They are out to get you

The EU and UK extend the scope of merger control to catch more pharma and biotech mergers


First published in our Biotech Review of the year – issue 9.  Also published in the Solicitors Journal, March 2022.


For several years now, the drumbeat in competition law circles has been concern over a perceived lack of enforcement in the face of increasing market concentration. Until recently, the main result appeared to be a marked increase in intervention against US tech giants including Google and Facebook. However, recent developments in both EU and UK merger control suggest that entities in other innovation-heavy sectors – including biotech and pharma – are likely to find themselves increasingly in the cross hairs, sometimes even where their links to the jurisdictions appear slight.[1]

At the EU level, the DNA sequencing giant, Illumina, finds itself locked in battle with the European Commission (EC) over its $7.1 billion acquisition of California-based Grail. In addition to a hotly contested phase II merger investigation, Illumina is facing charges of gun-jumping. This despite the fact that the deal does not meet the jurisdictional thresholds under the EU Merger Regulation (EUMR). Indeed, since Grail has no revenue at all in Europe, the deal did not originally trigger a filing requirement anywhere in the EU, even at national level. Instead, pursuant to a new policy set out in Guidance issued in April 2021, the EC has actively extended its jurisdiction to the transaction at the request of Member States using existing (but de facto dormant) powers under Article 22 EUMR.[2]

In the UK, the Competition and Markets Authority (CMA) has been flexing its merger control muscles as it develops its new role in a landscape remade by Brexit, most recently by imposing a fine of over £50 million on Facebook for procedural infringements.[3] Part of that process has been establishing a record for intervening in mergers with little if any jurisdictional link to the UK in cases such as Roche/Spark[4] and Sabre/Farelogix[5]. The Competition Appeal Tribunal (CAT)’s judgment in May upholding the CMA’s jurisdiction in Spark/Farelogix means this process is likely to continue.[6] And the CMA’s focus on innovation issues means that deals in the tech, pharma and biotech space will be a particular focus.

EU Merger Control Expansionism: Illumina/Grail and the new Article 22 policy

The Illumina/Grail deal

Illumina develops and commercialises next generation sequencing (NGS) systems for genetic and genomic analysis as well as the services and consumables needed to operate them. It is a world leader in the field, with – according to an earlier finding by the CMA – a global share of DNA sequencing systems in excess of 80%.[7] On 20 September 2020, Illumina announced its acquisition of the US oncology company Grail for $8 billion.

Grail has developed tests intended to allow the early detection of around 50 cancer types via blood samples in patients that are not showing symptoms. It is still in the early stages of commercializing these products. Grail began limited commercial activities in the US in April 2021, but it still has no EU sales. Grail’s tests are based on genomic sequencing and rely on NGS systems. Indeed, Grail started life as an Illumina business unit before being spun out in 2016.

On 22 July, the EC opened an in-depth phase II investigation of the deal on the basis that it raised substantial concerns about the impact of the transaction on the development and supply of NGS-based cancer detection tests.[8] In particular, existing and potential competitors to Grail in the cancer detection test space also rely on Illumina’s sequencing technology. As a result, it is concerned that Illumina might have the ability and incentive to cut short innovation efforts that might result in alternatives to Grail’s technology, so-called vertical foreclosure strategies. It is rare for the EC to oppose a merger between non-competitors and an even rarer example of an innovation theory based on threats to future competition in a vertical context. This would therefore appear to be an example of the EC’s increasing interest in pursuing non-standard theories of harm involving effects on innovation.

The jurisdictional issues

The primary basis for jurisdiction under the EUMR – and most national merger control laws in Europe – are turnover (i.e. value of sales) thresholds which the parties must fulfil, typically including some minimum turnover for the target in the relevant jurisdiction. Since, in this case, Grail had no sales (and therefore no turnover) in any EU Member State, the acquisition was not originally caught by the EUMR or national merger control rules in the EU. As a result, the parties were not automatically obliged to notify the deal to the EU for clearance prior to completion.

