EU Court Overturns Below-Threshold Merger Review Policy
文摘
2024-09-04 10:00
中国香港
On September 3, 2024, the EU’s highest court, the European Court of Justice (ECJ), ruled that the European Commission (EC) had no jurisdiction to review Illumina’s acquisition of Grail, overturning the EU’s revised Article 22 policy. While a somewhat pyrrhic victory for Illumina, as it had divested Grail in June 2024 based on an EC order, many consider the judgment to be a welcome rebuke of jurisdictional overreach.BackgroundGene sequencing company Illumina’s acquisition of Grail (a developer of “multi-cancer early detection” (MCED) tests that rely on NGS systems) did not meet EC or national-level merger review thresholds. Grail was originally founded by Illumina in 2016, but was spun out to be a standalone company. Four years later, Illumina sought to acquire it for $8 billion. Even though Grail had no revenue, the EC accepted a referral from national Member States based on the cross-border impact of the deal and the fact that Grail had competitive significance beyond its revenues. This was based on a revised approach to Article 22 of the EU’s Merger Regulation (seeWilson Sonsini Alert), which sought to capture so-called “killer acquisitions” (where companies acquire smaller, innovative players to cut off future competition) that may not be notifiable. The revised Article 22 policy enabled the national competition authorities of one or more EU Member States to request that the EC examine a deal that did not meet the EU-level or national thresholds, but that “affects trade between Member States” and “threatens to significantly affect competition within the territory of the Member State or States making the request.”The ECJ JudgmentThe ECJ ruled in favor of Illumina, overturning a 2022 General Court judgment that had upheld the revised Article 22 policy and annulling the decisions by which the EC accepted referral requests from national competition authorities (seeWilson Sonsini Alert).The ECJ found that the revised policy could not be used as a “corrective mechanism” to address potential gaps in EU merger control.1The GC was wrong to conclude under a “literal, historical, contextual, and teleological interpretation” of the EU Merger Regulation that national competition authorities could ask the EC to review a merger falling outside of their competence (as it did not meet the applicable national thresholds). According to the ECJ, the thresholds determining whether a transaction must be notified serve as “an important guarantee of foreseeability and legal certainty” for the companies involved.2The annulment has important knock-on effects for Illumina: the EC’s record €432 million fine on Illumina for implementing the transaction without prior EC approval (and symbolic fine of €1,000 on Grail—the first time a gun-jumping fine was levied against a target company) now falls away, and Illumina’s challenge to the EC’s prohibition of the deal is moot. The ECJ’s ruling is final.Key TakeawaysThe judgment has been cheered as a return to legal certainty. However, the practical impact for dealmakers may turn out to be limited. The EU’s Competition Commissioner, Margrethe Vestager,statedthat the EC would consider next steps to ensure it can still review below-threshold deals and referred to recent changes by a number of Member States that enable them to review below-threshold deals at a national level (such as Denmark, Hungary, Ireland, Italy, Latvia, Lithuania, Slovenia, and Sweden). Other Member States, like France, havereactedto the judgment by noting they will assess possible changes to their own merger thresholds. The EC is likely to turn to these Member States to ensure transactions that fall below notification thresholds continue to be referred to it. This could arguably run counter to the “guarantee of foreseeability and legal certainty” that the ECJ’s judgment promotes and could see further challenges in the future.This also means that the interplay between Article 22 and the EU’s Digital Markets Act (DMA) is not fully moot. Article 14 of the DMA requires designated gatekeepers to inform the EC of certain transactions, regardless of whether EU thresholds are met. Member States are notified of the deals and Article 22 would have granted the EC an effective mechanism to take jurisdiction over any gatekeeper transaction referred to it, regardless of thresholds. This ability will now be limited to Member States with their own below-threshold call-in powers.EC and national regulator officials have also hinted at using abuse of dominance rules for anex postreview of non-notifiable but potentially problematic transactions, as confirmed in the ECJ’sTowercastdecision.3In addition, the EC could choose to amend EU merger rules, but this is unlikely in the near term, leaving reliance on Member States with below-threshold powers as the most likely path forward for the EC for the moment.For more information, please contactDeirdre Carroll,Jindrich Kloub, or another member of the globalantitrust and competitionpractice at Wilson Sonsini Goodrich & Rosati.Deirdre Carroll,Jindrich Kloub,Julius Giesen,andLiam Boylancontributed to the preparation of this Wilson Sonsini Alert.[1]Judgment of the European Court of Justice, September 3, 2024, Illumina v. Commission, Joined Cases C-611/22 P and C-625/22 P, ECLI:EU:C:2024:677, para 201.[2]Ibid., para. 209.[3]Judgment of the European Court of Justice, March 16, 2023, Towercast, Case C-449/21, ECLI:EU:C:2023:207Please click "Read more (阅读原文)" at the lower left corner to access the original client alert on our website and the information at the hyperlinks herein.
