Illumina was fined a record $476 million for antitrust violations in connection with the Grail deal

(This July 12 story has been officially corrected by the European Commission, changing the transaction amount to $570 million from €570 million in paragraph 6)

Author: Foo Yun Chee

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

Illumina has been battling the EU competition authority on several fronts since it was forced to seek its approval in 2021, even though the deal fell below the EU’s scrutinized turnover threshold.

The deal was ultimately blocked last September, with regulators concerned that Illumina, after acquiring Grail, would have an incentive to cut off Grail’s competitors from access to its technology to develop blood-based early cancer detection tests that could compete with Grail.

The European Commission said Illumina’s conscious decision to walk away from the deal because it believed the potential profits outweighed the potential forced sale of Grail was the basis for the fine – amounting to 10% of its global revenues and the maximum allowed under EU merger rules such violations

The Commission’s decision confirmed Reuters’ reports from January.

Regulators proposed a much higher amount but lowered it to $570 million given Illumina’s decision to keep Grail as a separate company after the deal was completed, an EU official said. This value was then lowered to a ceiling of 10%.

By closing the deal prematurely, Illumina was able to exert decisive influence on Grail, the EU executive said, calling the move an unprecedented and very serious breach.

“If companies merge before our approval, they violate our rules. “Illumina and Grail did so knowingly and deliberately by consummating their merger while we were still investigating,” EU antitrust chief Margrethe Vestager said in a statement.

Grail was fined a symbolic fine of €1,000 for its active participation in the infringement; this was the first fine imposed on the target company.

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

“We closed the transaction in 2021 because there were no obstacles to closing the transaction in the US and the transaction deadline would expire before the EC could make a decision on the substance of the transaction,” the company said in a statement.

“The timing of the transaction was based on public statements by the EC that it would not have jurisdiction over mergers of this type until new guidelines were issued, yet the EC confirmed its jurisdiction over the merger before issuing the promised guidelines.”

The company is challenging the EU’s veto of the deal, the decision to consider the deal despite failing to meet EU merger criteria, and the EU’s order to split Grail so it can complete the deal.

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

Ilumina also appealed the U.S. Federal Trade Commission’s order to divest Grail.

($1 = 0.9072 euros)

(Reporting by Foo Yun Chee; Editing by Elaine Hardcastle)