Illumina/Grail in light of the Draghi Report: Decoding a paradigm to catch killer acquisitions

Abstract

The Court of Justice of the European Union's decision in Illumina/Grail limits the European Commission's power to accept non-notifiable transactions from the EU Member States. The decision also offers an insightful multi-pronged literal, historical, contextual and teleological interpretation of Article 22 of the EU Merger Control Regulation 139/2004. This article maps the Court’s decision in light of the Draghi recommendation to ‘revamping’ competition for more streamlined and effective enforcement. Following a thorough analysis of the decision, it decodes the dispersed legislative instruments, which can potentially capture innovation-driven acquisitions, that may otherwise escape scrutiny under the traditional turnover-based merger control framework. To offer a complete view, the discussion also refers to ex-post developments, including but not limited to the Illumina/Grail-related developments as well as the Commission's unconditional clearance of Nvidia/Run:ai, a prominent innovation-driven merger in the generative AI-sector.

1. Introduction

The question of merger control threshold is a crucial one as it is ‘the filter’ that determines whether a proposed concentration may be subject to the applicability of merger regulation. ¹ Viewed from this perspective, this filter is the gatekeeper to ensure the review of a proposed concentration by competition authorities. The question of thresholds is a significant one that has gathered substantial interest in light of the so-called killer acquisitions in the innovation-driven high tech and pharmaceuticals sector. This filter was put to test in the Illumina/Grail merger. On 3 September 2024, the Grand Chamber of the Court of Justice of the European Union (CJEU) delivered a historic decision in the Joined Cases C-611/22 P and C-625/22 P, the Illumina/Grail judgment, as it struck down the General Court's decision ² that upheld the Commission's decision ³ to accept a referral from Member States to review a proposed merger transaction, even when they did not qualify for a review under the national merger control rules. Considering the significance of the Grand Chamber's decision, follow-on academic works assessed the decision and the imminent restraint that the CJEU's decision may put on the Commission's power to review killer acquisitions ⁴ in the innovation-driven industries. ⁵ This research note contributes to the literature by assessing the Grand Chamber's decision in light of the Draghi Report. It presents the larger landscape such as the possibility of ex-post competition law enforcement tools, the different notification thresholds and call-in powers available in certain Member States and the obligations on gatekeepers under the Digital Markets Act (DMA) to inform about proposed concentrations. Section 2 offers a succinct background of the Illumina/Grail merger, followed by a detailed discussion (section 3) on the CJEU's decision and its grounds for accepting Illumina and Grail's appeal. Section 4 looks at the Illumina/Grail decision in light of the findings of the Draghi Commission's Report, and draws a complete spectrum, whereby problematic concentrations may, henceforth, be caught by and invite the Commission or the national competition authority's scrutiny, as the case may be. It also assesses the scope of Article 14 of the DMA that imposes continued obligations on the gatekeepers to inform the Commission about its impending acquisitions. Section 5 concludes by offering an ex-post review of the developments that unfolded following the CJEU's decision. Alluding to an ex-post review, the discussion concludes by suggesting how even though the Commission quickly and quietly retracted its Guidance on the application of the referral mechanism set out in Article 22 of the Regulation 139/2004, Illumina/Grail eventually did lead to the divestiture of the assets by the firms, and in that respect, the Commission's efforts were not a mere noise, they also had an effect. In addition, the section also casts light on other Article 22 referrals, such as EEX/NASDAQ Power, Qualcomm/Autotalks and the Nvidia/Run:ai merger.

