Abstract: As technology and scientific advancements drive the emergence of new industries and products, regulators face complex challenges in ensuring competition in these rapidly evolving markets. The recent ruling by the European Court of Justice (“ECJ”) in the Illumina/Grail saga represents a significant development in global competition law, particularly for its impact on the European Commission’s authority to review transactions that fail to meet the statutory thresholds that trigger the Commission’s jurisdiction. This is significant because many transactions in emerging markets with innovative technologies and nascent competition—similar to Illumina/Grail—involve firms that lack the requisite turnover or geographic presence to meet the EU’s statutory thresholds for merger review. Such thresholds, designed for traditional markets, often fail to capture the competitive implications of deals in sectors driven by rapid technological and scientific advancements.
I. Introduction
Illumina’s now-divested acquisition of GRAIL, a leader in early cancer detection technology, raised significant concerns about the potential suppression of competition and innovation in a highly nascent sector. The European Commission (hereinafter, “the Commission”) sought to review the transaction jurisdiction under its Article 22 referral mechanism, despite the transaction failing to meet the requisite turnover thresholds.[1]
After a four-year saga, the European Court of Justice (“ECJ”) ruling narrowly focused on the Commission’s jurisdiction—or lack thereof—to review transactions that fail to meet the turnover-based thresholds outlined in the statutory framework.[2] The outcome sharply limited the Commission’s authority and has far-reaching implications for merger control in Europe, particularly in markets where conventional jurisdictional thresholds often fail to capture the risk of harm to competition and innovation.
This post examines the Illumina/GRAIL case as a lens to explore the challenges that regulators face in protecting competition in emerging markets. It contrasts Europe’s merger control regime with the framework in the United States (“U.S.”), which allowed the Federal Trade Commission (“FTC”) to review and ultimately challenge the Transaction. The analysis delves into the effect of the ECJ ruling on the Commission’s authority to adequately address transactions involving nascent competition, “killer acquisitions,” and innovation competition. Lastly, the post considers potential solutions to the jurisdictional obstacle that remains after the ECJ ruling.
A. Merger Control in the European Union
The Treaty of Rome of 1957 laid the foundation of European Union (“EU”) competition law, which today lies in Articles 101 and 102 of the Treaty on the Functioning of the European Union (“TFEU”).[3] However, these provisions did not initially address oversight of mergers and acquisitions, leaving the Commission’s authority to investigate transactions to the establishment of the EC Merger Regulation (“ECMR”) in 1989.[4] The ECMR grants the Commission jurisdiction to investigate transactions that meet certain fiscal thresholds based on the global and EU-wide turnover of the parties to the transaction.[5]
In the U.S., merger review is divided between the FTC and the Department of Justice (collectively, “the Agencies”).[6] In contrast to the EU, the U.S. framework does not include turnover-based thresholds that would limit the Agencies’ ability to investigate non-notifiable transactions.[7] Instead, the U.S. employs a notification system under the Hart-Scott-Rodino Act, which requires parties to formally notify the Agencies of proposed transactions exceeding a transaction-value based threshold.[8] Below this threshold, the Agencies retain the authority to investigate transactions; however, notification by the parties involved is not obligatory.[9]
The EU operates under a multi-layered framework where the Commission has exclusive jurisdiction at the level of centralized oversight.[10] In addition to the turnover-based thresholds, the Commission may obtain jurisdiction to review a transaction if an acquisition is referred to the Commission by EU Member States under Article 22 of the ECMR.[11] The ECJ ruling underscores a fundamental distinction between the merger control regimes in Europe and the U.S.
