage Grail Acquisition, But It Nullifies Hefty Fine

Throughout Illumina’s more than four-year saga to acquire liquid biopsy company Grail, it insisted the opposition from European regulators has no basis in law. Europe’s highest judicial body now agrees. The court’s ruling Tuesday is too little too late, as Grail has already spun out from Illumina. But the legal decision does spare Illumina from paying what would have been a record fine.

The fine of €432 million (about $476 million), represented about 10% of Illumina’s annual revenue. It’s the stiffest penalty the European Commission can impose under European merger law. The commission levied it because Illumina closed the Grail acquisition before the regulator could complete its review. But the Court of Justice of the European Union said the proposed acquisition should have never even come under such review.

Gene-sequencing giant Illumina is based in San Diego and does business globally. Grail developed and commercialized a multi-cancer early detection test that looks for signs of cancer from a small sample of blood. That test, Galleri, is only commercially available in the U.S. European Union rules do permit the commission to examine business combinations that do not have a “European dimension” but still affect trade and competition in EU territory. But the high court said the commission misinterpreted this rule. Grail has no European revenue and does not meet the threshold for examination. The court’s ruling states that absence of a European dimension to the business deal means it does not fall under commission regulation.

The commission had said it examined the proposed Grail acquisition at the request of six European Union members. That was another mistake, according to the court. The ruling said the national merger control rules of the member states making those requests also do not permit them to examine this business deal.

In a statement released in response to the ruling, European Commission Executive Vice-President Margarethe Vestager said the regulator will carefully study the court’s judgement and its implications. But she added that even when turnover (the European term for revenue) figures are low, merger deals can still pose anti-competitive concerns. She added that there will continue to be need for review of mergers that have competitive effects on Europe, noting that a 2021 commission evaluation of EU merger control found that even small deals can harm competition in Europe.

“A company with limited turnover may still play a significant competitive role on the market, as a start-up with significant potential, or as an important innovator,” Vestager said. “Killer acquisitions seek to neutralize small but promising companies as a possible source of competition. These companies’ size is often dwarfed by the large corporations that seek to acquire them, and they should be protected against the risk of elimination.”

Illumina’s $8 billion Grail acquisition triggered antitrust litigation in the U.S. and Europe. The Federal Trade Commission was concerned that Illumina, as a supplier of gene-sequencing equipment and reagents used in liquid biopsy, would have pricing power over Grail’s competitors. Late last year, Illumina said it would stop further litigation and instead divest Grail. In June, Grail spun out of Illumina as a standalone, publicly traded company. That divestiture led the FTC to dismiss its case against Illumina and Grail in August. Illumina retains a 14.5% stake in Grail. It also continues to be a supplier to the liquid biopsy company.

The Court of Justice’s decision annuls the European Commission fine. As the unsuccessful party in the litigation, the European Commission must pay the court costs of Illumina and Grail, according to the ruling.

“Today’s judgment confirms Illumina’s longstanding view that the European Commission exceeded its authority by asserting jurisdiction over this merger,” Illumina said in a brief statement.

Photo: sinonimas, Getty Images