2. Background

In September 2020, Illumina, a supplier of sequencing and array-based solutions for genetic and genomic analysis, proposed to acquire Grail, a leading developer of blood tests for early detection of cancers. ⁶ As the turnover of Illumina and Grail, both US-based firms, neither met the turnover-based thresholds prescribed under the 139/2004 EU Merger Regulation (Regulation 139/2004), nor that of the EU or the EEA Member States, the parties did not notify the transaction to any competition authority. On 19 February 2021, the European Commission, sent an invitation letter to the EU Member States under Article 22(5) to look at the Illumina/Grail transaction, citing the grounds available under Article 22(1) of the Regulation 139/2004. The following month, the French national competition authority, Autorité de la Concurrence, sent a ‘referral request’ to the Commission, a request that was soon accompanied by similar ‘requests to join’ from the Icelandic, Norwegian, Belgian, Dutch and Greek national competition authorities. ⁷ Around the same time, on 31 March 2021, the European Commission published an important guidance, the Guidance on the application of the referral mechanism set out in Article 22 of the Regulation 139/2004 to certain categories of cases. ⁸ As the Commission was of the opinion that the requirements under Article 22 of the Regulation 139/2004 were met, it assessed the Illumina/Grail merger, and issued a prohibition decision. However, Illumina had, meanwhile, proceeded with the acquisition. Following the Commission's prohibition decision, Illumina appealed before the General Court (GC), and also complied with the ‘hold separate’ requirement, in order to ensure that it did not exercise a decisive influence or managerial control over the acquired firm. ⁹ In its appeal before the GC, Illumina raised the following three grounds of appeal. First, that the Commission lacked competence as the concentration did not fall under the merger control rules of the referring Member States; second, the referral request as set under Article 22(1) of the Regulation 139/2004 was time-barred; and thirdly, the Commission's review of the transaction transgressed the principle of legitimate expectations and legal certainty, namely the Commission's well-established practice of refusal to examine transactions that did not meet the national merger control thresholds. However, the General Court refused Illumina and Grail's request in entirety, as in the opinion of the Court, Article 22 of Regulation 139/2004 was a ‘corrective mechanism’ and the Commission's acceptance and assessment thereof facilitated compliance with the principle of legal certainty, as the application of the said Article was ‘conditional solely on the fulfilment of the four cumulative criteria laid down in the first subparagraph of Article 22(1) [Regulation 139/2004]’. ¹⁰ In the joined appeal before the Grand Chamber of the CJEU, Illumina and Grail requested that the decision of the Commission and the judgment of the GC therein be annulled, as the GC had erred in the interpretation of the scope of Article 22 of the Regulation 139/2004 (first ground), that the referral request was unreasonably delayed (second ground) and that there was an infringement of the principles of legitimate expectations and legal certainty (third ground). ¹¹ The CJEU assessed in detail only the first ground of appeal, namely whether the Commission misinterpreted its power to request appeal under Article 22 of the Regulation 139/2004 and opined that Illumina and Grail were correct in alleging errors in its interpretation thereof. As the first ground was well founded, the CJEU did not further its assessment, and therefore annulled the decision in its entirety. ¹² It also ordered the Commission to pay the costs incurred by Illumina, Grail and an intervening party, namely Biocom California. As the first ground was instrumental in the decision of the CJEU, the following section, accordingly, assesses in detail the parties’ arguments and the CJEU's assessment as regards the first assertion, namely whether there was indeed a misinterpretation of Article 22 of Regulation 139/2004.

3. Illumina/Grail merger before the CJEU

In its appeal, Illumina submitted that the General Court had erred in the interpretation of Article 22(1) of the Regulation 139/2004 as it allowed the Commission to ‘scrutinize concentrations’ that were below the European threshold as well as the national merger control rules, an interpretation that was evidently misaligned with the ‘principles of legal certainty, proportionality and subsidiarity’. ¹³ Such an interpretation, as per Illumina, mis-read the literal, historical, contextual and teleological interpretation of Article 22(1) of the Regulation 139/2004. ¹⁴ The Commission, on the other hand, found Illumina's (and Grail's) arguments ineffective, as, amongst other reasons, the Commission's ‘primary competence over mergers with a European dimension’ did not exclude its competence to accept a referral as provided for in Regulation 139/2004. ¹⁵ The CJEU, at the outset, rejected the Commission's assertion as regards the ineffectiveness of Illumina's appeal on the grounds that for a ground of appeal to be deemed ineffective, it must first be clearly established that ‘even if [that contested ground for appeal] were held to be well founded, it would not be capable of leading to the judgment under appeal being set aside’. ¹⁶ In its first ground, Illumina/Grail had essentially asked whether the Commission had the competence to review transactions that did not qualify for review; in other words, transactions that neither fell under the Commission's threshold nor under those of the national merger control rules of the EU Member States. This, in the opinion of the Court, was a sufficient ground, provided that it was well-established, to set the judgment under appeal aside or to annul the decision at hand. ¹⁷ The CJEU thus made a detailed assessment of the literal (section 3.1), historical (section 3.2), contextual (section 3.3) and teleological (section 3.4) interpretation of Article 22(1) of the Regulation 139/2004.