However, Article 22 of the EUMR allows member states to request that the EC initiate a merger review even where the EU turnover thresholds are not met.  In this case, six EEA member states – France, Belgium, Greece, the Netherlands, Iceland, and Norway – submitted requests asking the EC to take jurisdiction over the Illumina/Grail deal. (There have been press reports suggesting that the EC may itself have solicited those requests.[9]) The EC accepted the requests and opened an initial phase I investigation on 19 April 2021.[10] On 22 July, it opened an in-depth phase II investigation, indicating that it had substantial concerns in relation to the merger.[11]

Article 22 dates back to the original version of the EUMR which entered into force in 1990. It was designed to allow those Member States that in 1990 had no national merger control regimes – particularly the Netherlands – to correct that deficit by referring potentially problematic mergers to the EC. As a result, Article 22 became known as the “Dutch clause”.

Over time, the EC had, in its own words, developed a practice of “discouraging” Article 22 requests from Member States that did not have jurisdiction over the deal under their own merger control rules.[12] This reflected both concerns regarding legal certainty and experience indicating that such deals were not generally likely to have a significant impact on EU competition. As a result, use of Article 22 in such circumstances had effectively ceased.

However, in recent years, concerns had arisen that – in high innovation sectors such as pharma and digital – companies might play a significant competitive role despite having little or no sales or turnover, as a result of their R&D and innovation potential. As a result, in April 2021, the EC issued the new Guidance that overturned that previous practice.[13] This is the first case in which the new policy in that Guidance has been implemented. Illumina has, in other words, found itself in the unfortunate position of being the test case for a new policy, and one in place after it initiated the transaction.

Gun jumping

The opening of the EC investigation automatically triggered Article 7 of the EUMR, the standstill obligation which prohibits parties from implementing a merger pending EC clearance. This created a serious problem for Illumina. Its deal to acquire Grail would expire on 20 December 2021.[14] Once an in-depth investigation had been opened, EC clearance before that date was unlikely, and after a ‘stop-the-clock’ suspension in October, the deadline has extended into February 2022.

Illumina therefore faced a choice between completing the deal in the face of the standstill obligation, or risking its collapse. Illumina adopted a dual strategy to deal with the situation. First, it challenged the EC’s jurisdiction over the transaction in the EU courts. Second, it completed the acquisition while offering undertakings to hold the two businesses separate.

Unfortunately for Illumina, the EC did not regard those undertakings as sufficient. On 20 September, it issued a Statement of Objections (SO) to Illumina and Grail informing them that it considered them to be in breach of the Article 7 standstill obligation and intended to adopt interim measures.[15] On 29 October, those interim measures were adopted.[16] This is the first time that interim measures have been imposed under the EUMR. They require, among others, that:

  • Grail is run by independent hold separate management acting exclusively in Grail’s interests;
  • Illumina supplies any additional funds necessary for the operation and development of Grail;
  • Interactions between the parties take place on an arm’s length basis with no confidential information being shared outside the ordinary course of business; and
  • Grail work on alternatives to the transaction.

The SO also raises the possibility of fines. ‘Gun jumping’, the partial implementation of deals before clearance, has recently become an enforcement priority for the EC. For example, in 2018 it imposed fines of €125 million on the telecoms company Altice,[17] which were upheld by the EU General Court in September this year.[18]

The new Article 22 Guidance

The new Guidance is a response to long-standing EC concerns that the turnover-based thresholds of the EUMR were failing to catch problematic transactions.[19] A particular focus in this regard are deals in digital, pharma and others sectors where innovation is central to competition. In digital markets, free services frequently launch with the aim of building up a significant user base and/or commercially valuable data inventories, before seeking to monetise the business. In pharma, innovators may have strong competitive potential, even before their R&D activities are complete.  Such sectors are seen as vulnerable to so-called “killer acquisitions” in which emerging competitors are acquired before they grow large enough to trigger notification requirements.

