EC's landmark decision blocks merger of companies below turnover threshold
In a breakthrough decision, the European Commission has prohibited the merger of two US companies, Illumina and Grail, operating in the European biotechnology market. For the first time ever, the Commission did not allow a merger to proceed even though the companies did not meet the economic criteria for notifying a merger.
Illumina develops genetic technologies, providing its partners with outputs that are essential and unique in nature. GRAIL then uses these outputs to produce cancer detection tests. Last year, the two companies agreed to merge.
Although both companies are major players in their respective fields, their turnover did not meet the criteria for notification contained in the EU Merger Regulation or those laid down in national legislations. The acquisition was therefore not reported to the Commission or any other national competition authority. However, member states are entitled to request the Commission review any merger (even if it does not meet the turnover threshold) affecting trade between member states and threatening to significantly impede on the economic competition in an EU member state.
The Commission upheld the member states' proposal and did not authorise the merger on the grounds that despite the proposed measures (e.g., availability of technology to other undertakings), it could lead to other undertakings being cut off from the technology provided by Illumina to GRAIL. The Commission further noted that when assessing the significance of the undertakings under review, it is not only important to assess their turnover but also their scope of business and the market situation.
For the first time ever, it thus blocked a merger between two undertakings that did not meet the turnover threshold laid down by the EU Merger Regulation. In view of the Commission's recent call for the application of the above procedure, it is likely that similar situations will recur.
For the sake of completeness, we mention that for the implementation of a concentration prior to its clearance the Commission may impose a fine of up to 10% of the annual worldwide turnover of the undertakings concerned and, simultaneously, order the reversal of the concentration (e.g., via an obligation to sell the company or to terminate the contract).