The U.S. does not have a formal merger reporting regime at the state level.[12] Instead, state antitrust enforcement authorities (state attorneys general) generally collaborate with the Agencies when a transaction raises state-level concerns.[13] Unlike the U.S., the EU is composed of sovereign nation-states, most with their own competition authority and domestic legal framework.[14] The scope of Article 22 with respect to the Commission’s authority to review below-threshold acquisitions was the focus of the ECJ ruling in Illumina/Grail.[15]
B. The Transaction & Legal Theories
Illumina, an American biotechnology company, originally founded GRAIL in 2015 as a subsidiary focused on developing early cancer detection tests.[16] GRAIL spun off as an independent company in 2016.[17] However, in September 2020, Illumina announced plans to reacquire GRAIL for $8 billion (hereinafter, “the Transaction”).[18] In April 2021, the Commission accepted a referral request under Article 22, asserting jurisdiction to review the Transaction.[19] Illumina proceeded with the Transaction but continued to hold GRAIL as a separate entity while it weathered legal battles against the Commission and the FTC.[20]
Illumina mounted a legal challenge against the Commission’s authority to review the Transaction, arguing that the Transaction did not meet the statutory thresholds to trigger the Commission’s jurisdiction.[21] The European General Court ruled in favor of the Commission’s interpretation of and jurisdiction under Article 22, despite the Transaction not meeting the traditional turnover thresholds.[22] The General Court reasoned that Article 22 allows Member States to refer any transaction affecting trade between Member States and threatening to significantly affect competition, regardless of whether the transaction meets national notification thresholds.[23] However, on appeal, the ECJ overturned the lower court decision, finding that the General Court erred in its interpretation of Article 22.[24] Specifically, the ECJ noted that the provision was not intended to allow the Commission to review transactions that neither meet EU thresholds nor are subject to national merger control in any Member State.[25]
While the legal arguments in the European case were confined to the issue of jurisdiction, the U.S. FTC case offered a substantive exploration of the legal theories underpinning the challenge to the Transaction under antitrust laws.[26] The FTC’s challenge was grounded in concerns about vertical integration, specifically that Illumina—a dominant supplier of next-generation sequencing (“NGS”) technology—would have the ability and incentive to foreclose access to its technology for GRAIL’s competitors.[27] Such an outcome could undermine competition in the market for early cancer detection tests by disadvantaging rivals that rely on Illumina’s sequencing platforms.[28] These theories, which centered on concerns about potential competition and the risk of harm to innovation in a nascent market, closely mirrored the rationale advanced by the European Commission in its attempt to prohibit the transaction.[29]
II. The ECJ Ruling Undermines the Commission’s Authority to Review Transactions Involving Nascent Competition, Killer Acquisitions, and Innovation Competition
The significance of the ECJ ruling lies in its exclusive focus on the procedural issue of jurisdiction rather than the merits of a substantive competition law claim.[30] As a result, the competitive concerns surrounding the Transaction remain unexamined by any EU court.[31] Instead, the ruling narrowly defined the scope of jurisdiction under Article 22, which provided a regulatory framework that empowered the Commission to review transactions that would commonly fail to meet the relevant thresholds. Such transactions include the existence of nascent competition, a “killer acquisition,” an innovation competition market, and any other market dynamic that explains why a firm may not have the requisite turnover.”[32]
A. Nascent Competition and “Killer Acquisitions”
“Killer acquisitions” are generally considered to be transactions that eliminate nascent competitors.[33] The term stems from a study that defined the transaction where a market incumbent acquires an innovative target and terminates the development of the target’s innovations for the purpose of preempting future competition.[34] Transactions involving a nascent business often lack an EU dimension due to the nascent firm’s low revenues at the time of purchase.[35] As such, nascent acquisitions often fail to meet threshold requirements that render a concentration reviewable by the Commission.[36] “This is important in an age of concerns over especially pharmaceutical, biotech, and digital technology mergers where suggestions to use for instance the value of the acquisition as a proxy has so far not materialized at the EU level (although Germany and Austria have introduced such jurisdictional tests).”[37]
B. Innovation Competition
The Commission relied on an innovation competition theory of harm in its attempt to prohibit the Transaction,[38] emphasizing the “innovation race” between GRAIL and its competitors “to develop and commercialize early-stage blood-based cancer detection tests.”[39] The Transaction represents the first application of the theory to a vertical acquisition.[40] The theory was also previously employed by the Commission in the matter of DuPont/Dow Chemical;[41] in that case, the merger would, as alleged, significantly reduce incentives for innovation in the agrochemical sector, as the parties were two of the most innovative firms in the market.[42] The Commission ordered the divestiture of DuPont’s global pesticide research and development (“R&D”) division in order for the deal to receive approval.[43] Firms operating in highly innovative markets often focus on developing new technologies or products (R&D) and may not yet have significant sales revenues.[44] As a result, they might not meet the turnover thresholds while holding disproportionate competitive significance due to their innovation potential.[45]
III. Potential Solutions to the Jurisdiction Obstacle Affirmed by the ECJ Ruling
It is challenging to draw direct comparisons between the efficacy of merger control mechanisms in the U.S. and the EU, as their distinct geopolitical and legal frameworks significantly influence how antitrust laws are applied.
