In a significant legal victory, U.S. gene sequencing giant Illumina (NASDAQ:ILMN) has successfully challenged the European Union's scrutiny of its $7.1 billion acquisition of cancer diagnostic test maker Grail.
The ruling, issued by the Court of Justice of the European Union (CJEU) on Tuesday, is poised to curtail Brussels' authority over mergers that fall below the EU's traditional revenue thresholds.
The case revolved around the European Commission's decision to invoke Article 22, a rarely-used provision that allowed it to assess the Illumina-Grail deal despite the transaction not meeting the EU's revenue criteria for merger reviews.
This provision had previously been used to address concerns over so-called "killer acquisitions," where large companies buy smaller startups only to shut them down, stifling competition.
Illumina, which originally founded Grail in 2016 and later reacquired it in 2021, argued against the Commission's intervention.
Despite the General Court ruling in favor of the Commission in 2022, the CJEU's decision now sets aside that judgment and annuls the Commission's authority to review the merger based on referrals from national competition authorities.
"The Court of Justice sets aside the judgment of the General Court and annuls the decisions by which the Commission accepted requests from national competition authorities seeking the examination of the proposed concentration," the CJEU judges stated.
They further clarified that the Commission is not authorized to encourage or accept such referrals where the national authorities themselves lack the competence to examine these mergers under their own laws.
For Illumina, the ruling holds significant financial implications. The company had been fined 432 million euros ($478 million) by the EU for closing the deal without prior approval.
Following the CJEU's ruling, Illumina announced that the basis for this fine had been removed, and it would no longer be payable.
"Today’s judgment confirms Illumina’s longstanding view that the European Commission exceeded its authority by asserting jurisdiction over this merger," the company stated.
While the ruling marks a decisive win for Illumina, it may have limited impact on the company's current operations.
In June, Illumina spun off Grail once again to comply with an EU order, retaining only a minority stake of 14.5%.
The European Commission, which serves as the EU's competition enforcer, stated that it would carefully review the judgment and its broader implications.
Meanwhile, the ruling is final and cannot be appealed.