A surprise, or a slam dunk?

On 13 July, the EU’s General Court confirmed that the European Commission did have jurisdiction to review Illumina’s acquisition of Grail, following a referral from France’s competition authority. The technical rule is Article 22 of the EU Merger Regulation which allows a Member State to ask the Commission to take charge of the investigation. The judgment seems to be a wholesale endorsement of the EU’s new policy guidelines for the application of Article 22 of the Merger Regulation.

The case of the Holy Grail

This sorry tale began with the European Commission invoking a provision in the EU Merger Regulation known as Article 22. It’s a provision designed to allow Member States’ National Competition Authorities to ask the Commission to take over the review of a deal. It’s normally used when the national authority has jurisdiction to conduct the review but considers there are EU-wide implications. And that’s how it has been used up till now.

In February 2021, the acquisition of Grail was targeted by the Commission even though it did not trigger merger control in any Member State. So what happened? The Commission used its powers under Article 22 of the European Merger Control Regulation and wrote to all 27 Member States asking them to refer the deal to it. France made a reference. It was the first of what has been described as a ‘land-grab’ by the Commission of a deal where, on the face of it, it had no jurisdiction. The initial Phase I investigation became an in-depth Phase 2, and then the fireworks began.

Furious, Illumina filed an action with the General Court contesting the Commission’s seizing of the jurisdiction and went ahead and closed the transaction. The Commission retaliated by adopting interim measures against Illumina. The Commission also suspended its investigation, which was restarted on 19 July following the Court decision. On top of that, Illumina has been charged with ‘gun-jumping’ – the early closing of the deal before it was granted clearance from the Commission – and could receive a fine.

This unprecedented use of Article 22 came as a complete surprise to many observers, breaking with a 30-year tradition of not accepting a referral request from a Member State that had its own national merger control and did not have jurisdiction over the deal. In fact, although Vice-President and Commissioner for Competition, Margrethe Vestager, had flagged the policy change in a speech in September 2020, clarification came in the form of a Communication from the Commission containing Guidance on changes to the referral mechanism. This arrived one month after the Commission had intervened in Illumina’s deal. Unusually, the Guidance did not go through the process of public consultation.

If it looks like a sleight of hand, it may be just that. Others looking to do deals in the EU will be wary of the land grab.