Remarks by Executive Vice-President Vestager on the Commission decision to prohibit the acquisition of GRAIL by Illumina

Today, the Commission has prohibited the acquisition of GRAIL by Illumina.

Illumina is the leader in the supply of next generation sequencing systems for genetic and genomic analysis, also known as NGS technology. GRAIL is developing a non-invasive early cancer detection test. Based on a simple blood sample, these tests aim at detecting different cancers at an early stage, even before patients have developed symptoms.

GRAIL is currently engaged in an innovation race with a number of rivals, which are all vying to bring early cancer detection tests to the market. The competition in this space is fierce, as it will transform the way we screen for cancer. The market potential is enormous: by 2035 this market is expected to exceed 40 billion euros per year.

Illumina is an unavoidable partner in this race. Illumina is the only suitable supplier of NGS technology to run early cancer detection tests. All test developers currently depend on its platform.

Following the vertical integration of Illumina and GRAIL, Illumina would directly compete in the development of early cancer detection tests. GRAIL's rivals will depend for their vital input on one of their direct competitors. Illumina could cut them off from accessing its technology, or otherwise disadvantage them, to gain control of a bigger share of the lucrative early cancer detection market. This would stifle the ongoing innovation race between GRAIL and its rivals, and ultimately lead to less innovation, less choice and higher prices for European citizens and healthcare systems.

And preserving that competition between early cancer detection test developers is vital at this critical stage. GRAIL's rivals may develop new tests, potentially better and cheaper than that of GRAIL.  We need to make sure that such tests keep a chance of reaching the market and are not delayed or made too expensive by the merger.

The remedies that Illumina proposed were not sufficient to mitigate the negative effects of the merger. This is why the transaction could not be approved.

Illumina completed its acquisition of GRAIL last summer without our approval. That puts Illumina and GRAIL in a difficult situation since GRAIL's independence now needs to be restored.

This is a complex case with many angles. That is why I will spend some time to take you through the jurisdictional aspects, our theory of harm, the remedies Illumina proposed and the consequences of today's decision.

The Commission has jurisdiction to review mergers that exceed a certain turnover threshold, or following a referral by Member States.

In this case, the merger did not meet the EU thresholds. Neither did it meet the notification thresholds at Member State level. Six national competition authorities still asked the Commission to review the merger as they feared that it could have anti-competitive effects. The Commission accepted these requests.

In July this year, the General Court confirmed the legality of the Commission's approach on all grounds.  The Court confirmed that the Commission is entitled to accept referrals from Member States  even when they do not have the power to review a merger under their own rules. Based on our recent guidance, such referral is particularly well suited when the transaction involves companies whose turnover does not represent their real competitive potential.

GRAIL is a clear example of that. It generates little revenue today as its product is still in development. But GRAIL has strong competitive potential - its revenues are expected to grow exponentially, and its technology is of great importance as it can revolutionize the treatment of cancer.

Next-generation sequencing or NGS is a form of DNA sequencing. Sequencing is the process of revealing the information in the genetic code. Sequencing has applications in many fields, such as medicine, biology, and agriculture. And it can also spot cancer.

Cancer is the second largest cause of death in Europe. The disease is most treatable when caught at an early stage, before symptoms appear. Today, cancer screening is mostly done in response to symptoms. The vast majority of cancers remain undetected until after the cancer has grown or spread, when treatment is more difficult and survival rates are lower.

So, the detection is crucial, as underlined in the Europe's Beating Cancer Plan. The prospect of detecting cancer from DNA of patients without symptoms using a simple blood draw has the potential to revolutionise how we treat this terrible disease. And the more companies engage in a competitive race to develop the most accurate test, the better the chances we have to detect cancer early on, at the lowest possible cost.

In July last year, we opened an in-depth investigation into the merger, because we were concerned that post-transaction, Illumina could stop or degrade its supply of NGS systems to GRAIL's rivals. That would have allowed Illumina, through GRAIL, to gain control of the promising market for NGS-based early cancer detection testing and pre-empt competition in that space.