A. Literal interpretation of Article 22(1), Regulation 139/2004

The CJEU agreed with the General Court's literal interpretation of the first subparagraph of Article 22(1) of the Regulation 139/2004 that Member States could refer any concentration for review to the Commission, irrespective of whether the proposed concentration required review under the national merger control rules. ¹⁸ For compliance with this requirement, the following four cumulative conditions should be met: first, one or more Member States makes a request to the Commission; second, the proposed transaction qualifies as a concentration under Article 3, even though it does not meet the European thresholds under Article 1; third, it effects trade between Member States; and fourth, the proposed concentration adversely affects competition in the territory of the referring Member State(s). ¹⁹ The CJEU, like the GC, then proceeded to identify the historical context in the which the said provision was incorporated in the EU Merger Control Regulation.

B. Historical interpretation of Article 22(1), Regulation 139/2004

Even though, as early as 1950s, the founding Treaty of Rome promoted competition over regulation, and at the time, two expert groups were formed to evaluate whether concentrations be regulated by the Treaty provisions on anti-competitive agreements or whether they be assessed under rules on the abuse of dominance, absence of consensus amongst experts meant that the issue went unaddressed until 1973, when the Commission finally used the provisions under Article 86 (since Article 102 TFEU) to prohibit a merger in the Continental Cans ²⁰ case. The first council regulation on merger control in the EU, the 1989 Merger Regulation, finally entered force in 1990. ²¹ One of the key founding principles of the EU-wide merger control framework was to offer a ‘one-stop shop’, meaning that concentrations that met the thresholds, as prescribed therein, could henceforth be directly notified to the Commission for review. As some of the Member States at the time did not have national merger control rules, the Kingdom of Netherlands proposed a referral mechanism. As per the proposed referral mechanism, also known as the ‘Dutch clause’, the Commission was empowered to review a transaction referred by a Member State(s) provided that the referred transaction adversely effected trade in the territory of the referring Member State(s) (1) and that the transaction also adversely effected trade between Member States (2). ²² A perusal of the travaux préparatoires in the opinion of the Advocate General, and as endorsed by the CJEU, was a ‘referral mechanism’ for Member States that, at the time, did not have national merger control rules. It was, in the opinion of the CJEU, not a ‘corrective mechanism’ to remedy the rigidity of the strict turnover-based thresholds of Article 1 of the EU Merger Regulation 4064/89 (since replaced by EU Merger Regulation 139/2004). ²³

The CJEU, thus, differed in the interpretation of the historical backdrop of the said provision, and opined that, looking at the staff working documents (SWD) and the substantive provisions of the EU Merger Regulation 4064/89 (since EU Merger Regulation 139/2004 ²⁴ ), it was evident that the referral mechanism remains available to a Member State only if they do not have a national merger control framework to assess the proposed concentration.