The EC’s solution adopted is to actively “encourage” or “invite” Article 22 requests (also known-as referrals) from Member States authorities (NCAs).[20] The Guidance suggests that the EC does not intend to passively wait for transactions of interest to be brought to its attention. Instead it will seek to “identify concentrations that may constitute potential candidates for a referral” in close cooperation with Member State authorities.[21] It seems the EC envisages something similar to the CMA’s existing Mergers Intelligence Committee, which actively monitors merger activity to allow the CMA to ‘call in’ transactions of interest.

Consistent with that CMA model, the Guidance indicates that transactions will remain at risk of referral and review post-closing. This risk is potentially open ended, at least until after the “material facts about the concentration have been made public”. Although the EC will not “generally” consider a referral “appropriate” where more than six months has passed once that has occurred.[22]

As the Guidance makes clear, the legal threshold that must be satisfied before a referral can be made is extremely low. The transaction must (i) affect trade between Member States and (ii) threaten to significantly affect competition in the referring Member State. These criteria will be satisfied if the transaction may have “some discernible influence” on inter-state trade and a preliminary analysis based on prima facie evidence of a possible adverse competitive effect.[23]

The Guidance also sets out a range of factors that make it more likely the EC will accept a reference, where the target:

  • is a start-up or recent entrant that has yet to generate significant revenue but has significant potential;
  • is an important innovator or conducting potentially important research;
  • has access to significant data, IP rights or other competitive assets; and/or
  • provides key inputs or components to other industries.[24]

In addition, the EC may examine whether the consideration paid for the target is particularly high compared to its current turnover.[25]

UK merger control expansionism

The jurisdictional thresholds under UK merger control rules are notoriously flexible. The CMA may take jurisdiction over a transaction if the activities of the parties overlap in the supply of goods or services “of some description” where they have a combined share of at least 25% in the UK (the share of supply test).[26] While the transaction must result in some increment in the parties’ combined share, the CMA has broad discretion over what constitutes an appropriate description of goods or services.

In a number of recent cases, including Roche/Spark and Sabre/Farelogix the CMA has used the scope granted to it by the share of supply test to take jurisdiction over mergers with little or no obvious jurisdictional link to the UK. Several of these cases have been in innovation driven sectors like pharma and tech. Like the EC, the CMA seems particularly concerned about possible ‘killer acquisitions’ affecting innovation. In a 2019 speech, the CMA CEO Andrea Coscelli said: “if the price paid by the acquirer seems hard to explain based on current or likely future earnings, we should scrutinise the rationale for the acquisition with particular rigour and consider, in particular, whether the purchase price could reflect the benefit of killing off emerging competition.”[27]

To this extent, the UK developments mirror those in the EU.


In February 2019, the biotech giant Roche Holdings (Roche) announced a US$ 4.3 billion acquisition of US-based Spark Therapeutics (Spark). In the UK, Roche’s activities included the supply of emicizumab, a novel treatment for haemophilia, but not one based on gene therapy. Spark had no commercial activities and no sales in the UK. It was however active in the development of a gene therapy treatment for haemophilia.

Since Spark was not active in the supply of any products in the UK, Roche took the view that there was no overlap or increment in the parties’ UK activities and did not notify the transaction to the CMA.

However, the CMA disagreed. In June 2019 it issued an initial enforcement order (IEO) requiring the parties to hold their businesses separate pending CMA clearance.[28] In the CMA’s view, Spark was active in the supply of haemophilia treatments in the UK given the “commercial realities of the pharmaceutical sector” where, evidence showed, companies with existing products alter their commercial behaviour to compete with pipeline products that remain in the R&D stage.[29] Spark had employees in the UK active in its global R&D efforts and held UK/EU patents. The CMA therefore concluded that the 25% share of supply threshold met on the basis of:

  • the share of UK workers engaged in activities related to novel (gene therapy and non-gene therapy) treatments for haemophilia A; and
  • the proportion of UK patents procured in relation to treatments for haemophilia A.

