Clifford Chance

In his opinion in the Illumina / Grail case, the Advocate General expressed the view that Member States may not refer a merger to the EU Commission for review where they have no competence to review the merger under national law.

The acquisition of GRAIL LLC ("Grail") by Illumina, Inc. ("Illumina") received widespread attention both from the competition law community and competition authorities – however, one might argue, for all of the wrong reasons.

In 2021, Illumina announced plans to acquire Grail. As the merger did not meet any of the relevant thresholds set out in EU or national merger control rules of the EU Member States ("Member States"), it was not notified to the European Commission ("Commission") or the respective national competition authorities ("NCAs") of the Member States. Nonetheless, following an "invitation" on part of the Commission to do so, the French NCA referred the transaction to the Commission for review under Article 22 EUMR. Article 22 states that Member States may request the Commission to examine any merger that does not meet the EUMR filing thresholds but affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request.

For many years, the Commission's policy was to only accept Article 22 requests if the first requesting Member State had jurisdiction to review the referred transaction under its national merger control regime, unless it had no such national regime. But in March 2021 it announced a change of policy and stated that, in certain circumstances, it would accept such referral requests even if none of the referring member states would have been able to review the transaction under their national regimes. The change was motivated by concerns that some transactions could harm competition in the EU even if the target does not yet have significant sales or activities, e.g. businesses that are developing pipeline pharmaceutical products that would compete with those of the buyer, or start-up companies that might one day become a significant competitor to the acquirer.

Illumina/Grail was the first transaction caught by this policy change. Through an information letter, the Commission informed Illumina and Grail of the referral request and stated that the merger could not be implemented due to the standstill obligation laid down in Article 7 EUMR. In August 2021, while the Commission's review was still ongoing, Illumina publicly announced that it had completed its acquisition of Grail. Following review of the transaction under the EUMR, the Commission prohibited the acquisition of Grail by Illumina due to competitive concerns in September 2022, and in July 2023 fined Illumina €432 million for violating the standstill obligation. In an open letter, various former judges and heads of competition authorities, including two former judges of the EU Courts, criticised the Commission's assertion of jurisdiction over the deal.

Illumina unsuccessfully challenged the Commission's decisions accepting the referral by the French NCA and requests by other NCAs to join it before the General Court ("GC"). In its judgment, the GC found that Article 22 EUMR permitted the Commission to accept the referral requests, even though none of the requesting Member States had jurisdiction to review the transaction under their national merger control rules. The GC argued that one of the objectives pursued by Article 22 EUMR lay in providing a "corrective mechanism", permitting for the review of all mergers which are capable of impeding effective competition in the internal market and falling outside the scope of the merger control rules between the EU and the Member States because the turnover thresholds have not been met.

Illumina appealed the decision of the GC before the EU Court of Justice. In his opinion, AG Emiliou disagreed with the approach taken by the Commission and the GC in interpreting Article 22 EUMR. In particular, the AG considered that the GC had failed to properly consider documents of the Council of the EU that were prepared during the legislative passage of the original version of the EUMR. Those documents indicated that the intended purpose of Article 22 was to allow EU member states that did not, at the time, have a national merger control regime to refer transactions to the Commission for review under the EUMR. Not a single one of those documents supported the GC's view of Article 22 as a "corrective" mechanism. Moreover, the texts that the GC had taken into account did not, in the AG's opinion, support its conclusions.

The AG identified various adverse consequences that would flow from the interpretation proposed by the Commission and the GC, including a lack of legal certainty for merging parties and a less efficient system of merger control. In particular, parties to non-notifiable mergers would not have any means to predict the fate of their merger unless they file informal notifications with up to 30 different competition authorities. He also doubted that the Commission's proposed Article 22 policy was necessary to "fill a gap" in the scope of the EUMR, given the recent Towercast judgment, in which the Court of Justice confirmed that mergers which do not meet the thresholds laid down in the EUMR and the national merger control rules can be subject to review under the prohibition of agreements restricting competition contained in Article 101 TFEU and the abuse of dominance prohibition in Article 102 TFEU.

The outcome of the case is being awaited with great interest by the parties, as the fate of the Commission's further decisions against Illumina and Grail also depends on it: should the Court of Justice follow the AG's reasoning and annul the Commission's information letter to Illumina, the decision to accept the referral from the French NCA and the decisions accepting the request to join, the subsequent decisions against Illumina and Grail to prohibit the transactions and to impose fines for implementing it without clearance would lack a legal basis under EU law, and consequently would have to be annulled as well.

That outcome would also substantially improve legal certainty for undertakings that are parties to transactions that do not meet thresholds for notification at either EU or national level. However, any legal certainty achieved would be nullified should the EU or (more likely) the Member States in a possible reaction to the judgment decide to amend their respective merger control regimes to ensure that below-thresholds mergers can be "called in" for review by a competition authority, even if not subject to mandatory filing.