The European Union (EU) has imposed a hefty fine of $475 million on Illumina, a leading U.S. biotech company, for its unauthorized acquisition of cancer-screening firm Grail. This penalty marks yet another setback for the deal, following the EU’s decision to block the acquisition last year on the grounds that it would harm competition in the market.
Illumina had announced a $7.1 billion purchase of Grail in 2020, but the European Commission, which serves as the EU’s executive arm and chief antitrust regulator, declared that Illumina had violated EU merger regulations by completing the transaction without obtaining its consent. Margrethe Vestager, the EU’s antitrust Commissioner, emphasized that such actions constitute a serious infringement, stating, “If companies merge before our clearance, they breach our rules. Illumina and Grail knowingly and deliberately did so by implementing their tie-up as we were still investigating.”
Regulators from various jurisdictions around the world have targeted the deal. Earlier this year, the Federal Trade Commission (FTC) ordered Illumina to divest Grail, citing concerns that the merger would stifle competition and hinder innovation in the U.S. market for life-saving cancer tests. Similarly, the EU argued that the acquisition would squeeze out competitors and grant Illumina an excessively dominant position in the market.
Illumina, headquartered in San Diego, is a major supplier of next-generation sequencing systems for genetic and genomic analysis, while Grail is a health company focused on developing blood tests to detect cancer at an early stage. Illumina has pledged to appeal the European fine, just as it did with the FTC order, and is currently awaiting a ruling from the EU’s highest court regarding its challenge to the commission’s authority to review the merger. The company issued a statement expressing its belief that the announced fine is unlawful, inappropriate, and disproportionate.
The turmoil surrounding the acquisition has led to significant upheaval within Illumina. Its CEO and director, Francis deSouza, resigned last month following the removal of the company’s chairman by shareholders in May. This series of events unfolded during a heated battle with activist investor Carl Icahn, who urged shareholders to remove both executives due to the challenges associated with the Grail deal.
Illumina’s appeal against the FTC’s order to divest Grail is scheduled to begin court arguments in September. This development comes shortly after U.S. regulators suffered a setback in their attempt to block Microsoft’s high-profile acquisition of video game maker Activision Blizzard.
According to the European Commission, the imposed fine in Europe is the maximum allowable amount of €432 million. The severity of the violation determines the fines, which can reach up to 10% of a company’s annual revenue. The commission stated that companies typically adhere to the rules and refrain from completing an acquisition or merger until antitrust authorities have granted clearance. The commission’s statement noted, “Illumina and Grail knowingly and intentionally breached the standstill obligation during the commission’s in-depth investigation. This is an unprecedented and very serious infringement that undermines the effective functioning of the EU merger control system.” It further emphasized that Illumina weighed the risk of a gun-jumping fine against the potential high break-up fee if the acquisition failed, as well as the potential profits it could obtain by proceeding prematurely.