The CMA ultimately cleared the deal, in phase I and without conditions, on 10 February 2020. However, the CMA has subsequently amended its official guidance to underline that pipeline products will be taken into account in assessing UK jurisdiction.[30]


While Roche/Spark signalled that the CMA is prepared to push the boundaries of its jurisdiction, Sabre/Farelogix confirms that it is prepared to prohibit transactions in such circumstances, and will get support from the CAT in doing so.

On 9 April 2020, the CMA prohibited Sabre Corporation (Sabre)’s acquisition of Farelogix Inc (Farelogix) on the basis of concerns over the deal’s impact on innovation in technology solutions for the air travel industry. Both Sabre and Farelogix are US-based providers of IT solutions. Sabre operates a global distribution system (GDS) allowing airlines to provide booking information on fares, flight availability, etc. to travel agents. Globally there are three GDS in operation, the other two being provided by Amadeus and Travelport.

Farelogix does not have a GDS. It offers IT solutions that allow airlines to provide information to travel agents outside the scope of a GDS (so-called GDS by-pass). Compared to Sabre and the other GDS providers, Farelogix is barely even a minnow. In 2018, Farelogix’s global turnover was just over £30 million. Sabre’s global turnover in 2018 was around £3 billion. Sabre agreed to acquire Farelogix on 14 November 2018 for approximately $360 million.

Like Roche, Sabre decided not to notify its acquisition to the CMA believing that there was no UK jurisdiction. Farelogix had no UK revenues and no UK presence. Its only link to the UK was a contract under which British Airways (BA) supplied data to Farelogix in the context of BA’s interlining agreement with American Airlines (AA). Under the interlining agreement, AA marketed tickets covering flight segments provided by BA. Since AA used Farelogix to market its services, it had asked BA to enter into an agreement with Farelogix. The number of tickets involved was extremely small – 62 in 2018 – and Farelogix was paid by AA (rather than BA) in relation to those sales.

Despite the almost complete absence of a UK link, the CMA’s Mergers Intelligence Committee decided that Sabre’s acquisition of Farelogix warranted investigation. As a result, the parties notified the deal to the CMA on 19 June 2019, while disputing the CMA’s jurisdiction. However, the CMA concluded that the share of supply test was met in relation to the “supply [of] IT solutions to airlines for the purpose of airlines providing travel services information to travel agents to enable travel agents to make bookings”.[31] Sabre already had a share of over 25% in relation to the supply of such services in the UK, so any increment would be sufficient. Although Farelogix had no revenues in the UK, the CMA concluded that it was sufficient that it could have sought payments from BA under its contract, even though this did not in fact happen and doing so would have cost more than the value of the payments.

In the face of the CMA prohibition, the parties abandoned the deal in May 2020 (an attempt to block the deal by US authorities had been rejected by the US courts in April). However, Sabre also decided to challenge the CMA’s decision on jurisdiction in the CAT.

On 21 May 2021, the CAT rejected Sabre’s appeal and upheld CMA’s claim to jurisdiction.[32] In particular, the CAT emphasised that:

  • CMA’s decision to take jurisdiction was subject to only limited review – to succeed, Sabre would need to show that the CMA had acted “irrationally” in defining the relevant services or calculating the overlap;
  • the CMA was entitled to find that Farelogix supplied services in the UK, BA’s management had taken a conscious decision in the UK to enter into its contract with Farelogix, so the services had been procured in the UK, and BA had benefited from those services via the sale of tickets under its interlining agreement with AA;
  • it was not irrational for the CMA to rely on theoretical revenues in finding an increment in the UK share of supply that an overlap existed (although the CAT found this “a difficult issue to resolve”); and
  • any increment in UK share of supply was sufficient – no de minimis threshold applied: although Farelogix’s share was less than 1% – indeed Sabre argued it was less than 0.001% – any increment, however small, was enough.
Conclusions and comment

As the developments above make clear, the enforcement of both EU and UK merger control is moving towards greater intervention, greater uncertainty and a greater focus on innovation issues. Jurisdictional expansionism makes it more complex to predict clearance requirements and timetables. Aggressive implementation of gun jumping rules increases financial risk and complicate integration planning. Pursuit of non-standard theories of harm increases substantive risk. All of this will increase risk and complexity in mergers and acquisitions.

