The European Commission Fines Illumina and GRAIL for Implementing their Acquisition without Prior Merger Control Approval

On July 12, 2023, the European Commission (“the Commission”) imposed fines on Illumina and GRAIL in the amounts of approximately €432 million and €1,000, respectively. This action was taken due to the companies' violation of EU merger control rules by proceeding with their proposed merger before obtaining approval from the Commission.

The standstill obligation is a fundamental aspect of the European merger control system, mandating that merging companies refrain from implementing mergers until approved by the Commission. This allows the Commission to fulfill its role in assessing the potential impact of structural changes on competition.

In July 2021, the Commission initiated a thorough investigation into Illumina's acquisition of GRAIL. In September 2022, the Commission blocked the transaction due to concerns about its significant anticompetitive effects, which could impede innovation and limit choices in the emerging market for blood-based early cancer detection tests. However, in August 2021, while the Commission's review was still ongoing, Illumina publicly announced the completion of its acquisition of GRAIL. On this date, all necessary documents were executed by the parties, and GRAIL merged with two wholly-owned subsidiaries of Illumina. Moreover, Illumina made payments to GRAIL's shareholders in exchange for their shares. In July 2022, the Commission issued a Statement of Objections to Illumina and GRAIL, preliminarily finding that they had violated the EU Merger Regulation by implementing their merger before the conclusion of the Commission's in-depth investigation.

In today's decision, the Commission reaffirms its initial stance that Illumina and GRAIL intentionally breached the standstill obligation. The Commission determined that by finalizing the transaction, Illumina gained decisive control over GRAIL and actively exercised that control.

Under the EU Merger Regulation (“EUMR”), the Commission has the authority to levy fines on companies that intentionally or negligently violate the standstill obligation, with the fines amounting to a maximum of 10% of the companies' aggregated turnover. In determining the fine amount, the Commission takes into account the severity of the infringement and any mitigating or aggravating factors. The objective of the fine is to have a deterrent effect that discourages similar conduct in the future.

Illumina and GRAIL deliberately and knowingly violated the standstill obligation while the Commission was conducting its comprehensive investigation. This constitutes an unparalleled and highly significant violation that undermines the proper operation of the EU merger control system. Specifically, the Commission determined that:

• Illumina and GRAIL knowingly breached the standstill obligation during the Commission's investigation. This is a serious violation that undermines the EU merger control system. Illumina strategically considered the risks and benefits, ultimately deciding to proceed with the transaction while it was still being investigated. The Commission imposed a fine of approximately €432 million, taking into account Illumina's deliberate actions and the mitigating factor of holding separate measures.
• GRAIL, despite being fully aware of the standstill obligation, actively participated in the violation. It took legal actions to facilitate the completion of the transaction, even though it knew that the Commission's investigation was still ongoing. However, considering that this is the first instance of imposing a fine for gun-jumping on a target company, the Commission opted to impose a symbolic fine of €1,000 on GRAIL.

 

You can access the full text of the press release here.

 

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Zumbul Attorneys-at-Law

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