European antitrust regulator delivers ultimatum to Illumina over $8B Grail deal

The European Commission has delivered a list of objections to Illumina and Grail over their decision to proceed with their multibillion-dollar merger despite the regulators’ ongoing investigation. It also noted the measures watchdogs plan to take to cordon off the potential effects of the deal on the wider market.

The commission described its actions as an unprecedented step in response to the companies’ defiant move last month, which finalized an $8 billion transaction in the face of pending antitrust probes on both sides of the Atlantic.

“This is the first time companies openly implement their deal while we are carrying out an in-depth investigation,” Margrethe Vestager, the commission’s executive vice president in charge of competition policy, said in a statement

“Under our rules, companies have to wait for the commission's clearance before implementing deals that are subject to our review,” Vestager said. “Today, we send our objections to the companies informing them of the measures we intend to take to prevent the potentially detrimental impact of the transaction on the competitive structure of the market.”

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Even though Illumina and Grail have pledged to keep their business operations separate pending final reviews, being officially found in breach of the EU’s “standstill obligation” or other merger regulations could lead to fines of up to 10% of each party’s annual worldwide turnover—which for Illumina alone topped $3.2 billion in 2020—and the commission said that, in its preliminary view, the companies had already done so.

The DNA sequencing giant moved forward with the acquisition of its cancer-testing former spinout in late August after the deal was first announced one year ago. Reuniting with Grail would give Illumina broad reach into the clinical testing markets, starting with the recently launched Galleri blood test, which aims to detect early signs of cancer regardless of its location in the body.

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However, European antitrust watchdogs and the U.S. Federal Trade Commission (FTC) have said the deal could give Illumina an opportunity to throttle the R&D progress of potential cancer diagnostic competitors due to its weighty global market share in the necessary DNA analysis hardware.

The commission opened a full investigation into the companies’ proposal this past July following a monthslong preliminary review, while the FTC said it would largely postpone its actions until after a determination was made across the pond—a decision Illumina CEO Francis deSouza described as “time-wasting maneuverings” this past summer as the clock ticked down on the acquisition’s original terms.

The commission did not provide additional details into the specific objections it delivered to Illumina—but it did say its measures “go beyond Illumina's proposal” to hold onto Grail as a separate, wholly owned subsidiary and identified “a number of serious shortcomings” in the companies’ plan.

Illumina and Grail now have the chance to respond to European regulators, after which the commission said it may decide to make the interim measures legally binding and potentially enforced with “period penalty payments” in cases of noncompliance.