On September 3, 2024, the European Court of Justice (ECJ) ruled that the
European Commission (EC) lacked the authority to review Illumina’s acquisition
of Grail.
The legal cases, C-611/22 P (Illumina v. Commission) and C-625/22 P
(Grail v. Commission) include the challenges of the European Commission's
intervention in Illumina’s acquisition of Grail. After earlier rulings by the
European Commission to halt this merger, challenges made it to the European
Court of Justice (ECJ).
Background:
In September 2020, Illumina, a leader in DNA sequencing technology,
acquired Grail, a company specializing in early cancer detection. Illumina
confirmed the acquisition in a press release on September 21, 2020.
Since Grail had not yet generated revenue in the EU or globally, the
transaction did not meet the thresholds set by Article 1 of the EU Merger
Regulation (EUMR), meaning it was not required to be notified under EUMR rules.
Because of that the acquisition was not reported under EUMR rules.
Despite this, the European Commission invoked Article 22 of the EU
Merger Regulation, which allows the Commission to review mergers that do not
meet the usual notification thresholds if they may affect competition. And
according to Article 22 the European Commission block the merger.
European
Commission’s Role in Mergers and Acquisitions:
The European Commission oversees mergers and acquisitions within the EU
to ensure they do not harm competition within the internal market. This
involves:
1. Merger Control
and Assessment: The Commission reviews mergers involving companies
with significant operations in the EU to ensure they do not create or
strengthen a dominant market position. The primary legal framework for this is
the EU Merger Regulation (Regulation (EC) No. 139/2004).
2.
Pre-Notification: Companies exceeding certain turnover thresholds must
notify the Commission of planned mergers. This pre-notification allows for a
determination of whether further investigation for notified mergers is
necessary.
3. Investigative
Stages:
3.1. Phase I
Investigation: A preliminary assessment is conducted within 25
working days to identify competition concerns. If none are found, the merger is
approved.
3.2. Phase II
Investigation: If potential issues are identified, a more detailed
investigation lasts up to 90 additional working days.
4. Potential
Outcomes:
4.1. Approval: If the
merger poses no significant competition issues, it is approved.
4.2. Conditional
Approval: The merger may be approved with conditions to prevent
identified competition concerns.
4.3. Prohibition: If the
merger significantly harms competition, the Commission can block the
transaction.
5. Post-Merger
Monitoring and Enforcement: The Commission also monitors
compliance with any conditions imposed on mergers and can take action if
companies fail to adhere to these commitments. In cases of non-compliance, the
Commission can impose fines or even order the divestment of merged entities.
Article 22
Referrals: Under Article 22 of the EU Merger Regulation, member
states can refer mergers to the Commission for review, even if they fall below
the usual thresholds, if they believe the merger may affect competition. This
provision was notably used in the Illumina/Grail case, sparking significant
legal debate.
Legal Dispute:
The main legal dispute is whether the European Commission exceeded its
jurisdiction by invoking Article 22 to review the Illumina-Grail merger,
despite the merger not meeting the usual turnover thresholds.
Court Ruling:
The ECJ ultimately overturned the European Commission’s decision to
block the merger, ruling in favor of Illumina and Grail. This ruling clarified
the limits of the Commission’s authority under the EU Merger Regulation.
Sources:
Cases C-611/22
P (Illumina v. Commission) and C-625/22 P (Grail v. Commission)