C. Contextual interpretation of Article 22(1), Regulation 139/2004

The CJEU also looked at the contextual interpretation offered by the GC. The GC assessed the following factors in its contextual assessment and reached the conclusion that it did not support the assertion of Illumina/Grail. ²⁵ First, the GC looked at the legal basis of the EU Merger Control Regulation, namely Articles 103 TFEU and 352 TFEU, which offer additional powers to the Commission to attain a given objective. ²⁶ Second, the GC identified that Article 1(1) explicitly cross-referred to Article 22 of the Regulation 139/2004. Third, it enunciated the distinction between Article 4(5) and Article 22 of the Regulation 139/2004. Whereas Article 4(5) allowed a referral of concentrations that did not meet the European thresholds before notification at the request of the parties from a Member State to the Commission, Article 22, in the opinion of the GC, offered a framework for referral by the Member States. The GC also distinguished the scope of Article 4(4) and Article 9 from that of Article 22 of Regulation 139/2004 allowing reference of concentrations with a Community dimension from the Commission to the national competition authorities. Finally, the GC also assessed the relationship between the first sub-para of Article 22(1) and the other provisions of the said Article. Following a perusal of the context, the GC reached the conclusion that it did not support the assertion of Illumina/Grail. ²⁷ The CJEU agreed with the GC to the extent that ‘the contextual interpretation [did not] necessarily support’ Illumina. However, the CJEU went on to add that the factors assessed by the GC were ‘inconclusive’ to determine whether the Commission enjoyed (or did not enjoy) the competence to intervene. The CJEU, accordingly, went the extra mile to assess the following additional factors to determine the contextual interpretation of Article 22(1). ²⁸ The CJEU drew the distinction between Article 4(5) and Article 22 of the Regulation 139/2004. Whereas the referral mechanism under Article 4(5) allowed referral of concentrations caught by the national competition laws of at least three Member States to the Commission, Article 22 targeted concentrations without a European dimension. ²⁹ Secondly, the CJEU persuasively emphasized the two-fold objective of Article 22 of the Regulation 139/2004 – first, that the proposed concentration must ‘significantly affect competition in the territory of the Member State [making the referral request]’, and secondly, that the provisions of the said Article accentuate the ‘one-stop shop’ principle to avert ‘multiple notifications at national levels’. ³⁰ Third, Regulation 139/2004 offered the flexibility to rapidly adjust the scope in case the thresholds and competence criteria lagged the market developments, such that the EU Merger Regulation could no longer effectively capture harmful anti-competitive transactions. ³¹ Based on the foregoing additional considerations, the CJEU identified that the contextual interpretation of Article 22 of the Regulation 139/2004 did not allow a reference to the Commission such as in the case at hand.

D. Teleological interpretation of Article 22(1), Regulation 139/2004

Illumina and Grail criticized the General Court's teleological interpretation that Article 22 offered a ‘corrective mechanism’ to capture concentrations irrespective of whether they met the national merger control thresholds. Referring to the recitals of the Regulation 139/2004, which calls for effective control of concentrations that may lead to significant impediment to effective competition (SIEC), the GC opined that referral mechanism in Article 22 was unique and offered an opportunity to capture transactions that may otherwise not be caught, such as even under the provisions of Article 4(5) of the Regulation 139/2004. ³² The opinion of the Advocate General as also endorsed by the CJEU differed from the GC's interpretation of the said recitals. Notably, recital 11 of the Regulation 139/2004 offered a corrective mechanism to allocate competencies and exercise the ‘one-stop shop’ principle’. ³³ This, in the opinion of the CJEU, could not be interpreted as a gap-filling exercise, meaning that Article 22 performed a precise task of delineation of authority, and not to fill the gaps. ³⁴ Secondly, the reference to ‘effective control of all concentrations’ in recitals 6 and 24, in the opinion of the CJEU, alluded to only concentrations with a European dimension, a threshold that was clearly unmet in the case at hand. ³⁵ The CJEU was of the opinion that the GC erred in interpreting that recitals 15 and 16 of Regulation 139/2004 allowed referrals under Article 22 irrespective of the national merger control rules, as the historical and contextual interpretation together reflect the following two primary objectives of Article 22 of Regulation 139/2004: ³⁶ first, to allow scrutiny of concentrations, wherein the referring Member State did not have national merger control rules, and second, the exercise of the ‘one-stop shop’ principle, wherein a concentration notifiable in several Member States may be referred directly to the Commission for legal certainty. ³⁷ Article 22, in the opinion of the CJEU, could not be used as a ‘corrective mechanism’ or a safety net to capture all the other potentially problematic concentrations that may otherwise go unassessed under the EU Merger Control framework or the national merger control rules. An expansive interpretation, digressing from such clearly defined limitations, in the opinion of the CJEU, could undermine and ‘upset the balance between the various objectives’ pursued by the EU Merger Control Regulation. ³⁸ If at all, such an approach, were to be followed, could weaken ‘the effectiveness, predictability and legal certainty’ for the merging parties. ³⁹ The CJEU underscored how the EU Merger Regulation, based on Treaty Articles 103 and 352 TFEU, ‘form part of a legislative whole intended to implement Articles 101 and 102 TFEU and to establish a system of control ensuring that competition is not distorted in the internal market’. ⁴⁰ Moreover, as established in the Towercast decision, a concentration that escapes the scrutiny under the European Merger Control as well as under the national competition laws, may nonetheless qualify as abuse under Article 102 TFEU. ⁴¹

