The Court of Justice ruled in favour of Illumina and GRAIL in case C-611/22 P. In this unprecedented saga, the acquisition of the biotech company GRAIL by Illumina had been blocked by the European Commission, although the transaction did not have a European dimension or meet the relevant national thresholds, given the fact that GRAIL had no revenues in Europe. The Commission found nonetheless that it had jurisdiction to review the deal based on the “Article 22 referral procedure”. You can read more about the background in our previous article. The General Court had confirmed the Commission’s position in its 2022 judgment (T-227/21). However, the Court of Justice, in its judgment of 3 September 2024, sided with Illumina and GRAIL, setting aside the General Court’s ruling. The Court of Justice found, in essence, that “[t]he Commission is not authorised to encourage or accept referrals of proposed concentrations without a European dimension from national competition authorities where those authorities are not competent to examine those proposed concentrations under their own national law”.
The extended Article 22 referral procedure had been confirmed by the General Court
In its Communication on the referral mechanism of Article 22 of the Merger Regulation, the Commission explained its reading of that Article, finding that national competition authorities were allowed to request a referral to the Commission of deals not meeting the merger control thresholds under certain conditions. The General Court had confirmed this approach based on a literal, historical, contextual and teleological interpretation of the Merger Regulation. The General Court found that the Merger Regulation aims at providing a corrective mechanism for the effective control of all mergers that would have significant effects on the structure of competition within the internal market.
The Court of Justice annuls the General Court’s judgment
The Court of Justice opposed such a reading of the Merger Regulation. It found that national competition authorities cannot ask for a referral of a concentration that not only lacks a European dimension but also falls outside their competence of review where the applicable national thresholds are not met. In addition, the Court of Justice found that a different interpretation could upset the balance between the different objectives that the Merger Regulation pursues. The thresholds established in the Merger Regulation provide an “important guarantee of foreseeability and legal certainty for the undertakings concerned”. Undertakings should be able to determine easily whether a proposed deal is subject to a preliminary examination and, if so, by which authority and under which procedure. Illumina’s fine – of more than EUR 400 million – was annulled. The ruling of the Court of Justice is final and cannot be appealed.
What’s next?
The Judgment of the Court of Justice ends a much-debated expansion of the Commission’s toolbox aimed at reviewing deals that may be harmful to competition but could risk slipping through the cracks of its jurisdiction. The Commission is expected to look for new ways of reviewing potentially harmful deals such as killer acquisitions. In a statement on 3 September 2024, Executive Vice-President Margrethe Vestager announced that “we will consider the next steps to ensure that the Commission is able to review those few cases where a deal would have an impact in Europe but does not otherwise meet the EU notification thresholds.”