The focus on sectors where innovation is a major driver of competition means that pharma, tech and biotech companies are clearly in the sights of the enforcers. These risks may extend even to smaller operators, given the interest in new entrants and competitive potential – particularly where they are purchased by larger players.

Undertakings in these areas and their advisors will need to focus even more carefully on merger control risk assessment, timetables and the drafting to deal documents. The move away from clear jurisdictional tests, means that in additional to assessing thresholds and jurisdictional nexus, thought must be given to whether authorities are likely to have concerns that a transaction might give rise to substantive concerns, and where that is the case, to whether early engagement with the authorities might help limit the risks. In other words, at both the EU and UK levels, even more of the thinking that already goes on in relation to UK merger control issues will be needed.

[1] Indeed, in March this year the EC, CMA and both US antitrust authorities (the FTC and DoJ), among others, established a Working Group on pharmaceutical mergers, The European Commission forms a Multilateral Working Group with leading competition authorities to exchange best practices on pharmaceutical mergers, EC Press Release, 16 March 2021,
[2] EC Guidance on the application of the referral mechanism set out in Article 22 of the Merger Regulation to certain categories of cases, OJ C 113, 2021, p. 1 (the Guidance),
[3] Completed acquisition by Facebook, Inc. of GIPHY, Inc., CMA penalty decision, 28 October 2021,
[4] Anticipated acquisition by Roche Holdings, Inc. of Spark Therapeutics, Inc., CMA clearance decision, 16 December 2019 (Roche/Spark),
[5] Anticipated acquisition by Sabre Corporation of Farelogix Inc., CMA Final Report, 9 April 2020 (Sabre/Farelogix),
[6] Sabre v CMA [2021] CAT 11,
[7] Anticipated acquisition by Illumina, Inc. of Pacific Biosciences of California, Inc., CMA Preliminary Findings Report, 24 October 2019, para 8.120,
[8] Commission opens in-depth investigation into proposed acquisition of GRAIL by Illumina, EC Press Release, 22 July 2021,
[10] EC Press Release, Daily News 20 April 2021,
[11] Commission opens in-depth investigation into proposed acquisition of GRAIL by Illumina, EC Press Release, 22 July 2021,
[12] Guidance, supra, para 8.
[13] Guidance, supra, para 11.
[14] Illumina pushes ahead with closing $8bn Grail merger in defiance of EU probe, Financial Times, 18 August 2021,
[15] The Commission adopts a Statement of Objections in view of adopting interim measures following Illumina’s early acquisition of GRAIL, EC Press Release, 20 September 2021,
[16] Commission adopts interim measures to prevent harm to competition following Illumina’s early acquisition of GRAIL, EC Press Release, 29 October 2021,
[17] M.7993 Altice/PT Portugal, EC Decision of 24 April 2018,
[18] Case T-425/18, Altice Europe v Commission, judgment of 22 September 2021.
[19] The future of EU merger control, speech to the International Bar Association, 24th Annual Competition Conference, Vice President Margrethe Vestager, 11 September 2020,
[20] Guidance, supra, paras 11 and 26.
[21] Guidance, supra, para 23.
[22] Guidance, supra, para 21.
[23] Guidance, supra, paras 14 and 15.
[24] Guidance, supra, para 19.
[25] Id.
[26] Enterprise Act 2002, section 23(3).
[27] Competition in the digital age: reflecting on digital merger investigations, speech to the OECD/G7 conference on competition and the digital economy by Andrea Coscelli, 3 June 2019,
[28] Anticipated acquisition by Sabre Corporation of Farelogix Inc., IEO, 11 June 2019,
[29] Roche/Spark, supra, para 90.
[30] Mergers Guidance on the CMA’s jurisdiction and procedure, CMA2 revised, December 2020, para 4.63(c).
[31] Sabre/Farelogix, supra, para 5.28.
[32] Sabre v CMA, supra.