On the issue of closing the gap, the CJEU opined that the EU and Member States legislature could respectively review the thresholds or develop a refined test to determine the Commission's or Member States competence to review potentially problematic transactions. ⁴² The CJEU opined that the Commission had misinterpreted the scope of Regulation 139/2004 and wrongly interpreted the scope of Article 22 therein by reviewing a concentration that did not qualify for review under the rules of the referring Member State. As the CJEU found the first ground of appeal well founded, it quashed the decision of the General Court and annulled the Commission's prohibition decision in entirety. ⁴³ It also ordered the Commission to bear its own costs and pay the costs incurred by Illumina and Grail, as well as Biocom California following its successful intervention in the case.

4. Assessing potentially problematic transactions in a post-Illumina/Grail setting

The Illumina/Grail decision of the CJEU set a clear precedent that Member States can, henceforth, refer a transaction under Article 22 of the Regulation 139/2004 provided that the proposed concentration qualifies for review under its national merger control rules. The CJEU also clarified that Article 22 does not offer an opportunity to fill a gap, namely capture potentially problematic transactions that may not qualify for review under national merger control rules. An important question emerges about the future of merger control – namely, how can potentially problematic concentrations henceforth be reviewed by the Commission? Concentrations may be horizontal or vertical in nature. When firms at same level of the value chain merge, it is a horizontal concentration, which may also qualify as killer acquisitions, as the objective may sometimes be to kill the competing pipeline products. ⁴⁴ Cunningham et al. identify that over 6.4% of acquisitions in the pharmaceuticals sector qualify as killer acquisitions and that they frequently escape the scrutiny of competition authorities. ⁴⁵ As regards vertical integration, following the rise of the Chicago School, it was widely accepted in antitrust literature that vertical transactions are usually efficiency-enhancing as they lead to the elimination of double marginalization, and the savings therein are passed on to consumers. ⁴⁶ The rise of the neo-Brandesian movement led to questioning the conventional wisdom of the Chicago School. ⁴⁷ Illumina/Grail was a vertical merger transaction, with Illumina and Grail operating at different levels in the value chain. It nonetheless invited the scrutiny of the competition authorities on both sides of the Atlantic. This implies that concentrations, whether horizontal, vertical or conglomerate, may require scrutiny to assess their impact on competition. Focusing on this side of the Atlantic, an important question emerges in the post-Illumina/Grail world – namely, will potentially problematic transactions that do not quite meet the national or European thresholds henceforth go unassessed?

To respond to this question, this section first looks at the Draghi Report, which calls for effective enforcement of current rules, while simultaneously exercising caution in setting up and implementing new rules (section 4.A). It then assesses whether other competition and regulatory provisions may fill in the gap to catch innovation-driven transactions that might otherwise escape the net of turnover thresholds in Regulation 139/2004 (section 4.B).

A. Draghi Report

Mario Draghi's report The Future of European Competitiveness, published on 9 September 2024, a detailed report over 328 pages long, critically evaluates the current challenges confronted by the European Union towards achieving a sustainable, prosperous and successful Single Market. ⁴⁸ While the Report, driven by the larger industrial policy goal of a sustainable and digital Europe, ⁴⁹ looks at many aspects, such as energy, trade, investment and competition, as well as the macro geopolitical challenges that limit the EU's capability to realize its full potential of growth, relevant to our discussion here is the Draghi Report's observations on the role of merger control in the making of ‘European champions’ ⁵⁰ . ⁵¹ Draghi argues for a tailored and targeted approach to facilitate ‘effective competition [by European firms] with large non-European players, especially in key strategic sectors’. ⁵² An important consideration that remains unanswered in the Report, though, is the meaning and definition of a European firm. Is it a firm that is incorporated in Europe, or does that refer to a firm wherein the majority of its shareholders are EU-based? ⁵³ The Draghi Report also calls for ‘predictable and practical legal frameworks’ that optimize the dynamism and optimal resource allocation in the internal market. ⁵⁴ Easing the complexity of the rules is expected to bring down the cost of doing business, and will thereby have a positive impact on the European economy. Notably, Draghi calls for the following three reforms to the EU's approach to merger control: enhancing the weight of efficiency defence (1), an EU-wide (as distinct from Member State-wide) relevant geographic market definition in the telecoms sector ⁵⁵ (2) and the ‘strengthening’ of ex-post-merger control enforcement (3). ⁵⁶ The Report clearly cautions against the increasing complexity of merger control following the entry into force of Guideline on Article 22 of the Merger Regulation ⁵⁷ (since recalled by the Commission following the CJEU's decision, see section 5). Notably, the Report offers a connecting thread between three instruments that are central to discussion in this research article – first, enhanced ambiguity following Article 22 of the Merger Regulation (as evidenced in Illumina/Grail); second, the possible application of Article 101 and 102 to non-notifiable merger transactions and third, the ever-emerging newer theories of harm, alongside the Foreign Subsidies Regulation and the Digital Markets Act (DMA), that can capture otherwise unreportable merger transactions. ⁵⁸ The Report's ‘reimagined competition policy [calls for] a more flexible, adaptive approach’ to achieve its envisioned competitive outcomes. ⁵⁹ The following sub-section assesses the potential of complementary competition and regulatory tools, which may potentially help keep problematic mergers under check.

