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EU court says it can probe M&As even when one party has no European operations

Bloc insists it has right to rule on planned merger between US biotech firms Illumina and Grail

A European court has said it can examine M&As among tech and science companies even if one of the parties has no operations in the EU.

The judgement from the European Union's General Court found that it had the right to look into and rule on the planned merger between US biotech firms Illumina and Grail. Illumina is a global firm with offices in Germany and France, while Grail, a company developing early cancer screening technology, does not yet operate within the EU.

Nonetheless, the court said the planned $8 billion merger could have an effect on competition within the EU, regardless of the size of the deal.

In preparation, the European Commission, the EU's secretariat, met with organizations complaining about the planned merger and subsequently exchanged views with competition authorities in Germany, Austria, Slovenia, and Sweden. It was also in contact with the UK's Competition and Markets Authority – which had received the complaint as well – even though the UK is no longer in the political and trading bloc.

"The Commission reached the preliminary conclusion that the concentration at issue could be the subject of a referral under [EU merger regulations] Article 22(1) of Regulation No 139/2004, in particular in view of the fact that Grail's importance for competition was not reflected in its turnover," the judgment said.

The view is said to set a precedent which could affect tech firms globally as the EU tries to stem the tide of the dominance of big tech. Earlier this month, the EU passed the Digital Markets Act and the Digital Services Act, both designed to place restrictions on the behavior of large tech companies.

Verity Egerton-Doyle, counsel in Linklaters' antitrust and foreign investment practice, told The Register the decision was "a significant and far-reaching judgment."

"It endorses the European Commission's power to review mergers in the tech and other innovation heavy industries, even where they do not meet the merger control thresholds at EU or member state level. This is the first time the Commission has used these powers and this week’s decision demonstrates that any acquisition falling below the notification thresholds of national competition authorities in Europe can now also be reviewed by the Commission, adding an additional regulatory hurdle for companies within the sector.

"This will likely not be the end of the road as Illumina have confirmed that they’ll be appealing to the European Court of Justice. Unless and until the European Courts of Justice overrules the General Court virtually all mergers with an EU nexus, whatever the turnover and/or market shares of the parties, could be subject to review by a referral to the Commission.

"Given the Commission's stated intention to use this power to review tech, pharma, life sciences and other innovation heavy sectors where deals previously went under their radar, the possibility of a Commission review should be front of mind – alongside the CMA of course."

Illumina has been contacted by The Register for comment.

In a statement to the Financial Times, the US life sciences company said it was focused on obtaining clearance of the deal.

"We continue to work with the European Commission to reach a resolution. We are committed to showing that this deal is not only pro-competitive, but that it will also usher in a transformational new phase in the detection and treatment of cancer by facilitating equal and affordable access to the life-saving early cancer detection test sold by Grail."

The case is yet to go before the European Court of Justice where it is not likely to be heard this year. ®

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