July 17, 2023

EU fines DNA sequencing pioneer €432 million for violating the EUMR’s standstill obligation

The European Commission recently announced that it fined Illumina, a San Diego-based pioneer of DNA sequencing, approximately €432 million ($476 million) for proceeding with its acquisition of GRAIL, a San Francisco-based cancer-testing company, before the transaction was approved by the Commission.  The Commission alleges that the merger violates “the standstill obligation” in the EU Merger Regulation (“EUMR”).  GRAIL was fined €1,000 for its alleged role in the infringement.  The standstill obligation, set out in Article 7(1) of the EUMR, requires companies with an EU dimension to refrain from implementing mergers until the Commission approves the transaction.  The Commission considers the obligation to be a cornerstone of the European merger control system enabling it to investigate possible anticompetitive effects of a merger before it can have an irreparable negative impact on the competitive structure of a market.

In July 2021, following a referral request from six Member States, the Commission launched an investigation into the proposed acquisition of GRAIL by Illumina.  However, in August 2021, despite the Commission’s ongoing investigation, Illumina publicly announced that the acquisition of GRAIL had been completed.  While the Commission informed the companies in July 2022 that the merger violated EU merger controls and reportedly blocked the transaction in September 2022 for anticompetitive reasons, its recent decision to impose the record-breaking fine upon Illumina was reportedly intended to have a deterrent effect and reflect the gravity of its actions.  On July 12, 2023, the Commission specifically found that Illumina acted intentionally and strategically by weighing the risk of potential fines by the Commission against the risk of paying break-up fees if the acquisition was not completed, before proceeding with the acquisition.  According to the Commission, Illumina also considered the potential profits it could make by “jumping the gun,” even if Illumina was forced to ultimately divest GRAIL.

The Commission indicates that Illumina’s fine reflects the unprecedented and very serious nature of Illumina’s actions that have undermined the effective functioning of the EU merger control system.  The Commission reports that the €432 million fine represents 10 percent of Illumina’s aggregated turnover, the statutory limit allowed under the EUMR.  While the Commission also found that GRAIL played an active role in the infringement, it only imposed a symbolic fine of €1,000 because this is the first fine of its kind ever imposed upon a target company.

European Commission Press Release