The Illumina/Grail case has drawn significant attention due to its potential to reshape merger control in the EU, since the European Commission (“the Commission”) tried to increase its competence to review mergers that did not fall within the scope of EU and national merger control regimes.
The Court of Justice of the European Union (“CJEU”) rendered its judgment in this case on 3 September 2024 and disapproves of the Commission’s attempt to increase its powers to scrutinize mergers through a creative interpretation of merger control rules. Merger control will still change, but not quite as fast as the European Commission and national competition authorities would have liked.
Background and Initial Proceedings before the General Court
Illumina Inc., a US-based company specializing in genetic analysis solutions, announced its intention to acquire Grail LLC, a developer of early cancer detection tests, in September 2020 for the hefty sum of € 8 billion. This proposed acquisition did not meet the turnover thresholds required for notification under the EU Merger Regulation (No 139/2004), nor did it meet the thresholds of any national merger control regime within the EU due to Grail's lack of substantial turnover in these jurisdictions. Following a complaint about this concentration, the European Commission solicited requests from Member States to review this deal under Article 22 of the EU Merger Regulation. The French competition authority sent a referral request and was subsequently joined by several other national competition authorities from Iceland, Norway, Belgium, the Netherlands and Greece. The Commission accepted these referral request and the requests to join and considered itself competent to assess such a referred concentration, provided the criteria of article 22 (1) were fulfilled: i) no EU dimension; 2) an effect on trade between EU Member States; and 3) a threat to significantly affect competition within the territory of the Member State(s) making the request.
The use of article 22 in this way was remarkable and heavily criticized, since it extended the scope of application of the article to allow the Commission to review mergers that were not caught by any merger control thresholds, thus greatly reducing legal certainty. The article was initially included in the predecessor of the current Merger Regulation for Member States who lacked a national merger control regime at the time (at the suggestion of the Netherlands, which gave the article its nickname “the Dutch clause”). The article had not been used in this way and in fact the Commission had suggested its removal from the Merger Regulation in a previous working paper. Shortly after accepting the referrals in the Illumina case, the Commission published a Guidance document on its intended renewed use of the referral mechanism of article 22, making clear that the Commission intended to review so-called killer acquisitions: mergers and acquistions where large companies buy small innovative companies before they reach maturity to prevent an innovative product or technology from entering the market.
The General Court approved of the Commission’s application of article 22, dismissing actions brought by Illumina and Grail challenging the Commission’s decisions. The General Court explored various methods of interpretation to apply to the article and found that almost all of these methods except the (historical, contextual and teleological interpretation) supported the Commission’s findings and decisions and that article 22 was intended as a “corrective mechanism” so that there was effective control of all concentrations which had the potential to endanger competition in the internal market.
CJEU Judgment
Advocate General Emiliou was highly critical of the General Court’s judgement and advised the CJEU to quash the judgement and the CJEU takes heed of that advice. The CJEU rules that all of the possible interpretation methods applied by the General Court to article 22 could not lead to the conclusion that the European legislator originally intended to confer an extra competence on the Commission to scrutinize mergers that do not have an EU dimension and also cannot be scrutinized by national competition authorities. The Court attaches great value to the predictability of the merger control system and the principle of a “one-stop shop”. Those principles would be undermined by the referral mechanism that the Commission advocated and applied in the Illumina / Grail case.
Consequences and response of Commission and national competition authorities
In response to the judgement all pending article 22 referrals on the basis of the Illumina/Grail interpretation of the article were withdrawn. However, the Commission issued a statement on the same day as the judgement emphasizing that it could still review transactions under article 22, if the national merger control regimes of the Member States granted their national competition authorities a “call-in” power to refer a transaction to the Commission. The first referral under such a competence has already occurred: the acquisition of Run:ai by Nvidia was referred to the European Commission by the Italian competition authority.
The statement of the Commission seems to be intended to convince Member States that do not yet have such a competence to introduce it in their competition law regimes. Several Member States are already explicitly considering to introduce such a power and in fact the Dutch Ministry of Economic Affairs announced a revision of competition law in which it is considering introducing such a power for the Dutch ACM. The newly installed Commission has put the review of merger control rules high on its list of priorities and is considering, amongst other options, the introduction of a competence to review a transaction based on deal value.
Conclusion
Although the broad interpretation and application of Article 22 of the current Merger Regulation is ruled out by the CJEU, the Commission and at least some of the national competition authorities are determined to increase their ability to scrutinize mergers and acquisitions. Although there is some merit in the argument that competition authorities are currently unable to review all transactions that threaten competition, the current options that are being considered will greatly reduce legal certainty: buyers cannot know for sure whether their transaction will be scrutinized by the competition authorities even after implementation.
