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Marking the latest development in the Illumina/Grail saga, on 3 September 2024, the CJEU annulled the General Court’s judgment and European Commission’s decisions allowing EU national competition authorities (NCAs) to review concentrations that fall below national (turnover) thresholds.1 In 2021, Illumina, a U.S. biotech company, sought to acquire Grail, a U.S. company developing tests for cancer screening. In July 2022, the General Court blocked the acquisition by permitting the use of Article 22 of the ECMR.2 Pursuant to Article 22, EU Member States may request the European Commission to examine a concentration that does not meet European or national filing thresholds but still affects trade between EU Member States and threatens to significantly affect competition within their territory.3
This GT Alert analyzes the CJEU’s judgment and its potential impact on the merger control landscape.
Background
Illumina did not file its contemplated acquisition of Grail with any member state or the European Commission. However, after receiving complaints about the contemplated acquisition, several EU Member States filed a request under Article 22 ECMR, prompting the European Commission to investigate.
In March 2021, the European Commission implemented a policy change expanding the use of Article 22 ECMR (also known as the “Dutch clause”), allowing NCAs to request investigations into mergers lacking European dimension and falling below national turnover thresholds, which previously prevented NCAs from reviewing them under national competition laws. This broadened the European Commission’s reach, enabling it to scrutinize mergers that could potentially harm competition irrespective of the companies’ size. While this change provided the European Commission with greater flexibility to address competition concerns, it also introduced uncertainty for the M&A sector by extending the scope of mergers subject to review.
The General Court endorsed this broader interpretation of Article 22 ECMR, asserting that a “literal, historical, contextual and teleological” interpretation justified its use for reviewing mergers that would not otherwise be subject to national or European merger control. However, Advocate General Emiliou dissented from this interpretation, arguing that the General Court misconstrued the intended scope of Article 22 ECMR.4 He emphasized that it was never intended to be used as a “corrective mechanism” and that such expansive application undermined predictability, certainty, and procedural efficiency; principles that are inherently important to, inter alia, the M&A practice.
CJEU Judgment
With its judgment, the CJEU brought closure to the Article 22 ECMR debate. The CJEU rejected the General Court’s broader interpretation and found that Article 22 should not be used as a corrective mechanism. Instead, the CJEU reaffirmed that turnover thresholds are designed to ensure a high degree of predictability and certainty in the merger review process. According to the CJEU, Article 22 ECMR cannot be used to trigger a merger review at the request of an EU Member State that lacks jurisdiction in the matter under its national competition laws.
Takeaways
The CJEU judgment marks a turning point in the Illumina/Grail case and the broader interpretation of Article 22 ECMR. By overturning the General Court’s ruling, the CJEU has reasserted the importance of maintaining clear jurisdictional boundaries based on established turnover thresholds and clarifies that Article 22 ECMR cannot be used as a tool for EU Member States without jurisdiction. The European Commission, however, stated that it will “continue to accept referrals made under Article 22 ECMR by EU Member States that have jurisdiction over a concentration under their national rules where the applicable legal requirements are met”.5
The decision restores predictability, stability, and legal certainty to merger control practices as well as the EU M&A landscape and upholds the procedural integrity of EU competition law. However, in the last few years, several EU Member States (e.g., Denmark, Ireland, and Italy) have introduced measures enabling them to request the notification of mergers that do not meet national thresholds, if such merger poses potential competitive concerns. As a result, the practical impact of the decision may be somewhat moderated.
Amid increasing regulatory pressure on M&A activities, this judgment provides a measure of relief, protecting deal certainty and predictability while incentivizing EU Member States to refine their national competition laws instead of relying on European merger-control provisions.
1 Judgment of 3 September 2024 in joined cases C-611/22 P (Illumina v Commission) and C-625/22 P (Grail v Commission).
2 Judgment of 13 July 2022, T-227/21, (Illumina v Commission).
3 Article 22 of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings.
4 Opinion by AG Emiliou of 21 March 2024 in joined cases C-611/22 P (Illumina v Commission) and C-625/22 P (Grail v Commission).
5 European Commission, “Statement by Executive Vice-President Margrethe Vestager on today's Court of Justice judgment on the Illumina/GRAIL merger jurisdiction decisions,” 3 September 2024.
