Antitrust and Unfair Competition Law

In the Matter of Illumina, Inc. and Gail, Inc., Administrative Complaint, Before the FTC, Docket No. 9401, filed March 30, 2021

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The Federal Trade Commission filed an administrative complaint and authorized a federal court lawsuit to block Illumina’s $7.1 billion proposed acquisition of GRAIL, Inc. (Grail) Grail produces of a non-invasive, early detection liquid biopsy test that can screen for multiple types of cancer in asymptomatic patients at very early stages using DNA sequencing. This early detection may revolutionize cancer treatment.  Illumina is the only provider of DNA sequencing that is a necessary input to produce these multi-cancer early detection, or MCED, tests in the United States.  Illumina and Grail do not compete with each other, so this is not a horizontal merger. Grail, however, does compete with other companies also trying to produce MCED tests.   The FTC’s concern is that after purchasing Grail, Illumina could impede Grail’s competition from MCED producers by raising their input price, denying them technical assistance or crimping ther ability to compete in other ways by controlling a critical input.  A copy of the FTC press release is here.  A copy of the Redacted Public Complaint is here.

The complaint alleges the proposed acquisition will diminish innovation in the U.S. market for MCED tests, which could be used to detect up to 50 types of cancer. Most of these types of cancer are not screened for at all today, and the MCED test could save millions of lives around the world. The trial is scheduled to begin on Aug. 24, 2021.

The Complaint is of particular interest because it does not challenge a horizontal merger.  It is another in a recent series of merger challenges where the federal government has challenged “nascent” mergers. The relevant market alleged is MCED tests.  Rather than waiting for cancer to arise, MCED tests use a “liquid biopsy to examine fragments of DNA in the bloodstream to determine whether cancer cells have shed any DNA.  Grail, with its Galleri MCED test, is racing against several other firms to develop and ultimately commercialize this revolutionary technology.” Complaint at ¶4.  Illumina is a dominant provider of NGS platforms, an essential input for the development and commercialization of MCED tests. Grail’s Galleri test, along with its rivals’ MCED tests in development, must and do rely on Illumina’s NGS platforms. Id. at ¶6.

The FTC found the competitive harm in this proposed acquisition in that if Illumina owned Grail, as the only supplier of a critical MCED test input, Illumina could impede the competitiveness of any rival MCED test developer by 1) raise the test developers prices for necessary inputs; 2) deny important mechanical assistance; or 3) refuse or delay the execution of necessary licenses.  If the Acquisition is consummated, the FTC alleges that Illumina will gain the incentive to foreclose or disadvantage firms that pose a significant competitive threat to Grail and to limit the competitiveness of any MCED product that Respondents expect to compete closely with Galleri.  Post-Acquisition, Illumina will have the ability to monitor each company developing an MCED test using its NGS platform and the incentive to kill or disable any products that appear likely to take significant business away from Galleri.  Id. at ¶¶11-14.  The Acquisition, if consummated, would be likely to lessen competition substantially in interstate trade and commerce in the market for MCED tests throughout the country in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. 

The proposed merger is not a horizontal merger of competitors, the type that typically are challenged if concentration levels are deemed by the agency to create competitive concerns.  In a press release, Illumina stated that “The FTC’s challenge to the proposed transaction is a marked departure from longstanding antitrust precedent.”   Illumina’s press release further states: “that it disagrees with, and will oppose, the U.S. Federal Trade Commission (FTC)’s challenge to its previously announced acquisition of GRAIL, a pre-commercial company founded to accelerate early screening of cancer. Illumina will pursue its right to proceed with the transaction, the impact of which would accelerate the adoption of a breakthrough multi-cancer early detection blood test.”

The acquisition parties have 14 days to file and answer to the complaint. An evidentiary hearing before an Administrative Law Judge of the Federal Trade Commission is set for August 24, 2021. 

An interesting sidenote to the case is that Illumina formed Grail in 2015 before spinning it off two years later.  Had Illumina not spun of Grail. Of course, there would be no acquisition to challenge.

Note:  On April 1, 20201 Illumina agreed to delay closing its acquisition of Grail until at least September 20, 2021 or after 11:59 p.m. on the second business day after the court rules on the FTC’s move for a preliminary injunction blocking the merger, whichever comes first.

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