EU court rips up Commission’s killer acquisition tool

The European Commission was dealt a blow to how it handles problematic tech or pharma deals when the European Union’s top court threw out a key legal tool.
The Court of Justice said the Commission can’t take over deals from national authorities that aren’t in charge of them and can’t review transactions outside of its usual revenue thresholds
The ruling is a massive win for healthcare firm Illumina which argued that the Commission should never have reviewed its takeover of cancer diagnostics provider Grail which made no revenue in Europe. The EU later vetoed the deal and fined the company for closing the deal without permission.
Keen to pick up mergers with low or no revenue that aren’t caught by EU thresholds, the Commission has started using a legal tool, Article 22, to review them. This allows national competition authorities to refer smaller deals to Brussels.
This gives the EU a way to deal with killer acquisitions where a powerful company buys up an innovative company to squash its chances of becoming a rival. The EU has previously missed out on reviewing some billion-dollar Big Tech or pharma deals where the target had valuable assets but made no money.
Judges said this system can’t continue. The Commission doesn’t have the right to accept or encourage referrals outside revenue thresholds, as these “are an important guarantee of foreseeability and legal certainty for the undertakings concerned.”
They said that the Commission had misinterpreted merger rules by it using Article 22 to accept requests from national authorities that weren’t entitled to review deals under national rules.
Margrethe Vestager, the EU’s competition chief, said the Commission will keep using the tool to review deals where national authorities do have jurisdiction and that more member countries now have the power to look at deals without revenue thresholds.
The possibilities to examine deals “are thus already more extensive than they were at the time of the Illumina/GRAIL referral,” she said in an online statement.
“More generally, we will consider the next steps to ensure that the Commission is able to review those few cases where a deal would have an impact in Europe but does not otherwise meet the EU notification thresholds,” she said.
Illumina said in a press release that the ruling confirmed its “longstanding view that the European Commission exceeded its authority by asserting jurisdiction over this merger.”
The basis for a €432 million fine “has now been removed and will no longer be payable,” it said.
The cases are C-611/22 P Illumina vs. Commission and C-625/22 P Grail v Commission and Illumina.
This article has been updated with a statement from Executive Vice President Margrethe Vestager.