The European Commission recently announced its decision to order Illumina, a US-based DNA sequencing developer, to unwind its acquisition of GRAIL, a US-based company that develops cancer screening tests, after the companies completed the merger before the Commission could conclude its investigation into the possible anti-competitive impact. On October 12, 2023, the Commission adopted restorative measures, in accordance with the EU Merger Regulation (“EUMR”), that not only required Illumina to divest GRAIL but also imposed transitional measures with which the companies must comply until the dissolution is complete.
The divestment measures require Illumina to restore GRAIL’s independence from Illumina; to enable GRAIL to be as viable and competitive in the marketplace as it was before the acquisition; and adhere to strict deadlines with sufficient certainty to ensure that the unwinding occurs in timely manner. Illumina is also required to submit a divestment plan that must be approved by the Commission. Among the transitional measures is a requirement for Illumina and GRAIL to remain separate and for GRAIL to remain viable until the divestment is complete. If the companies fail to comply with the order, they risk the imposition of additional fines of up to 10 percent of their annual worldwide turnover as well as periodic penalty payments of up to 5 percent of the company’s average daily aggregate turnover.
Illumina issued a statement acknowledging receipt of the divestiture order and emphasizing its commitment to resolve all issues regarding GRAIL in a timely manner. Illumina also maintains that the Commission does not have jurisdiction over the acquisition as it awaits a decision from the European Court of Justice on the jurisdictional challenge.
The Commission launched an investigation into the merger, in July 2021, in response to referral requests from six Member States; however, the companies announced in August 2021 that the acquisition had been completed despite the Commission’s ongoing investigation. In September 2022, the Commission concluded its in-depth investigation and prohibited the merger citing concerns that it stifled innovation and reduced choice in the emerging market for blood-based early cancer detection tests. In December 2022, the Commission adopted a Statement of Objections to the completed acquisition that included an outline of restorative measures demanding that Illumina unwind the acquisition. In July 2023, the Commission fined Illumina €432 million and fined GRAIL €1,000 after finding that the companies intentionally breached the standstill obligation in the EUMR, which requires companies with an EU dimension to refrain from implementing mergers until the transaction is approved by the Commission. Illumina also disclosed in an August 2023 securities filing that the US Securities and Exchange Commission had initiated an investigation into Illumina’s acquisition of GRAIL.