B. Complementary competition and regulatory instruments to target below-threshold mergers

This sub-section looks at complementary competition and regulatory tools such as ex-post competition law enforcement, the DMA, the Foreign Subsidies Regulation as well as the national merger control thresholds that may become even more relevant following the CJEU's decision, which interestingly also resonates with the Draghi Report's call for a ‘predictable and practical legal framework’. ⁶⁰ This is a pertinent question, as shortly after the CJEU's decision, the Commission withdrew its 2022 guidance. ⁶¹

At the national level, different Member States have different notification requirements. Notably, the German, Austrian and the Italian competition authorities introduced amendments to their notification requirements to catch below-threshold mergers. Following a report by the Monopolkommission in 2016, calling for change to catch killer acquisitions in innovation-driven sectors, Germany introduced a new notification regime, wherein if the value of the transaction exceeded €400 million, it must, henceforth, be notified to the German competition authority, Bundeskartellamt. ⁶² This was soon followed by Austria, wherein a similar, ‘value of the transaction’ test was introduced to capture transactions worth €200 million and above. ⁶³ These thresholds have on several occasions captured otherwise non-notifiable transactions.

The $19 billion Facebook/WhatsApp merger did not meet the turnover-based thresholds in the EU. However, the national merger laws with lower threshold invited notification obligations on Facebook. To avert multiple investigations at different national levels, Facebook exercised the flexibility under Article 4(5) of Regulation 139/2004 to make a request for assessment of the transaction by the European Commission. ⁶⁴ The merger was assessed and unconditionally cleared by the Commission under Article 6(1) of Regulation 139/2004. ⁶⁵ Compare this with the Apple/Shazam €363 million merger deal, which was uncaught by the turnover-based thresholds under Article 1 of the Regulation 139/2004. The Austrian threshold referred to above, following the reform to its transaction threshold, could assess transactions worth €200 million and above. The Bundeswettbewerbsbehörde (BWB), the Austrian Federal Competition Authority, accordingly ‘referred up’ the Apple/Shazam merger to the European Commission under Article 22(1) Regulation 139/2004. In addition to valuable addition of the new test in the German and Austrian merger control laws, these examples also illustrate the difference in the scope of Articles 4(5) and 22(1) Regulation 139/2004, an issue that was central to the CJEU's decision in Illumina/Grail.

However, if the local nexus requirements are not met – meaning that the target does not have ‘sufficient business’ in the host country – the transaction value test may be unable to capture the merger, as was evident in the Facebook/Kustomer merger before the German BKartA. ⁶⁶ This is a pertinent observation as regards the limits of Article 22 of the Regulation 139/2004.

