ECJ strengthens legal certainty in EU merger control: Judgment in Illumina/Grail

In a landmark judgment, the European Court of Justice (ECJ, C-611/22 P and C-625/22 P) has denied the EU Commission's authority under Article 22 of the European Merger Control Regulation (EUMR) in the Illumina/Grail case. The EU Commission is not entitled to initiate or accept the referral of proposed concentrations that lack a European dimension by national competition authorities if they are not responsible under national law for reviewing these transactions.

The decision has significant implications for merger control in the European Union. On the one hand, it strengthens legal certainty for companies planning transactions. On the other hand, it significantly limits the European Commission's ability to review so-called “killer acquisitions”.

Background to the decision

The US company Illumina Inc. planned to acquire the start-up Grail, which specializes in innovative blood tests for early cancer detection. The companies involved in the transaction did not meet the turnover thresholds required for merger control in the EU, which is why the transaction was not notified to the EU Commission. The transaction was also not notified in the individual member states of the European Union or the contracting states of the EEA because it did not fall within the scope of their national merger control regulations as Illumina and Grail did not meet national turnover thresholds. 

The EU Commission then asked several national competition authorities to file a request under Art. 22 of the EUMR. According to this provision, the EU Commission may examine mergers at the request of one or more EU member states even if the scope of European merger control is not triggered, but a significant adverse effect on competition in the internal market is possible. The original intention of this provision was to offer EU member states without their own merger control regime the opportunity to refer a case to the EU Commission. According to this, an EU member state should be able to refer a case to the EU Commission for review even if the transaction does not fall under that member state's merger control regime. The European Commission wanted to close an alleged gap in merger control in order to be able to review so-called “killer acquisitions”. These are cases in which highly valued start-ups are acquired by large companies. Due to the low or, in some cases, non-existent turnover of these start-ups, such “killer acquisitions” usually fall below the thresholds of the EU Commission and the EU member states.

In line with the EU Commission's broad interpretation, the French competition authority referred the Illumina/Grail case to the EU Commission in March 2021 based on Art. 22 EUMR, even though the parties did not meet the thresholds of the French merger control regime. The EU Commission accepted the case and prohibited the merger in 2022. Since the merger had already been implemented, the EU Commission also imposed a record fine of EUR 432 million on Illumina and ordered the break-up of the transaction.

The ECJ's decision

The ECJ ruled that the EU Commission was not competent in this case. Specifically, the Court found that Member States that do not have the authority to review a merger under their own merger control regime may not refer it to the EU Commission via Art. 22 EUMR. The ECJ has thus put a stop to the EU Commission's attempt to extend the scope of Art. 22 EUMR.

The Court emphasized that the turnover-based thresholds of the EUMR and the national merger control regimes are a central element of merger control. They provide companies with the predictability and legal certainty necessary to plan their transaction projects. This clarification strengthens the position of companies that rely on the thresholds of the EUMR and national merger control regimes to determine whether notification to the EU Commission or national authorities is required.

In addition, following the ECJ ruling, it is clear that the EU Commission's prohibition and fine decisions against Illumina cannot stand. The EU Commission was not competent to decide on the case, and in the absence of a notification requirement, Illumina and Grail were not subject to a prohibition on implementation.

Implications for practice

The judgment significantly limits the jurisdiction of the EU Commission to review mergers. Although EU member states can still refer a case to Brussels under the conditions of Art. 22 EUMR, they can only do so if they are also authorized to review the transaction under their own merger control law.

The ECJ's decision therefore provides more legal certainty for companies, as they can once again rely more on the clear rules of the merger control system and no longer have to fear completely unpredictable reviews by the EU Commission.

However, it is to be expected that the EU Commission will now try to adapt the EUMR quickly in order to be able to review “killer acquisitions” in the future. In addition, there is an increasing trend in EU member states to also subject transactions to national merger control via ex-officio take-up options (so-called “call-ins”) that do not meet the respective turnover thresholds of the member states. Corresponding rules exist, for example, in Denmark, Ireland, Italy, Sweden, Slovenia, Lithuania, Latvia and Hungary. The trend is therefore towards a steady expansion of the jurisdiction of competition authorities to review transactions. 

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