The European Union has fined U.S. biotech company Illumina $475 million for its acquisition of cancer-screening company Grail without obtaining regulatory approval. This penalty represents another setback for the deal.
In 2020, Illumina announced its $7.1 billion acquisition of Grail. However, the European Commission, the executive arm of the EU responsible for enforcing antitrust regulations, determined that the company violated EU merger rules by completing the acquisition without consent. The EU blocked the acquisition last year, citing concerns about its impact on competitors.
EU antitrust Commissioner Margrethe Vestager stated, “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. This is a very serious infringement.”
The deal has also faced scrutiny from regulators around the world. The Federal Trade Commission (FTC) in the U.S. ordered Illumina to sell Grail earlier this year after finding that the merger would hinder competition and innovation in the domestic market for life-saving cancer tests. Similarly, the EU argued that the acquisition would squeeze out competitors and grant Illumina excessive market dominance.
Illumina, based in San Diego, is a major supplier of next-generation sequencing systems for genetic and genomic analysis, while Grail is a healthcare company focused on developing blood tests for early cancer detection.
Illumina has declared its intention to appeal the European fine, just as it did with the FTC order, and is awaiting a ruling from the EU’s highest court on its challenge to the commission’s authority to review the merger.
“We believe that the fine announced by the European Commission today — while expected and accrued for over the last year — is unlawful, inappropriate and disproportionate,” the company stated.
The turmoil surrounding the acquisition has caused upheaval at Illumina. Its CEO and director, Francis deSouza, resigned last month following the removal of the company’s chairman by shareholders in May. This followed a contentious months-long battle with activist investor Carl Icahn over the challenges posed by the Grail deal, with Icahn urging shareholders to oust both executives.
Court proceedings for Illumina’s appeal against the FTC order to sell Grail are scheduled to begin in September. This comes after a recent setback for U.S. regulators, who failed in their attempt to block Microsoft’s significant acquisition of video game maker Activision Blizzard.
In Europe, regulators have imposed the maximum fine possible of €432 million, according to the commission’s statement. Such fines can range up to 10% of a company’s annual revenue, depending on the severity of the violation.
The commission noted that companies almost always comply with regulations and refrain from completing an acquisition or merger until antitrust authorities have granted approval.
“Illumina and Grail knowingly and intentionally breached the standstill obligation during the commission’s in-depth investigation,” the statement said. “This is an unprecedented and very serious infringement that undermines the effective functioning of the EU merger control system.”
The statement also emphasized that “Illumina strategically weighed up the risk of a gun-jumping fine against the risk of having to pay a high break-up fee if it failed to take over Grail. It also considered the potential profits it could obtain by jumping the gun.”