The ECJ judgement Illumina/Grail – Minus plus minus does not equal plus regarding jurisdiction in European merger control

In 2020, Illumina, a US-based leader in genomic sequencing technology, planned to acquire Grail, a company focusing on early cancer detection. This transaction in the emerging market for cancer tests raised competitive concerns as it was considered a “killer acquisition”. A killer acquisition refers to a situation where a dominant company acquires a smaller, innovative rival (such as a startup) to stifle potential competition, often eliminating the target’s future competitive threat before it can materialize. In this case, Illumina’s acquisition of Grail, though focused on innovation in early cancer detection, raised those concerns in the emerging field of cancer diagnostics.

Although the merger did neither meet European nor national merger control thresholds of any EU Member State (Grail as the target had actually no business activities in Europe yet), the French competition authority and other Member States referred the transaction to the Commission under Art. 22 EUMR after the Commission had encouraged the Member States to do so. The Commission interpreted the wording of Art. 22 EUMR in a way that enables Member States which have a merger control regime of their own to submit such a letter of request.

In April 2021, the Commission accepted the referral and decided to review the acquisition. The Commission was concerned that Illumina might limit access to its next-generation sequencing (NGS) technology, crucial for Grail’s competitors in cancer diagnostics. The Commission decided to prohibit the merger, raising concerns that the acquisition would harm innovation and competition in the market for early cancer detection technologies. In addition to blocking the deal, the Commission also imposed a fine on Illumina for “gun-jumping” which refers to the illegal practice of merging or implementing aspects of a merger before receiving clearance from the relevant competition authorities, thereby bypassing required antitrust review procedures.

Illumina challenged the Commission's decision to accept the referral from the French competition authority pursuant to Art. 263 TFEU before the General Court of the European Union (“General Court”) arguing that the Commission lacked the authority to review the merger since it did not meet the jurisdictional thresholds. They claimed the referral process was improperly used.

On 13 July 2022, the General Court ruled in favor of the Commission, dismissing Illumina’s challenge (T‑227/21). The General Court confirmed a broad interpretation of Art. 22 EUMR and that the Commission had the right to review mergers under this regime, even if the transaction does not meet thresholds under European and national merger control law, as long as the transaction might have a significant or harming impact on competition – especially when innovative markets are at stake.

Illumina appealed the decision, arguing that the Commission’s reliance on Art. 22 EUMR circumvented jurisdictional limits and created legal uncertainty.

In his non-binding opinion dated 21 March 2024, Advocate General Emiliou criticized the Commission’s approach, suggesting that the use of Art. 22 EUMR in this case was inappropriate. He argued that the Commission’s strategy could undermine legal certainty for businesses, particularly regarding the predictability of when and where mergers need to be notified.

On 3 September 2024, the ECJ overturned the Commission's approach regarding the interpretation of Art. 22 EUMR (C-611/22 P; C-625/22 P). The ECJ nullified the judgement of the General Court on 13 July 2022 and the decisions made by the Commission on 19 April 2021. A clear battle won by Illumina and Grail in the last instance (although the transaction will eventually not be concluded due to antitrust concerns in the US). Looking at the ECJ’s reasoning, it is important to note that the court did not disagree on all points of the judgement made by the General Court. However, the Commission’s principal argument that Art. 22 EUMR empowered it to act upon a notification from a Member State, irrespective of whether that Member State having its own national merger control regime, was rejected.

The ECJ took a further look at the differentiation made by the General Court between Art. 4 (5) EUMR and Art. 22 EUMR. Art. 4 (5) EUMR enables the Commission to exclusively examine a case without community-wide significance at the request of one of the parties to the transaction. Art. 22 EUMR still enables other Member States to act based on their own national merger control regime. It is important to keep in mind that Art. 22 EUMR is primarily a tool for Member States with no own national merger control regime – looking back at the name “Dutch-clause” given, at a time when the Netherlands did not have a national merger control regime of its own. In 2021, the Commission laid down a wider interpretation of Art. 22 EUMR (cf. in particular Communication 2021/C 113/01) which the ECJ has now turned against in its judgement.

