In a landmark decision in joined Cases C-611/22 P and C-625/22 P, the Court of Justice of the EU (Court) overturned the General Court’s ruling and annulled the decision by the EU Commission (Commission) to accept jurisdiction over the Illumina/Grail merger under Article 22 of the EU Merger Regulation (EUMR). This case involved the $7 billion acquisition of Grail, a start-up developing innovative cancer screening tests, by biotech giant Illumina.
The case illustrated the Commission’s reinterpretation of Article 22 EUMR, which led to its decision to block the merger. The Court’s ruling limits the scope of Article 22 EUMR and in doing so, provides legal certainty and predictability in EU merger control for businesses.
1. Back to the origin: Article 22 EUMR referrals
In 2020, Illumina Inc., a US genetic analysis company, announced its $7 billion acquisition of Grail LLC. The merger did not meet the turnover thresholds required for notification to the Commission or any EU Member State. In 2021, the Commission invited Member States to refer the case to it under Article 22 EUMR due to concerns that the merger could have significant anticompetitive impacts. Six countries referred the case to the Commission, which accepted jurisdiction to review the merger.
Article 22 EUMR, commonly known as the “Dutch clause,” was initially designed to enable EU Member States without a national merger control regime to refer cases to the Commission for review whenever they could have a negative impact in its territory and affect trade between Member States. Currently, this only applies to Luxembourg, as the bill of law to introduce a national merger control regime has not yet been adopted.
In 2021, fearing the impact that below-threshold transactions (notably killer acquisitions) could have on the internal market, the Commission issued the Guidance on the application of the referral mechanism set out in the Article 22 EUMR, thus conferring a new interpretation of that provision. This Guidance actively encourages referral and review of transactions that fail to meet EU and national thresholds, and therefore transactions that would typically fall outside the assessment scope of the Commission and national competition authorities (NCA). The transactions must, however, affect trade between Member States and threaten to significantly affect competition within the territory of the referring State.
Illumina/Grail was the first transaction for which the Commission accepted the referral under this new interpretation of Article 22 EUMR, despite it failing to meet national thresholds. The Commission subsequently blocked the merger in September 2022. Among the several appeals lodged against the Commission’s decisions, the companies concerned challenged the decision to accept the referral.
Although the General Court ruled in favour of the Commission in the first instance, the Court considers that the Commission’s broad interpretation of Article 22 EUMR failed to respect the principles of legal certainty and predictability in merger control. The Court emphasised that the turnover-based thresholds are crucial for providing companies with the necessary legal certainty to determine whether their mergers require notification and if so, to which authority.
It clarified that the teleological intent behind the Article 22 EUMR referral was not to serve as a corrective tool on the scope of merger control, but rather to address specific gaps in the allocation of competences between Member States and the Commission.
Therefore, the Court set aside the ruling of the General Court and concluded that the Commission could not accept a request under Article 22 EUMR in a situation where Member States making that request are not entitled, under their national merger control rules, to examine the concentration which is the subject of that request.
2. Impact on Luxembourg businesses
The Court’s judgment brings comfort and legal certainty to businesses as it concludes that Member States with a national regime cannot request the referral of mergers falling below their national thresholds. However, its impact on Luxembourg is limited.
Even after stripping Article 22 EUMR of the Commission’s broad interpretation, the ruling does not alter the earlier rationale, which is to allow a Member State that does not have merger control regime to refer a concentration if it affects trade between Member States and poses a significant threat to competition within the referring Member State.
Given that Luxembourg has yet to pass bill of law 8296 (Bill), which aims to establish an ex-ante merger control regime, the Luxembourg Competition Authority retains the option to use the Article 22 EUMR referral mechanism. For companies planning transactions within Luxembourg or transactions with an impact for the Luxembourg markets, the possibility of referrals under Article 22 EUMR, even after the Illumina/Grail judgment, continues to be legitimate.
It is important to reiterate that the Luxembourg Competition Authority is also equipped to conduct an ex-post review of transactions that strengthen a dominant position but fall below EU merger control thresholds. This is grounded in Article 102 TFEU, was established in the Continental Can judgment in 1973 and was confirmed in the recent Towercast case, thus giving NCAs legitimate cause to assess whether such transactions, despite not triggering mandatory merger notifications, could still constitute an abuse of dominance by significantly distorting competition post-transaction. In 2015, the Luxembourg Competition Authority made use of this tool by reviewing ex post the takeover of CinéBelval by its closest competitor Utopia[1] through application of Article 102 TFEU. In this case, it took into account the EU Commission’s Guidelines on the assessment of horizontal mergers. This decision illustrates the Luxembourg Competition Authority’s commitment to scrutinising acquisitions for potential anti-competitive impacts, even without a regime imposing the need for notification prior to implementation. In this context, Article 22 EUMR referrals actually serve as an additional merger control tool for the Luxembourg Competition Authority, in addition to the ex-post review.
[1] 2016-FO-04
3. looking ahead: the commission’s position on the ruling and potential implications for luxembourg
While the Commission must abandon its recent approach to Article 22 EUMR, the overall impact could be mitigated by an evolving legal framework in several Member States. Some countries, such as Denmark, Ireland and Italy, have introduced “call-in” mechanisms that enable their NCAs to review mergers even if they fall below national thresholds.
Executive Vice-President Margrethe Vestager acknowledged this trend in a statement issued on 3 September 2024 in response to the Illumina/Grail decision by the Court, noting that the provisions allowing for such referrals have become “more extensive” since the Illumina/Grail case was first referred. Could this signal that the Commission may continue to advocate for the use of Article 22 EUMR in such cases where national authorities have the power to review below-threshold mergers under their domestic laws?
On the other hand, to the extent that NCAs have the power to review below-threshold mergers under their domestic laws, it may be reasonable to consider that it is no longer necessary to refer them to the Commission as a way to comply with the allocation of competences between the Commission and the NCAs, which underpins Article 22 EUMR, as emphasised by the Court. In addition, referrals to the Commission of below-national thresholds mergers could still raise issues in light of the principle of legal certainty, unless the national provisions authorising the review of such mergers are sufficiently clear and accurate.
If the Commission considers that below-threshold transactions reviewed by NCAs under national provisions fall within the scope of Article 22 EUMR and if the CJEU does not quash such an approach in future judgments, this could preserve some of the Commission’s broad interpretation of Article 22 EUMR in the 2021 Guidance. Otherwise, this provision may revert to its historical rationale and more marginal role, as was the case when referrals were less common. The broader implications of this judgment will depend on how the Commission navigates these legal complexities.
As for Luxembourg, the current draft of the Bill includes a provision that allows the Luxembourg Competition Authority to examine mergers that do not meet the standard thresholds if they are deemed to potentially restrict competition. This means that even after passing the Bill, Luxembourg would join the list of Member States that introduced “call-in” mechanisms in their national regimes.
