Today, the European Commission has approved, under the EU Merger Regulation ('EUMR'), Illumina's plan to divest GRAIL following the restorative measures requiring Illumina to unwind its completed acquisition of GRAIL, which the Commission adopted in October 2023.
In September 2022, the Commission prohibited the acquisition of GRAIL by Illumina over concerns that it would have stifled innovation and reduced choice in the emerging market for blood-based early cancer detection tests. Illumina and GRAIL unlawfully completed the merger during the Commission's in-depth investigation, in breach of EU merger control rules. In July 2023, the Commission fined both companies for this infringement. In October 2023, it adopted restorative measures requiring Illumina to divest GRAIL in order to restore the competitive situation prevailing before the completion of the transaction. The restorative measures required Illumina to submit a divestment plan for the disposal of GRAIL to the Commission for approval.
The decision approving the divestment plan
With today's decision, the Commission has approved the divestment plan submitted by Illumina for the disposal of GRAIL. In line with the restorative measures, the divestment plan foresees that Illumina can select the appropriate divestment method (either via a trade sale or a capital markets transaction). The Commission found that the plan, including the optionality between different divestment methods, met all the conditions set out in its decision imposing restorative measures on Illumina and GRAIL. In particular:
- GRAIL's independence from Illumina would be restored to the same level enjoyed by GRAIL prior to the acquisition. Restoring GRAIL's independence will remove the possible harm to competition resulting from Illumina's ability and incentive to delay or disadvantage GRAIL's rivals.
- The divestment plan ensures that GRAIL will be able to continue to operate as a viable and competitive business after the divestment as it was before Illumina's acquisition. This will ensure that the innovation race between GRAIL and its rivals can continue in conditions similar to those in place before the transaction.
- The divestment options set out in the divestment plan are capable of being exercised in a timely manner, within strict deadlines and with sufficient certainty, so that the pre-transaction situation can be promptly restored.
Therefore, the Commission decided to approve Illumina's divestment plan.
The divestment plan does not affect the transitional measures that Illumina and GRAIL need to comply with until Illumina has dissolved the transaction, as ordered by the Commission in its decision of October 2023, and confirms their applicability until the disposal is finalised. Such measures will ensure that Illumina and GRAIL continue to be held separate until the transaction is completely unwound in order to prevent further integration of GRAIL into Illumina's business and subsequently irreparable harm to competition.
Companies and products
Illumina, headquartered in the US, is a global genomics company, which develops, manufactures and commercialises next generation sequencing ('NGS') systems, including sequencing instruments, consumables and related services. Illumina's NGS systems are medical devices used in a variety of applications, including by customers in the oncology space that develop and run blood-based tests that can detect cancer or select appropriate therapies for cancer patients.
GRAIL, also headquartered in the US, is a healthcare company developing blood-based cancer tests based on genomic sequencing and data science tools. GRAIL's flagship product is "Galleri", an early multi-cancer detection test, whose purpose is to detect cancers in asymptomatic patients from a blood sample. In April 2021, GRAIL initiated a limited commercialisation of Galleri in the US. GRAIL has two additional pipeline products: (i) a diagnostic aid for cancer testing used to confirm a diagnosis of cancer in symptomatic patients, and (ii) a minimal residual disease test, to detect potential relapse in patients after cancer treatments. GRAIL was founded by Illumina in 2016, and was spun off later in the same year.
Background
The Illumina/GRAIL merger case
Following a referral request from six Member States, on 19 April 2021 the Commission accepted to review the proposed acquisition of GRAIL by Illumina and opened an in-depth investigation on 22 July 2021. On 13 July 2022, the General Court confirmed the Commission's jurisdiction to review the transaction.
While the Commission's in-depth investigation was still ongoing, Illumina publicly announced that it had completed its acquisition of GRAIL. As a result, on 29 October 2021, the Commission adopted interim measures to ensure that Illumina and GRAIL would remain separate pending the outcome of the Commission's merger investigation.
On 6 September 2022, the Commission prohibited the implemented acquisition of GRAIL by Illumina over concerns that the merger would have stifled innovation and reduced choice in the emerging market for blood-based early cancer detection tests. Following the prohibition decision, the Commission renewed and adjusted the interim measures on 28 October 2022.
On 5 December 2022, the Commission sent a Statement of Objections to Illumina and GRAIL outlining the restorative measures it intended to adopt.
Furthermore, on 12 July 2023, the Commission fined Illumina and GRAIL €432 million and €1,000 respectively, for implementing their proposed merger before approval by the Commission, in breach of EU merger control rules.
Finally, on 12 October 2023 the Commission adopted restorative measures that order i) Illumina to divest GRAIL and restore the situation prevailing before the completion of the acquisition, and (ii) transitional measures that Illumina and GRAIL need to comply with until Illumina has dissolved the transaction.
Procedural background
The obligation not to implement a notifiable transaction either before its notification or before it has been declared compatible with the common market is laid down in Article 7(1) of the EU Merger Regulation. This standstill obligation prevents potentially irreparable negative impact of transactions on the market, as well as possible irreversible integration of merging parties, pending the outcome of the Commission's merger investigations.
Compliance with the standstill obligation is essential for legal certainty, enables the Commission to conduct a correct analysis of the impact of mergers in the market and prevents the potentially detrimental impact of transactions on the competitive structure of the market. In this way, market forces work for the benefit of consumers. In cases where the standstill obligation has not been respected, and the Commission subsequently decides to prohibit the merger, it is necessary to adopt measures restore the situation pre-transaction.
Article 8(4)(a) of the EU Merger Regulation authorises the Commission to take appropriate restorative measures to restore the situation prevailing prior to the implementation of the concentration where the Commission finds that a concentration has already been implemented and that concentration has been declared incompatible with the internal market.
In case of non-compliance with the restorative measures, the Commission can impose periodic penalty payments of up to 5% of the average daily aggregate turnover of the company under Article 15 EUMR. Moreover, companies failing to comply with the restorative measures can be fined up to 10% of their annual worldwide turnover under Article 14 of the EU Merger Regulation.