According to the ECJ, looking at the systematic interpretation, the General Court’s ruling that an application made on the basis of Art. 22 EUMR was independent of the existence or the range of a national merger control regime, being applied ex-ante, is incorrect and cannot be reasoned by the original intention of the legislator. Also, the teleological interpretation does not argue in favor of Art. 22 EUMR as a corrective for a wider interpretation of the turnover- based merger control system. The General Court addressed a need for more flexibility in the merger control system – this need was not confirmed by the ECJ. According to the ECJ, the intention behind Art. 22 EUMR is predictability and legal certainty for companies as well as efficient merger control by the competent authority.

It has to be kept in mind that the EUMR is the foundation for a so-called “one-stop shop system”, enabling an analysis of transactions that influence the market on a cross-border scale. Art. 22 EUMR therefore requires a connection with or influence on competition within the internal market of the European Union. Enabling the Commission to challenge any transaction, without fulfilling this requirement, would lead to a disproportionate amount of uncertainty for companies.

The primary objective shall continue to be the strengthening of competition within the European Union through the application of the EUMR, as well as the national merger control laws of each Member State.

The ECJ’s judgement has far-reaching consequences for the European and national merger control regimes.

Considering the Commission’s general ambition to review all transactions that could have a relevant economic impact in Europe, the Commission is likely to push for a reform of the EUMR to strengthen its own position in examining transactions. Because of the ECJ’s interpretation of Art. 22 EUMR, the Commission currently depends on the thresholds defined in national merger regimes. The Commission can only review a case by way of a referral pursuant to Article 22 EUMR if the relevant thresholds in national merger regimes are met. Additionally, even if the relevant national thresholds are met, the Commission relies on the national competition authorities’ willingness to refer a case pursuant to Art. 22 EUMR. This dependency poses a problem for the Commission, as it only has a limited influence on case allocation. However, given the complexity and the necessity for the Member States to consent to an amendment of the EUMR, it remains to be seen whether the Commission will invest the time and energy to push for such an amendment.

It bears some significance that in the run-up to the ECJ’s judgement, national legislators have already become active in mitigating the consequences of a restrictive interpretation of Art. 22 EUMR, ultimately adopted by the ECJ. Several national merger regimes have been made more flexible to give national competition authorities further room to examine mergers & acquisitions. Among others, Italy, Denmark and Ireland have introduced the possibility for their competition authorities to also assess transactions below certain thresholds defined in their merger control regimes. Additionally, Germany as well as Austria have introduced transaction value thresholds in the past years (cf. in particular: Merger control of Venture Capital investments | LUTHER Rechtsanwaltsgesellschaft mbH (luther-lawfirm.com)). Hence, the perceived loophole left by the ECJ’s interpretation of Art. 22 EUMR has already been partially closed by national legislators. In its first statement commenting on the Commission’s defeat in the Illumina/Grail-case, Commissioner Vestager pointed to this trend and concluded that in her view the judgement only has minor consequences.

However, it is doubtful whether the Commissioner’s claim is truly accurate. First statements of national competition authorities, such as the French competition authority, indicate otherwise. The statements suggest that national competition authorities may increasingly rely on Art. 102 TFEU and their national provisions to apply an ex-post control of mergers & acquisitions not captured by merger control regimes. This even applies to the period of time after the closing of the transaction. Recently, the ECJ approved this extensive approach in the Towercast decision (C-449/21). In this scenario, pursuant to Art. 102 TFEU competition authorities assess whether the acquisition signifies an abuse of a dominant market position by way of strengthening market power. This does not apply to transactions which were approved under a merger control regime.

Hence, in the future it will become more important for legal advisors to assess whether the acquisition could give rise to competition concerns pursuant to Art. 102 TFEU and is likely to be taken up by a competition authority at a later date. Although the ECJ already ruled in 1973 in Continental Can (Case 6/72) that acquiring a competitor can constitute an infringement of Art. 102 TFEU and this approach is also common practice for competition authorities in other countries (such as the US and Japan), the judgement in the Illumina/Grail-case significantly increases the importance for legal counselors to take Art. 102 TFEU into account when advising clients throughout the whole process of a transaction, from assessing the initial feasibility of the case to the drafting of the SPA. In this context, in particular walk-away clauses (termination rights) that allow the parties to back out of the transaction in case of Art. 102 TFEU proceedings by a competition authority will gain increased importance. Other than that, it remains to be seen how the European and national legislators will react to this landmark judgement.