In a major setback for U.S. biotech giant Illumina, the European Union (EU) has imposed a staggering $475 million fine on the company for its acquisition of cancer-screening firm Grail without obtaining the necessary regulatory approval.
The move comes as a blow to Illumina, which had announced a $7.1 billion deal to acquire Grail in 2020. The European Commission, the executive arm of the EU, stated that Illumina violated EU merger rules by completing the transaction without consent.
Last year, the EU blocked the acquisition, citing concerns over its potential negative impact on competitors, giving it an overly dominant position in the market. US regulators had also not approved the deal.
The EU antitrust Commissioner, Margrethe Vestager emphasized the severity of Illumina and Grail’s actions, stating, “If companies merge before our clearance, they breach our rules. Illumina and Grail knowingly and deliberately did so by implementing their tie-up as we were still investigating. This is a very serious infringement.”
The deal has faced scrutiny from regulators who hope the fine would deter other companies seeking to close deals without approval.
Earlier this year, the Federal Trade Commission (FTC) ordered Illumina to divest Grail, asserting that the merger would stifle competition and affect innovation in the U.S. market for life-saving cancer tests.
Illumina has expressed its intention to appeal the European fine, as it did with the FTC order. The company is currently awaiting the ruling of the EU’s highest court on its challenge to the commission’s authority to review the merger.
The tumult surrounding the acquisition has had far-reaching consequences for Illumina. Francis deSouza, the company’s CEO and director, resigned last month following the removal of its chairman by shareholders in May.
The court proceedings for Illumina’s appeal against the FTC’s order to sell Grail are scheduled to commence in September. This development follows a recent setback for U.S. regulators in their attempt to block Microsoft’s landmark acquisition of video game maker Activision Blizzard.
In Europe, regulators have imposed the maximum possible fine of €432 million, as stated in a commission announcement. Such fines can reach up to 10% of a company’s annual revenue, depending on the gravity of the violation.
The commission emphasized that companies typically adhere to the rules and await clearance from antitrust authorities before completing an acquisition or merger. “Illumina and Grail knowingly and intentionally breached the standstill obligation during the commission’s in-depth investigation,” the statement said.
“This is an unprecedented and very serious infringement undermining the effective functioning of the EU merger control system.”
It further asserted that “Illumina strategically weighed up the risk of a gun-jumping fine against the risk of having to pay a high break-up fee if it failed to take over Grail. It also considered the potential profits it could obtain by jumping the gun.”