Illumina hit with record $476 million EU antitrust fine over Grail deal

By Foo Yun Chee

BRUSSELS (Reuters) -U.S. genetic testing company Illumina (NASDAQ:) was fined a record 432-million-euro ($476 million) by the EU on Wednesday for closing its takeover of cancer test maker Grail before securing EU antitrust approval.

Illumina has been fighting the EU competition watchdog on several fronts since it was forced to seek its approval in 2021 despite the deal falling short of the EU turnover threshold for scrutiny.

The deal was eventually blocked last September, with regulators concerned that Illumina, once it had acquired Grail, would have an incentive to cut off Grail’s rivals from accessing its technology to develop blood-based early cancer detection tests to compete with Grail.

The European Commission said Illumina’s deliberate decision to jump the gun, because it thought the potential profits outweighed the potential forced sale of Grail, underpinned the size of the fine – amounting to 10% of its global revenue and the maximum allowed under EU merger rules for such infringements

The Commission’s decision confirmed a Reuters story in January.

Regulators had come up with a much higher figure but reduced it to 570 million euros to take into account Illumina’s decision to hold Grail as a separate company after closing the deal, an EU official said. That figure was then lowered to the 10% cap.

By closing the deal prematurely, Illumina was able to exercise a decisive influence over Grail, the EU enforcer said, calling the move unprecedented and a very serious infringement.

“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,” EU antitrust chief Margrethe Vestager said in a statement.

Grail was given a symbolic 1,000 euro fine for its active role in the infringement, the first time a target company has been sanctioned.

Illumina criticised the fine as “unlawful, inappropriate, and disproportionate” and said it would appeal the penalty. It has set aside $458 million, representing 10% of its consolidated annual revenue for fiscal year 2022, for the fine.

“We closed the transaction in 2021 because there was no impediment to closing in the U.S. and the deal timeframe would have expired before the EC could reach a decision on the merits,” the company said in a statement.

“The deal timeframe relied on the EC’s public statements that it would not assert jurisdiction over mergers of this type until new guidelines were issued, yet the EC nonetheless asserted jurisdiction over the merger before issuing the promised guidelines.”

The company has challenged the EU veto of the deal, its decision to examine the deal despite not meeting the EU merger criteria and the EU order to keep Grail separate so that it can unwind the deal.

It said success in the second case would nullify the EU fine and expects the EU court to rule in late 2023 or early 2024.

Ilumina has also appealed against a U.S. Federal Trade Commission order that it divest Grail.

($1 = 0.9072 euros)