Italy presents another interesting approach. In 2022, following a study on innovation-driven mergers, the Italian competition authority, L’Autorità Garante Della Concorrenza e Dell Mercato (AGCM), introduced special call-in powers, beyond its regular notification thresholds. To qualify under Article 16(1-bis) the following conditions must be met cumulatively: (1) the merged entity is notified within six months following the concentration; (2) either the turnover-based thresholds under Article 16(1) are met or, alternatively, the merging parties have a worldwide turnover of €5 billion and above; and (3) there exist identifiable and precise risks to innovation ⁶⁷ in part or entirety of the relevant national (Italian) market. ⁶⁸ Nvidia's acquisition of Run:ai was caught by the AGCM within the framework of these call-in powers. The AGCM had called in US-based Nvidia, the world's leading supplier of graphical processing units (GPU), for acquiring Israel-based Run:ai, an innovative AI-optimization software solution provider. ⁶⁹ Italy then formally made a referral request under Article 22(1) of the Regulation 139/2004 to the European Commission, requesting it to review the transaction. ⁷⁰ The Commission accepted a reference from the Italian competition authority requesting a review of said deal. ⁷¹ Following a phase 1 investigation, the Commission unconditionally approved the merger on 20 December 2024. ⁷²

In addition to the above instruments available at the Member State level, the DMA also imposes certain information sharing obligations on gatekeepers. As per Article 14 of the DMA, gatekeepers must inform the Commission about their intended acquisitions that may ‘provide a core platform service or any other service in the digital sector or enable the collection of data’. ⁷³ Recitals 10 and 11 of the DMA clearly highlight the complementary nature of the DMA and competition law rules (ex-ante Merger Control as well as ex-post competition law enforcement under Articles 101 and 102 TFEU). The objective of Article 14, when seen in a broader perspective, is to complement the provisions under Regulation 139/2004, the EU Merger Control Regulation. The Commission has also released a standard template, prescribing minimum information that the gatekeepers are required to offer the Commission to comply with Article 14(1) of the DMA. ⁷⁴ One of the objectives of this notification obligation is to ensure the effectiveness of the gatekeeper status and adjust the list of core platform services, and therefore ‘is crucial to monitoring the broader contestability trends in the digital sector’. ⁷⁵ Thus the mandated requirements on gatekeepers may ‘upscale’ the number of mergers that are subject to the national and EU merger control regime. ⁷⁶ However, firstly, the requirements under Article 14 of the DMA are limited to the digital markets and/or data-driven mergers, and secondly, the objective vis-à-vis digital markets seems much more targeted than that envisioned under the EU Merger Control Regulation, which targets all concentrations, irrespective of their field of activity. ⁷⁷ Thus Article 14 DMA is only a partial solution to the problem at hand.

The EU Foreign Subsidies Regulation, in full force since 2023, levels the playing field between EU-based firms and state-subsidized foreign undertakings. ⁷⁸ It prescribes a threshold wherein potentially state-subsidized mergers and acquisitions must be notified to the Commission. In the year following its entry into force, the Commission assessed over 53 transactions, of which 42 underwent parallel assessments under the EU Merger Control Regulation, while five were simultaneously assessed by national competition authorities. ⁷⁹ Thus, while the EU Foreign Subsidies Regulation may not address the issue on Article 22 of the Regulation 139/2004, parallel investigations thereunder may require a closer cooperation and coordination between the investigators.

5. Summary, ex-post developments and the wider paradigm to assess innovation mergers

In June 2024, about three months before the decision of the Grand Chamber of the CJEU, Illumina had already divested Grail, though Illumina, similar to the pre-merger situation, continues to hold a 14.5% common stock in Grail. ⁸⁰ Following a successful spin-off of Grail, the company now operates as a completely separate undertaking on major stock exchanges, including Nasdaq. ⁸¹ Notably, Illumina had proceeded with the divestment following the opinion of the Advocate General Emiliou, delivered on 21 March 2024, that clearly leaned in favour of the merging parties. ⁸² Potentially, herein, parallel developments on the other side of the Atlantic also had a role to play. ⁸³ The key point is that the Illumina/Grail saga eventually did lead to the divestiture of the assets by the firms, and in that respect, the Commission's efforts were not a mere noise, they also had an effect.

