• The European Union's authority to investigate and block mergers takes a hit after high-profile case defeat.

• CJEU ruled in favor of U.S. company Illumina, whose $7.1 billion acquisition of cancer-screening company Grail had been blocked by the European Commission in 2022.

• The Commission needs to stick to the revenue thresholds for examining mergers in order to ensure stability and legal certainty for the business sector, the ruling says.

The European Union’s merger oversight capabilities have taken a significant blow following a key ruling by the Court of Justice of the European Union (CJEU) in the Illumina-Grail case, according to a Reuters report. 

The CJEU ruled in favor of U.S. gene sequencing company Illumina, challenging the European Commission's decision to investigate the company’s $7.1 billion acquisition of cancer-screening company Grail. 

The Story So Far

• Illumina founded Grail and spun it off in 2016, and then reacquired it in 2021 for $7.1 billion.

• The Commission investigated and blocked the deal in 2022, at the request of several national competition authorities, and ordered Illumina to divest Grail. The Commission argued that the deal could potentially stifle innovation and competition in the burgeoning field of genomic-based cancer detection, even if Grail had minimal current market presence.

• The Commission also fined Illumina $478 million for closing the deal in 2021 before securing its approval.

• Illumina sued the Commission, criticizing its decision to leverage the rarely-used Article 22 to assess the deal even though it was below the EU's merger revenue threshold.

• The EU's General Court had ruled in favor of the Commission in 2022.

• The CJEU sided with Illumina, in what is a final ruling that cannot be appealed.

What the CJEU Ruing Says

• The CJEU said EU regulators need to stick to the revenue threshold for examining mergers because this was an important guarantee of foreseeability and legal certainty for companies.

• "The Commission is not authorized to encourage or accept referrals of proposed concentrations without a European dimension from national competition authorities where those authorities are not competent to examine those proposed concentrations under their own national law," the CJEU judges added.

What’s Next

• Illumina said the CJEU ruling meant it did not have to pay the $478 million fine. "Today's judgment confirms Illumina's longstanding view that the European Commission exceeded its authority by asserting jurisdiction over this merger," the company said in a statement quoted by Bloomberg.

• EU antitrust chief Margrethe Vestager said the judgment and its implications need to be studied in detail. "More generally, we will consider the next steps to ensure that the Commission is able to review those few cases where a deal would have an impact in Europe but does not otherwise meet the EU notification thresholds," she said.

Why It Matters

The case has been closely watched by companies wary of EU scrutiny of minor deals and regulatory overreach.

The court’s decision to back Illumina sets a precedent that could reshape the landscape of EU merger enforcement. This outcome effectively limits the Commission's ability to assert jurisdiction over mergers involving companies that have negligible business activities within the EU.

The ruling is particularly relevant for deals in innovative sectors such as technology and biotech, where the competitive landscape is rapidly evolving and often involves players with limited market presence initially but significant potential future impact.