Illumina And The Quest For GRAIL: The Search For Merger Clearance In An Increasingly Aggressive And Global Antitrust Enforcement Environment

JurisdictionEuropean Union,United States,Federal
Law FirmMayer Brown
Subject Matterorporate/Commercial Law, Antitrust/Competition Law, M&A/Private Equity, Antitrust, EU Competition
AuthorMs Rachel J. Lamorte, Leo Nuovo, Camila Panama and William Stallings
Published date22 May 2023

The long and tortured regulatory-review path for Illumina, Inc.'s $7.1 billion acquisition of GRAIL, Inc. demonstrates the current climate of intense global antitrust scrutiny of transactions. The combination raises so-called "vertical" antitrust issues in that it combines firms at different levels of a supply chain. Illumina provides DNA sequencing tools used in the development and commercialization of multicancer early detection tests ("MCED" tests), while GRAIL is a downstream developer and provider of those MCED tests. Antitrust regulators in the United States and the European Union have been focusing on whether the deal would provide Illumina, the allegedly dominant supplier of a critical input in MCED test development, with the incentive and ability to disadvantage GRAIL's MCED rivals.

The deal, first announced in September 2020, triggered in-depth reviews in both the United States and European Union. On August 18, 2021, nearly a year after announcement, the parties closed the transaction. They did so despite the EU and US regulatory reviews remaining open and active. With regard to the European Union, Illumina justified closing the deal by taking the position that it did not believe the European Commission nor its member states had jurisdiction over the transaction, given that GRAIL has no business in the European Union. The European Commission continued its inquiry and on September 6, 2022, issued a ruling prohibiting the acquisition. It also accused the parties of improperly closing the transaction while the investigation was pending, potentially subjecting them to the maximum fine that the European Commission can impose (10% of Illumina's annual revenue) and informed the parties of its intention to use "restorative measures" to unwind the completed deal.

The review in the United States has been similarly fraught. Following a "second request" investigation, the Federal Trade Commission ("FTC"), in March 2021, filed a complaint challenging the deal in its administrative court. The FTC Administrative Law Judge ("ALJ") conducted a trial, hearing testimony from 56 fact witnesses and 10 expert witnesses and receiving over 4,500 exhibits into evidence. On September 9, 2022, the ALJ issued a detailed opinion, finding, on the facts, that FTC counsel had failed to prove its case. However, under established procedure for matters under the FTC's jurisdiction, the matter then went on appeal back to the full FTC'the same body that initially issued the complaint. On April 3, 2023, the FTC overturned the ALJ's findings and concluded that the acquisition was anticompetitive. It further ordered the parties to unwind the transaction.

As of the time of this publication, Illumina is appealing the FTC's decision to the US Court of Appeals for the Fifth Circuit. It also is appealing the European Commission's assertion of jurisdiction over the transaction and its substantive objections to the deal. Rulings are expected in these proceedings by the end of 2023 or beginning of 2024.

While it may take over a year for these proceedings to conclude, several...

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