A. Value-Based Thresholds
One area of common concern is the continued reliance on turnover-based thresholds under the EU framework, which are increasingly seen as misaligned with the modern realities of competition law. Turnover thresholds, while administratively straightforward, fail to capture many transactions in innovation-driven and nascent markets, where companies may have little revenue but substantial competitive significance.[46] Transaction value-based thresholds offer a promising alternative by capturing deals based on their overall economic value rather than turnover, ensuring that acquisitions of high-potential startups do not evade scrutiny.[47]
In 2019, the Commission deliberated on whether to modify the jurisdictional thresholds.[48] The discussions emerged in response to growing concerns that the existing turnover-based thresholds failed to capture significant transactions in innovation-driven sectors; such sectors include digital technology and pharmaceuticals, where companies may have substantial competitive significance despite generating minimal revenue.[49] While the Commission acknowledged the need for reform, it ultimately decided against revising the thresholds, citing concerns over increased legal uncertainty and the potential administrative burden on businesses and competition authorities.[50]
Instead, the Commission opted to introduce the 2021 Article 22 referral policy, allowing Member States to refer transactions that may pose competition risks, even if they fall below national or EU thresholds.[51] The Commission sought to balance the need to address enforcement gaps with the risks associated with broader jurisdictional changes.[52] The Commission relied on the same referral policy to assert jurisdiction over the Transaction.[53]
Nevertheless, thresholds must serve as a structured framework where Member States and the Commission can align on jurisdiction while preserving national sovereignty and enabling the Commission to fulfill its role effectively. This balance could be achieved through clearer rules or protocols that define the scope of jurisdiction while respecting the diverse economic and legal priorities of Member States.
B. Coordination between the Major Competition Authorities.
Another potential solution, albeit ambitious, is fostering collaboration among the world’s leading competition authorities. Such cooperation could involve joint investigations or shared enforcement efforts in cases where multiple jurisdictions have overlapping interests; this would help ensure consistent and effective regulation of cross-border transactions. While such global coordination may face practical and political hurdles, it would represent a step toward addressing the complexities of regulating mergers in a global economy.
IV. Conclusion
In critiques of judicial rulings, it is customary to adopt the position that the court erred in its reasoning or outcome. However, in this instance, the ECJ’s decision highlights a more profound issue: the urgent need for a deliberate and considered solution to the jurisdictional gap that now prevents the Commission and Member States from scrutinizing transactions with potentially transformative implications for critical markets, such as early cancer detection technologies.
[1] European Commission Press Release, Mergers: Commission Prohibits Acquisition of GRAIL by Illumina (Sept. 6, 2022), https://ec.europa.eu/commission/presscorner/detail/en/ip_22_5364.
[2] Illumina, Inc. v. European Commission, Joined Cases C-611/22 P & C-625/22 P, ECLI:EU:C:2024:677 (Sept. 3, 2024).
[3] John J. Parisi, A Simple Guide to the Economics of Merger Remedies, Fed. Trade Comm’n (2022), https://www.ftc.gov/system/files/attachments/key-speeches-presentations/ecmergerregsimpleguide.pdf.
