EU can review tech takeovers without EU presence

A court has ruled that Brussels may review science and tech M&A moves even if one party has no operations in the EU.

The EU's General Court has said the Union may examine mergers and acquisitions in the science and tech sector, even if one party has no operations in the region and the deal would not normally need member state approval.

The ruling was handed down regarding the $7.1 billion acquisition of US biotechnology company Grail by another American firm, Illumina.

Existing merger regulations stipulate that EU regulators can probe a deal if the firm being acquired has a commercial presence in the EU and meets certain revenue thresholds.

Illumina announced the acquisition deal in September 2020, and finalised it August 2021. It did without waiting for EU permission, as the deal did not reach the turnover threshold of the EU's merger regulation.

Illumina is a multinational company with offices in France and Germany, while Grail - which specialises in developing early cancer detection technology - does not currently do business in the EU, and therefore has no European revenues.

The European Commission conducted a preliminary examination after receiving a complaint about the deal. It assessed the possibility that the merge could allow Illumina to block its rivals from accessing Grail's technology.

The EU executive talked to various national competition authorities, encouraging them to make a referral request to the European Commission.

France's Autorité de la concurrence sent the first request, followed by regulators from Belgium, Greece, Iceland, the Netherlands and Norway.

The two American companies challenged the investigation, which the General Court rejected.

The court said the proposed acquisition might have an impact on competition inside the EU, regardless of how large the transaction really is.

'The Commission has the competence to examine that concentration which did not have a European dimension or fall within the scope of the national merger control rules of Member States of the European Union or States party to the Agreement on the European Economic Area,' the court said.

The case is important for Margrethe Vestager, the head of the EU's antitrust agency, who wants more powers for the European Commission to probe deals where large companies buy startups that could stifle their competitors, particularly in the tech and pharmaceutical industries.

Illumina intends to challenge the ruling before the European Court of Justice, arguing that the acquisition would be beneficial to biotech research and would help in the fight against cancer.

The company said in a statement that it was focused on securing approval of the deal.

'We continue to work with the European Commission to reach a resolution. We are committed to showing that this deal is not only pro-competitive, but that it will also usher in a transformational new phase in the detection and treatment of cancer by facilitating equal and affordable access to the life-saving early cancer detection test sold by Grail.'

The matter has not been brought before the European Court of Justice, and it is unlikely that it will be heard this year.