One Stop Shop Called Into Question ' EU General Court Confirms The European Commission's Stance On Referrals Of Non-Notifiable Deals From National Competition Authorities

• Published date: 26 July 2022
• Subject Matter: orporate/Commercial Law, Anti-trust/Competition Law, M&A/Private Equity, Antitrust, EU Competition
• Law Firm: Morrison & Foerster LLP
• Author: Mr Tom McQuail and Maria Francisca Couto

The EU General Court ("General Court") has confirmed that the European Commission ("Commission") can examine deals that do not trigger merger control thresholds in the EU or any EEA Member State¹ following a referral request from national competition authorities. This ruling, which upholds the Commission's stance in the Illumina/Grail deal, confirms the broad reach of the Commission's jurisdiction to review a transaction, even if the merger control thresholds are not met. This significantly reduces legal certainty for companies engaged in M&A activity.

Background

Deals that fall below merger control thresholds but which could potentially give rise to competition risks have been a focus of recent debate in Europe. The Commission has become concerned that there is an enforcement gap, which means that potentially anticompetitive mergers (especially in the technology and pharmaceutical sectors) fall below all merger thresholds in the EU and so cannot be reviewed. These transactions - which involve the acquisition of a highly valued but not yet significantly revenue-generating new business - are sometimes referred to as "killer acquisitions."

Until recently, the Commission discouraged national competition authorities from referring transactions under Article 22 of the EU Merger Regulation ("EUMR") that the authorities lacked jurisdiction to review themselves. The Commission considered that these transactions were generally unlikely to have a significant impact on the internal market.

However, in March 2021, the Commission reversed this well-established practice by issuing practical guidance encouraging national competition authorities to refer to the Commission certain transactions that do not trigger national merger control thresholds and would otherwise be non-reportable in the EU.² To qualify, transactions must affect trade between Member States and significantly threaten to affect competition within the territory of the requesting Member State. While mergers in the digital and pharmaceutical sectors are likely to be among the most commonly referred up, this new policy approach is not limited to those specific sectors.

The dispute

In September 2020, Illumina agreed to acquire sole control of Grail, which develops blood tests for the early detection of cancers. The parties did not meet any merger control thresholds in the EEA (Grail did not generate any revenue at all), so they did not notify the Commission or any Member State of the merger.

The Commission...