[4] CESifo, EU Merger Control in the Digital Economy: A Review of Emerging Challenges (2020), https://www.cesifo.org/DocDL/cesifo1_wp8213.pdf.
[5] Council Regulation 139/2004, art. 1(2), 2004 O.J. (L 24) 1 (EC).
[6] Illumina, Inc. v. FTC, 88 F.4th 1036, 1047 (5th Cir. 2023).
[7] United States Submission, Jurisdictional Nexus in Merger Control Regimes, OECD Working Party No. 3 on Co-operation and Enforcement, 123d Meeting, DAF/COMP/WP3/WD(2016)22 (June 3, 2016), https://www.justice.gov/atr/file/872376/dl.
[8] 15 USCS § 18a.
[9] In the past, the Agencies have challenged numerous consummated mergers that were not reportable under the threshold. See e.g., In the Matter of Otto Bock HealthCare North America, Inc., Docket No. 9378 (Complaint issued Dec. 20, 2017); In the Matter of Valeant Pharmaceuticals International, Inc., Docket No. C-4602 (Consent order entered on Feb. 8, 2017); FTC v. St. Luke’s Health Sys., Ltd., 1:12-cv-00560-BLW-REB (D. Id. filed March 13, 2013); U.S. v. Bazaarvoice, Inc., C13-0133 (N.D. Cal., filed Jan. 10, 2013; U.S. v. Twin America LLC, 12 CV 8989 (S.D.N.Y., filed Dec. 11, 2012); In the Matter of Polypore International, Inc., Docket No. 9327 (Complaint issued Sept. 10, 2008).
[10] European Commission, Merger control procedures, https://competition-policy.ec.europa.eu/system/files/2021-02/merger_control_procedures_en.pdf.
[11] Council Regulation 139/2004, art. 22, 2004 O.J. (L 24) 1 (EC).
[12] United States Submission, supra note 7.
[13] Historically, states have participated in merger investigations conducted by the Agencies and often joined as co-plaintiffs in federal court challenges to the transaction. Recently, however, the States of Washington and Colorado, asserting their sovereign authority, independently initiated lawsuits under their respective state antitrust laws to challenge Kroger’s proposed acquisition of Albertsons. See FTC v. Kroger Co. & Albertsons Co., Inc., 2024 U.S. Dist. LEXIS 223077 (D. Or. 2024).
[14] Jotte Mulder & Wolf Sauter, A New Regime for Below-Threshold Mergers in EU Competition Law? The Illumina/Grail and Towercast Judgments, 11 J. Antitrust Enf’t 544, 546 (2023).
[15] See Illumina, supra note 2.
[16] Nick Paul Taylor, Grail CEO Predicts Transformative 2024 Illumina Split, MEDTECH DIVE (Dec. 12, 2023), https://www.medtechdive.com/news/grail-ceo-predicts-transformative-2024-illumina-split/702895.
[17] Illumina Forms New Company to Enable Early Cancer Detection via Blood-Based Screening, ILLUMINA (Jan. 10, 2016), https://investor.illumina.com/news/press-release-details/2016/Illumina-Forms-New-Company-to-Enable-Early-Cancer-Detection-viaBlood-Based-Screening/default.aspx.
[18] Illumina to Acquire GRAIL to Launch New Era of Cancer Detection, ILLUMINA (Sept. 21, 2020), https://investor.illumina.com/news/press-release-details/2020/Illumina-to-Acquire-GRAIL-to-Launch-New-Era-of-Cancer-Detection/default.aspx.
[19] Press Release, Court of Justice of the European Union, The General Court Confirms the Commission’s Jurisdiction to Examine the Acquisition of GRAIL by Illumina Following a Referral Request Made by Several Member States (July 13, 2022).
