On September 5, 2024, the European Court of Justice (ECJ) annulled the decision of the European Commission to prohibit the merger of the US biotechnology company Illumina with the cancer testing company Grail (ECJ, joint cases C-611/22 P and C-625/22 P). This decision marks a significant milestone in European merger control and emphasizes the EU legal requirements for the expansion of the Commission’s competencies in relation to market concentrations that have not yet exceeded the usual turnover thresholds of the European merger control regime.
Background of the merger
Illumina is a US biotechnology company primarily developing and marketing innovative technologies in genome sequencing. Grail, on the other hand, specializes in the development of blood tests for the early detection of various types of cancer and can be considered a pioneer in the so-called liquid biopsy. In 2020, Illumina intended to acquire all shares in Grail to gain access to innovative diagnostic procedures based on molecular genome analysis.
Initially, the planned acquisition was not subject to merger control at the European level, as neither Illumina nor Grail exceeded the relevant turnover thresholds according to the EU Merger Regulation (ECMR). However, due to third-party indications, a recently introduced extension of merger control under Art. 22 ECMR was applied, which allows national competition authorities to refer mergers that do not reach turnover thresholds to the Commission.
Prohibition by the European Commission
In 2022, the Commission prohibited the takeover on the grounds that the merger could significantly impede competition in the future market for early cancer test procedures. In particular, innovations in diagnostics were threatened by the structural risk posed by the integration of critical technologies into the Illumina Group. The Commission expressly relied on Art. 22 ECMR and justified its jurisdiction by the need to address potential competitive disruptions at the inception stage of a market effectively.
However, the companies involved argued that the transfer competence under Art. 22 ECMR was applied in violation of EU law, as neither a relevant link to the internal market nor an immediate threat to competition could be identified. Additionally, it was claimed that the Commission illegitimately assumed jurisdictions not aligned with the Merger Regulation.
ECJ decision: Annulment of the prohibition
The ECJ annulled the Commission’s decision with the judgment of September 5, 2024. According to the court, the Commission had not sufficiently justified the requirements for invoking its expanded jurisdiction under Art. 22 ECMR. There was a lack of sufficient threat to competition beyond hypothetical assumptions and an adequate connection to the internal market. The court further emphasized that the Commission’s authority to control mergers without adhering to clear jurisdictional criteria contradicts the principles of rule of law and the requirement of legal certainty.
Notably, the court recognizes the importance of effective control of market developments in the digital and biotechnological sectors, but emphasizes the necessity for any expansion of regulatory competencies to be based on clear EU legal grounds. In particular, a retroactive inclusion of mergers to which there was initially no control competence should not lead to unpredictable legal application.
Impacts and significance for the European business location
Significance for merger control
The judgment has far-reaching consequences for the future application of Art. 22 ECMR and the handling of corporate mergers in the innovation sector. The decision of the ECJ once again sets legal boundaries for the Commission, preventing it from extending the scope of ECMR through teleological interpretation beyond its wording. Merger plans that do not exceed the legal turnover thresholds are only subject to expanded control if there are substantial indications of a specific competitive threat within the internal market.
Legal certainty and investment climate
The decision significantly strengthens legal certainty in the European market. Potential investors and companies gain planning security about the cases in which a merger control review at the EU level is to be expected. It remains the task of the European legislator to further develop existing regulations—especially for innovative and dynamic markets—and, if necessary, to define clear criteria for the applicability of merger control below the turnover thresholds.
Outlook
The ECJ’s ruling creates an important precedent for EU law control of novel and technology-driven transactions. Nevertheless, it remains to be seen how the European Commission will respond to this decision and whether a renewed adjustment of the merger regulation will occur to better balance innovation protection and effective competition in the future. It should also be noted that the Commission still has legal remedies available; thus, the legal development remains in flux.
In light of the ongoing dynamics of European and international antitrust law, those affected should closely monitor developments and seek sound advice on applicability, procedures, or risks of European merger control in specific cases. The lawyers at MTR Legal advise companies and investors nationwide and internationally, particularly in the context of complex merger projects and issues related to regulatory frameworks.
