Opinion

European Commission's record gun-jumping fine on Illumina serves as warning to merging parties

Published Date
Jul 19, 2023
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The European Commission (EC) has imposed a fine of around EUR432 million on genomics company Illumina for closing its acquisition of blood-based cancer test developer GRAIL before the conclusion of the EC’s merger control investigation into the transaction. GRAIL was fined EUR1,000.

Illumina’s fine is the highest ever imposed by the EC for breach of procedural rules under the EU Merger Regulation (EUMR). It is almost four times higher than the EUR124.5m gun-jumping fine imposed on Altice in 2018. 

But it was not unexpected. 

Illumina disputed that the EC had jurisdiction to assess its planned acquisition of GRAIL. It challenged the EC’s revised policy on Article 22 referrals, which allows member state antitrust authorities to refer to it for review transactions that do not meet EU or national merger control thresholds (see our commentary on this aspect of the case). 

In August 2021, while the EC’s in-depth investigation into the transaction was ongoing, Illumina publicly announced that it had completed the deal. Unsurprisingly, the EC launched an investigation into whether Illumina breached the EUMR’s “standstill” obligation, which prevents merging parties from implementing their transaction prior to receiving EC approval. 

Shortly after, the EC adopted interim measures aimed at preventing harm to competition pending the outcome of the EC’s merger review. The measures required GRAIL to be kept separate from Illumina (with Illumina providing funds for GRAIL’s operation and development), prohibited the sharing of confidential information and obliged the parties to deal with each other on arm’s length terms. This was the first time the EC had adopted interim measures in a gun-jumping scenario. The parties have appealed. 

The EC has now concluded its gun-jumping probe. It found that Illumina and GRAIL “knowingly and intentionally” breached the standstill obligation. This was, said the EC, an “unprecedented and very serious infringement undermining the effective functioning of the EU merger control system”. In particular, the authority took issue with the fact that Illumina strategically weighed up the risk of a gun-jumping fine against the risk of having to pay a high break-up fee (USD300m) in the event that the deal failed. 

The case is unusual on its facts. It is the first (and only) time that merging parties have intentionally completed a transaction during an ongoing EC merger review. We don’t expect to see many other cases with the same fact pattern.

However, for merging parties, the fine is still a clear warning of the risks of breaching procedural merger control rules. It shows the EC’s willingness to use the full extent of its powers. In its press release the EC suggests that it initially set a higher fine, but was ultimately subject to the statutory limit of 10% of Illumina’s global turnover and so had to impose an amount of around EUR432m. 

The EUR1,000 fine on GRAIL is also important. The EC notes it was only symbolic given that this is the first time it has imposed a gun-jumping fine on a target company. But the authority made clear its findings that GRAIL played an active role in the infringement. In future, target companies knowingly involved in any breach may well face much higher penalties. 

The saga of this case continues. In September 2022 the EC blocked the transaction, concluding it would harm competition, stifle innovation and reduce choice in the emerging market for blood-based early cancer detection tests. This in itself was a landmark decision, marking the EC’s first prohibition based solely on vertical concerns and the first time the EC has blocked a below-threshold merger. 

The parties’ appeal of the prohibition decision is pending, as is their appeal of the interim measures decision and the European Court of Justice’s ruling on the EC’s revised Article 22 policy. Even the gun-jumping aspects of the case are not over – Illumina has announced it will appeal the fine.

In the meantime, the parties await a final EC decision on how the deal should be unwound. We will keep you updated as developments unfold.

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This content was originally published by Allen & Overy before the A&O Shearman merger