[20] Illumina Acquires GRAIL to Accelerate Patient Access to Life-Saving Multi-Cancer Early Detection Test, ILLUMINA (Aug. 18, 2021), https://investor.illumina.com/news/press-release-details/2021/Illumina-Acquires-GRAIL-to-Accelerate-Patient-Access-to-Life-Saving-Multi-Cancer-Early-Detection-Test/default.aspx.
[21] Press Release, Court of Justice of the European Union, Judgment in Case C-123/22 (July 12, 2022), https://curia.europa.eu/jcms/upload/docs/application/pdf/2022-07/cp220123en.pdf.
[22] Id.
[23] Id.
[24] Illumina, Inc. v. European Commission, Joined Cases C-611/22 P & C-625/22 P, ECLI:EU:C:2024:677 (Sept. 3, 2024).
[25] Id.
[26] See Illumina, 88 F.4th at 1036.
[27] In re Illumina, Inc. & GRAIL, Inc., No. 9401 (F.T.C. Mar. 30, 2021), https://www.ftc.gov/system/files/documents/cases/redacted_administrative_part_3_complaint_redacted.pdf.
[28] Id.
[29] European Commission Press Release, Mergers: Commission Prohibits Acquisition of GRAIL by Illumina (Sept. 6, 2022), https://ec.europa.eu/commission/presscorner/detail/en/ip_22_5364.
[30] See Illumina, supra note 2.
[31] See Peter Whelan, EU-Level Jurisdiction over “Killer Acquisitions” in the Aftermath of Illumina/Grail, Antitrust Chronicle 1 (2024).
[32] Jotte Mulder & Wolf Sauter, A New Regime for Below-Threshold Mergers in EU Competition Law? The Illumina/Grail and Towercast Judgments, 11 J. ANTITRUST ENF’T 544, 545 (2023).
[33] Jonathan M. Barnett, “Killer Acquisitions” Reexamined: Economic Hyperbole in the Age of Populist Antitrust, 3 U. Chi. Bus. L. Rev. 39, 41 (2023).
[34] Colleen Cunningham, Florian Ederer & Song Ma, Killer Acquisitions, 129 J. Pol. Econ. 649 (2021).
[35] Evelina Åsberg Siska, The European Commission’s Solution to Catch Nascent Acquisitions: A Legal Study of the New Approach to Article 22 of the EU Merger Regulation, Konkurrensverket (Swedish Competition Authority) (2023).
[36] Id.
[37] Mulder & Sauter, supra note 25, at 545.
[38] European Commission Press Release, Mergers: Commission Prohibits Acquisition of GRAIL by Illumina (Sept. 6, 2022), https://ec.europa.eu/commission/presscorner/detail/en/ip_22_5364.
[39] Press Release, European Commission, Commission Prohibits Illumina’s Acquisition of Grail (Oct. 11, 2024).
[40] Vaclav Šemjkal, Dynamic Industries Require a Dynamic Approach to Law? On the Illumina-Grail Takeover, 10 J. Int’l & Eur. L., Econ. & Market Integration 45, 60 n.38 (2023).
[41] Case M.7932 – Dow/DuPont, Comm’n Decision, 2017 O.J. (C 353) 11 (EC).
[42] Press Release, European Commission, Mergers: Commission Clears Merger Between Dow and DuPont, Subject to Conditions (Mar. 27, 2017).
[43] Id.
[44] See OECD, Start-ups, Killer Acquisitions and Merger Control – Background Note, DAF/COMP(2020)5, at 8 (June 2020).
[45] Id.
[46] OECD, supra note 44.
[47] Whelan, supra note 37, at 11.
[48] Nicolas Levy, The European Commission’s New Merger Referral Policy: Creative Reform or Departure from the Bright-Line Principle?, 44 Eur. Competition L. Rev. 365, 368 (2021).
[49] Id. at 369.
[50] Id.
[51] Communication from the Commission, Guidance on the Application of the Referral Mechanism Set out in Article 22 of the Merger Regulation to Certain Categories of Cases, 2021 O.J. (C 113) 1.
[52] Levy, supra note 48, at 369.
[53] Id. at 374.
