Commission can call in deals for review that do not hit any merger control thresholds in an Article 22 referral procedure

19 July 2022

The General Court of the EU (“GC”) backs the European Commission (“EC” or “Commission”) and finds that the Commission has jurisdiction to review a merger that does not meet any European or national merger control thresholds. On 13 July 2022, the GC dismissed Illumina’s action for annulment against the EC’s decision to assess the acquisition of Grail by Illumina. That decision entailed the acceptance of a referral request under Article 22 of the EU Merger Regulation (Regulation No 139/2004, “EUMR”) from France, as joined by other Member States.

The GC validated the Commission’s controversial policy change whereby it announced that it would start welcoming referrals under Article 22 EUMR in cases where neither the Commission nor the referring Member State – under its own national merger control rules – has jurisdiction. In the Commission’s earlier practice, referrals were discouraged where the referring Member State did not have jurisdiction over the case either, but the EC has now taken a U-turn. The EC issued new Guidance on the application of the Article 22 referral mechanism on 26 March 2021, pointing out that deals can be called in for review even after they have been implemented.

The proposed acquisition of exclusive control over Grail, an American biotech company which develops cancer screening tests based on genomic sequencing, by Illumina, an American company focused on genomic sequencing inter alia for cancer screening tests, was the first case to test the EC’s new approach. The EC had actively solicited Member States to submit a referral request to it, which France did, followed by a couple of other Member States, including Belgium. The EC accepted the referral request and asserted jurisdiction to review the case.

Illumina challenged the Commission’s competence to accept the referral, but the GC found that the EC was right to do so. The GC found that the referral mechanism of Article 22 EUMR is a corrective mechanism to the turnover-based jurisdictional thresholds primarily defining the Commission’s competence and is part of the overall objective of the EUMR to allow for effective control of all concentrations with significant effects on the structure of competition in the EU. As a result, the GC considered that a referral request under Article 22 EUMR may be submitted irrespective of the scope of national merger control rules. 

Illumina has already indicated that it will appeal the GC’s judgment, but also that it is looking to secure approval for its acquisition by the Commission.

The potential impact of the GC’s judgment cannot be denied, and it will definitely render merger control analysis more complex. Parties will need to carefully consider the target and its potential as an innovator, whether it is providing key inputs or components for other industries, has access to important strategic assets, etc. In certain cases it may be advisable to proactively approach the Commission or the relevant national authorities to explore whether there may be any interest in picking up the case.

Please reach out to the Eubelius Competition Team if you would like more information about this.