Following its intervention in Illumina/Grail, in 2023, the European Commission went further with two other referral requests from the EU Member States under Article 22(1), 139/2004 Merger Regulation. In EEX/NASDAQ Power, the Nordic competition authorities (Danish, Finish, Swedish and Norwegian) requested the Commission's intervention as Nasdaq Power, controlled by US-based stock exchange, Nasdaq Inc., proposed to acquire EEX, Europe's leading energy exchange. ⁸⁴ In Qualcomm/Autotalks, following a request from over 15 EU Member States, the Commission opened investigations in the US-based semiconductor manufacturer, Qualcomm's, acquisition of Israel-based Autotalks, specializing in vehicle-to-everything (V2X) communications. ⁸⁵ Following the initiation of proceedings by the European Commission, as well as the UK Competition and Markets Authority, both these mergers – EEX/NASDAQ Power and Qualcomm/Autotalks – were subsequently withdrawn on grounds of long drawn-out, unpredictable regulatory outcomes. ⁸⁶

As regards the Nvidia/Run:ai acquisition, though the transaction did receive the Commission's unconditional approval, ⁸⁷ Nvidia recently initiated legal proceedings before the EU court to challenge the Commission's decision to intervene in the acquisition. ⁸⁸ This merits thought, as it may lead to similar challenges from EEX/NASDAQ Power and Qualcomm/Autotalks as regards the interventions referred to above. In that respect, the CJEU's Illumina/Grail decision may have paved the way for a handful of follow-on legal proceedings by other similarly situated merger parties.

Today, with the exception of Luxembourg, all the Member States in the EU have national merger control regimes. This means that following Illumina/Grail, only Luxembourg retains a theoretical possibility to make a referral in any situation, considering that it does not have national requirements that be met for a referral. This is clearly evident in light of the above-referred ‘historical interpretation’ offered by the CJEU. ⁸⁹ The question remains whether Illumina/Grail has also axed the scope of the review and scope of remedies. ⁹⁰ Prior to Illumina/Grail, even when only certain Member States made a referral request or when certain Member States continued their parallel merger control investigations, the Commission assessed the effect of the proposed transaction on EEA-wide relevant geographic market. ⁹¹ Following Illumina/Grail, merging parties seem to have ‘an additional bargaining [leverage]’ in merger review, particularly in the definition of the relevant geographic markets, as well as the design of remedies, in light of the well-established principle of proportionality. ⁹² This observation is also underscored by the contextual and teleological interpretation of Article 22(1) offered by the CJEU, which in turn endorsed the opinion of AG Emiliou, establishing clearly the distinction between the scope of Article 4(5) and Article 22(1) of the 139/2004 EUMR. AG Nicholas Emiliou, in his opinion, categorically referred to the following forceful argument ⁹³

[The wording of Article 22(1) EUMR] is consistent with the purpose of a provision which, after its amendments in 1997 and in 2004, is also meant to strengthen the one-stop-shop nature of the EU merger control system by avoiding, as far as possible, multiple national filings.

By contrast, the wording of the provision becomes less obvious if that provision is interpreted as the General Court stated, as constituting a ‘corrective mechanism’ […] If that is so, why did the EU legislature refer only to restrictions of competition occurring at Member State level? Should not the provision refer, more generally or in addition, to restrictions of competition within the internal market? More fundamentally, why would the Commission need a referral from a Member State's authority altogether, if the competition problem is at EU level?

In a pre-2022 setting, meaning prior to the Commission's Article 22 Guidance, this boundary and scope can be neatly illustrated by two above-referred notable acquisitions discussed in section 4 – namely, Facebook/WhatsApp and Apple/Shazam – that remained uncaught by the EUMR's turnover-based thresholds.

Looking ahead, the gap to catch below-threshold innovation mergers it then seems may be best caught by the EU Member States’ call-in powers coupled with cooperation at the NCA-level, and complemented by the provisions under Article 14 DMA. Riley's suggestion to have an ‘NCA network notice [clearly setting] out terms’ merits attention. ⁹⁴ Such terms should include both procedural as well as substantive considerations. Procedural terms could include time limits, stop-the-clock provisions and a common notification procedure. Substantive limits can include the criteria to intervene only in innovation-driven sectors, such as tech and pharma. ⁹⁵ This recommendation also well aligns with the CJEU's call for ‘predictability and legal certainty’ as well the Draghi Report's call for ‘coherence’ in the application of law.

Acknowledgements

The work is author’s research output. The author would like to express her sincere gratitude to Professor Caroline Cauffman and Professor Daniel On for their thoughtful discussions, inputs and exchanges, which form the inspiration and the basis of this research article.