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Illumina-Grail opinion raises questions over EU merger control regime

An advocate general’s legal opinion has advised the Court of Justice of the EU (CJEU) to overturn a lower court decision which found that the European Commission had power to review a merger where neither EU nor national merger notification thresholds were triggered.

In a recently published legal opinion, advocate general (AG) Nicholas Emiliou said that the CJEU should set aside a judgment of the EU General Court concerning the Commission’s jurisdiction to review a merger.

The opinion states that the General Court erred in its interpretation of Article 22 of the EU Merger Regulation (EUMR) when concluding that a “literal, historical, contextual and teleological” view would allow member states to request that the Commission review a merger, even when they have no competence under the national law of the relevant EU member state.

Considering the wording, origin, context and purpose of Article 22 EUMR, and having taken into account the logic of the EU system of merger control as well as of some fundamental principles of EU law, AG Emiliou concluded that Article 22 EUMR cannot be interpreted as supporting the broad interpretation of the provision.

AG Emiliou considered that the General Court’s ruling gave rise to “a very significant extension of the scope of the EUMR and of the Commission’s jurisdiction. In one fell swoop, by means of an original interpretation of Article 22 EUMR, the Commission gains the power to review almost any concentration, occurring anywhere in the world, regardless of undertakings’ turnover and presence in the European Union and the value of the transaction, and at any moment in time, including well after the completion of the merger”.  Moreover, the AG highlighted that procedures resulting from such a broad interpretation would be inefficient, unpredictable, and reduce legal certainty for transaction parties.

The CJEU is not obliged to follow the AG’s recommendations. However, if the CJEU’s forthcoming judgment does follow AG Emiliou’s legal opinion, it would mean that the Commission had no jurisdiction to review the Illumina-GRAIL merger in the first place and would also call into question the validity of other decisions and enforcement steps the Commission has taken under the EUMR concerning the merger, according to competition law experts at Pinsent Masons.

Tadeusz Gielas, competition law expert at Pinsent Masons, said that this case “goes to the very heart of the Commission’s strategy to detect and scrutinise so-called ‘killer acquisitions’”. If the CJEU adopts AG Emiliou’s conclusions, “its judgment will likely reverse the Commission’s controversial approach in using Article 22 EUMR to review below-threshold mergers in the EU. It would also call into question the Commission’s prohibition of the Illumina/GRAIL merger, as well as the €432 million gun-jumping fine it levied, and the divestiture order it imposed on Illumina”, said Gielas.

Robert Vidal, competition law expert at Pinsent Masons, said: “This is a perfect example of the recurring conflict between the rule of law and the will of a powerful institution that prefers to exert discretionary power in the interests, of what it perceives, as the greater good.  AG Emiliou regards the Commission’s actions as an unjustified power grab. This opinion will attract a lot of support from the business community who prefer to make significant investment decisions based on established legal principles where the merger rules are applied on a predictable basis.”

The merger involved Illumina buying GRAIL, a US-based company that develops blood tests for early detection of cancer. Illumina, also US-based, is currently the only credible supplier of next generation sequencing (NGS) technology, which is an essential part of cancer detection diagnostics being developed by GRAIL.

Following a 17-month merger investigation, the Commission formally prohibited Illumina’s acquisition of GRAIL in September 2022.  The Commission said it was concerned the transaction would deter GRAIL’s competitors from innovating and developing their own cancer testing tools, impacting future competition. According to the Commission, this posed further risks of price increases, reduced consumer choice, and could impact the ability of health authorities to more readily access breakthrough diagnostics to detect a range of cancers.

The Illumina-GRAIL transaction was completed in August 2021, without prior EU merger approval, almost one year before it was formally blocked by the Commission. From the outset Illumina and GRAIL disputed that the Commission had the power to accept referral requests from EU member states.

The Commission published new guidance (6-page / 559 KB PDF) on applying Article 22 EUMR just weeks before it claimed jurisdiction and began reviewing the merger. An appeal to the General Court challenging the Commission’s jurisdiction was filed days after the merger review began. The General Court’s subsequent ruling, which upheld the Commission’s approach, is now the focus of AG Emiliou’s opinion and the CJEU judgment that is yet to follow.

The Illumina-GRAIL acquisition was the first time the Commission used its new interpretation of Article 22 EUMR (11-page / 882KB PDF) to screen transactions referred to it by national competition authorities where the national merger notification thresholds of the referring EU member state were not triggered. In conjunction with the mandatory merger reporting obligation in the Digital Markets Act (DMA), that approach would also allow the Commission to call-in for review certain digital sector mergers that fall below EU and national merger notification thresholds.

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