During our investigation, we gathered feedback from NGS system suppliers, GRAIL's rivals, healthcare authorities, as well as key opinion leaders in the field of NGS-based cancer detection. Over several months we have gathered information on all aspects of the case, including the capabilities of Illumina's NGS systems and those of other suppliers; the progress of GRAIL and its rivals towards developing their early cancer detection tests, and the sequencing requirements of such tests. We collected more than a million documents.  All of this resulted in an extensive decision, setting out the Commission's reasoning in more than 600 pages.

And our in-depth investigation confirmed our initial concerns. It showed that Illumina, holding a dominant position in NGS systems, would have had the ability and the incentive to obstruct GRAIL's rivals.

First, early cancer detection testing requires a supplier that can offer suitable NGS systems, a reliable support network and a solid track record. Today, only Illumina meets these requirements. Therefore, GRAIL and its rivals rely on Illumina's NGS systems to develop their tests.

Other companies are working to develop a suitable alternative to Illumina's technology. But, it is uncertain whether they will succeed. And if successful, such entry would come too late and GRAIL's rivals would have already been delayed, or possibly even eliminated from the market. Even if Illumina were to face credible competitors in the future, switching NGS system by test developers is difficult, time-consuming and costly.

Second, the market for NGS-based early cancer detection testing is expected to be very lucrative. So, while limiting sales to its downstream competitors may initially cost Illumina money, it would amply recuperate that loss with the additional sales of GRAIL's tests. Therefore, it would be in Illumina's business interest to engage in such a strategy.

Illumina offered remedies to address our competition concerns. We have analysed their offer and sought insights from various market participants. Our investigation showed that the proposed remedies would not have been effective in practice and would be easy to circumvent. The remedies offered were so complex, that it would have been hard for market participants and the Commission to monitor and enforce Illumina's compliance.

First, Illumina offered a remedy that aimed to clear the way for a new suitable NGS system supplier to emerge. This remedy included a licence to some of Illumina's patents. It also included a “patent peace” promise, meaning that Illumina would stop patent lawsuits against the Chinese competitor BGI Genomics, for three years.

However, Illumina has many more patents that competitors would need to develop an alternative system. The licence included only very few of those.  Illumina's competitors face many other obstacles than intellectual property. For example, they need to have the know-how to develop a reliable NGS system, they need a strong support network and they need to build their track record with customers.  The remedy did not address these obstacles. And even if those issues were resolved, it would still be a challenge for GRAIL's rivals to switch to other NGS systems.

Second, Illumina proposed to offer comparable supply conditions to GRAIL's rivals as to GRAIL when buying Illumina's NGS systems. To this end, GRAIL's competitors were invited to sign a standard contract valid until 2033.

But our investigation showed that this standard contract requires Illumina to respect a complex set of behaviours. It would be easy for Illumina to evade these rules. Due to this complexity, it would also be very difficult for the Commission to monitor compliance with this remedy.

So, given the significant negative effects of the merger, and the absence of suitable remedies, the Commission blocked the merger.

Our decision today means that the innovation race between developers of NGS-based cancer detection tests will continue. In the future, Europeans will be able to access this promising technology at competitive prices and have a choice of suppliers.

A bit more than a year ago Illumina completed its acquisition of GRAIL in an apparent violation of the EU Merger Regulation's standstill obligation. This is unheard of. Companies abide by our rules. They require them to not implement a merger before they have been notified and cleared by the Commission.

The Commission sent a statement of objections to Illumina and GRAIL in this regard in July this year, informing them that their closing of the transaction could be illegal and they may need to pay fines. This process is ongoing. 

Illumina's decision to implement the merger in an apparent contravention of our rules has created this troublesome situation. Illumina now needs to undo the effects of its actions and unwind the acquisition.

Therefore, I intend to suggest in due course a separate decision ordering Illumina and GRAIL to dissolve the transaction and restore GRAIL's independence. In the meantime, the interim measures adopted last autumn to prevent harm to competition from Illumina's early acquisition of GRAIL will continue to apply.

Thank you for your attention.