Last month, the European Commission (“Commission”) fined the companies Illumina and GRAIL for violating the EU rules on mergers. The company Illumina, as the acquirer in the transaction, was fined approximately 432 million euros, while the company GRAIL was fined as the target company in the transaction, with a symbolic 1,000 euros, which is however the first time for the EU competition watchdog to fine the target company with respect to the merger.
Details of the case
In July 2021, the Commission initiated the proceeding to control the commenced acquisition of the company GRAIL by Illumina company.
During the investigation of this case by the Commission, i.e., in August 2022, Illumina publicly announced that it had completed the acquisition of GRAIL and that both parties to the transaction had signed all documents necessary to close the deal. As a result of the publicly announced closing, the Commission adopted a set of interim measures in October of the same year, to ensure that Illumina and GRAIL remain separate entities until the merger control procedure is completed.
The Commission then blocked this transaction, considering that such a change would lead to a negative impact on innovation, as well as to a reduction of choice in the relevant market, i.e., that it would imply significant anticompetitive effects. In addition, the Commission sent a Statement of Objections to Illumina and GRAIL, informing them of the preemption measures it intends to adopt.
The rules of the EU on the protection of competition provide that companies intending to merge cannot carry out status changes until the Commission approves them (the so-called standstill obligation). In a situation where the parties in the transaction violate this obligation, the Commission can impose a fine in the amount of up to 10% of the aggregated turnover of the companies.
In this specific case, the Commission established that the companies Illumina and GRAIL knowingly and intentionally violated the standstill obligation, making a business decision to end the merger procedure while the control was still being conducted by the Commission, i.e., following an assessment of the risks and profit that this entails.
Therefore, the Commission imposed a maximum fine on Illumina, i.e., in the amount of 432 million euros, in accordance with the prescribed limit of 10% of the company’s turnover, while for the first time it decided to fine the target company as well, by imposing the fine in the aforesaid symbolic amount.
The Law on the Protection of Competition (Off. Gazette of RS no. 51/2009 and 95/2013) (“Law”) also provides for the respective solution.
Namely, the Law stipulates that the participants in the concentration are obliged to interrupt the implementation of the concentration until the decision of the Commission for the Protection of Competition (“CPC”) is passed (the so-called interruption of concentration). In case the CPC initiates the investigation of the concentration ex officio, the participants in the concentration are obliged to interrupt the implementation of the concentration from the date of receipt of the decision on institution of the concentration approval proceeding.
If the participant implements the concentration contrary to the obligation of interruption, i.e., for which the CPC has not issued the necessary approval, a measure of the protection of competition will be issued, in the form of an obligation to pay an amount up to 10% of the total annual turnover generated in the territory of the Republic of Serbia and calculated in accordance with the Law.
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