Mind the Gap: ECJ Judgment Determines European Commission Cannot Review Deals Below Member State Merger Control Thresholds

By: Nicole Kar, Rich Pepper, William Feerick, Andrea Wei Ling Chong & Timothy Noelanders (Paul Weiss)

The European Court of Justice (ECJ) has ruled against the European Commission’s ability to accept referrals under Article 22 of the EU Merger Regulation (EUMR) from national competition authorities that lack jurisdiction to review transactions under their own national laws.

The ruling centers around Illumina’s attempted acquisition of GRAIL, a company specializing in early cancer detection tests. While the deal was blocked in 2022 and has since been unwound, the implications of the judgment extend far beyond this case. The decision challenges the Commission’s approach to overseeing transactions that fall below the national merger control thresholds but may still pose competition concerns within the internal market. To address this, the Commission may need to reconsider how it asserts jurisdiction over such deals. Potential solutions could include amending the EUMR to introduce value-based transaction thresholds similar to those under the HSR Act in the U.S., encouraging more Member States to update their national merger control laws to include acquisition value or market share thresholds, or relying on Member States’ enforcement of Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), which address anti-competitive agreements and abuse of dominance.

Despite the judgment, it is unlikely to slow the momentum for scrutinizing deals that fall below Member State notification thresholds in Europe. There remains significant concern that traditional turnover and market share thresholds are inadequate for evaluating transactions in rapidly evolving sectors like digital technology and life sciences, where historic revenues may not reflect the “future competitive potential” of emerging players. Recent amendments to merger regimes in the UK and proposals in Australia and India, as well as existing practices in Austria and Germany, all underscore the need for reform in this area.

The Court’s Findings
The controversy began on March 9, 2021, when the French Competition Authority—followed by authorities in Belgium, Greece, Iceland, the Netherlands, and Norway—referred the Illumina-GRAIL transaction to the European Commission for review at the Commission’s invitation, based on a third-party complaint. The referral was contentious because the transaction did not meet any of the national or EU-level turnover thresholds, as GRAIL had not yet generated any revenue in the EU. While Illumina engaged with regulators in the UK and the US—both of which have jurisdictional thresholds not based solely on revenue—the transaction was referred for EU-level review under Article 22, which has traditionally been used to address transactions that might escape scrutiny under conventional criteria…

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