The European Commission issued a record gun jumping penalty against Illumina for prematurely closing its acquisition of Grail - fining Illumina €432 million, 10% of the company's annual turnover, and Grail a symbolic €1,000. The Commission deemed this action an "unprecedented" breach of EU merger control rules. But how did this all begin?
Illumina announced its intention to acquire Grail in October 2020. At this time, Grail didn't have any products launched or generate any revenue within the EU, or have any EU-based assets. Additionally, EC guidance in relation to Article 22 of the Merger regulation, otherwise known as the "Dutch clause", had only recently changed. Historically, the EC had discouraged member state authorities from referring transactions to them when those states did not have jurisdiction, but this changed in September 2020, when the EC began encouraging these referrals.
The level of the gun jumping fine imposed on Illumina did not come as a complete surprise to industry observers, given that Illumina's recent proxy statement suggests that the potential fine for gun jumping was weighed against the amount of the break fee that would have been payable had the transaction not closed. It may not even have come as a surprise to Illumina, who set aside $453 million for this eventuality.
Aside from it being an unprecedented breach, why did the Commission impose such a high fine? Ultimately, they are seeking to deter others from doing the same, and sending a strong message about the importance of adhering to EU merger control rules. While opinions may differ on the specifics of this case, it highlights the Commission's willingness to take decisive action when its investigations are not shown appropriate deference.
The European Commission has issued a record gun jumping penalty against Illumina for unlawfully closing its acquisition of Grail, saying it was an "unprecedented" breach of EU merger control rules to do so before the end of its probe.
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