The European Court of Justice (ECJ) has issued a landmark ruling in the Illumina/Grail case, overturning the General Court’s (GC) interpretation of Article 22 of the EU Merger Regulation 139/2004 (EUMR). This judgment marks a pivotal shift, putting an end to the European Commission’s (EC) practice of accepting referrals under Article 22 EUMR for transactions that fall outside the national review powers of Member States of the European Union (EU).

Background and Context

Broad interpretation of Article 22 EUMR

In recent years, the EC has voiced concerns over so-called “killer acquisitions” — cases where large companies acquire innovative start-ups with little or no turnover to allegedly eliminate future competition. While several Member States, like Germany and Austria, have addressed this perceived gap by introducing transaction value-based thresholds, the EC took a different approach. Frustrated by its inability to review these transactions under existing EU turnover-based thresholds, in 2021 the EC began encouraging Member States to refer transactions that were not caught by either EU or national merger control rules under Article 22 EUMR to the Commission. 

In March 2021, the EC issued a detailed Guidance paper reinterpreting the blog’s referral mechanism of Article 22 EUMR, a provision which originally had been primarily designed twenty years ago for Member States without an own merger control systems to provide them with a possibility to refer cases to the EC. Since all Member States aside from Luxembourg have now adopted their own regimes, the provision was rarely used and the EC even actively discouraged NCAs from referring cases that did not meet the national merger control thresholds. With the new guidance, the EC decided to take the provision off the shelf, dust it down, and mold it into a potential panacea for its growing concerns about “killer acquisitions”. Consequently, the new guidance effectively transformed Article 22 EUMR into a “catch-all” corrective mechanism, allowing referrals even for transactions that did not meet traditional notification criteria. 

As this marked a departure from established judicial principles, the new approach sparked significant debate. Critics asserted that the EC had exceeded its authority. They argued that the EC had contravened some of the most crucial foundational principles of EU competition law enforcement, including clear allocation of jurisdiction between the EU and Member States, reliance on straightforward turnover-based thresholds, and adherence to strict time limits. The EC’s new interpretation of Article 22 EUMR created legal uncertainty for businesses, who now faced scrutiny for transactions previously outside the scope of review.

The Illumina/Grail-Saga: The First Test Case

Illumina and Grail had the dubious privilege of being the first test case under this new referral policy. First, the EC blocked Illumina’s acquisition of Grail long after the deal had been completed. Then it imposed divestiture, the most severe structural remedy for mergers, on the transaction at significant financial loss to the parties involved. The parties appealed, arguing that the EC had overstepped its legal authority by applying Article 22 EUMR to a transaction that was not subject to national merger control.

While the GC accepted the EC’s approach to catching deals that do not trigger any national thresholds (see our previous alert on the GC’s decision) in July 2022, Advocate General (AG) Emiliou issued an opinion on March 21, 2024 which in large part concurred with these criticisms (see our previous alert on the AG’s opinion). He suggested that the EC should only investigate mergers referred by NCAs if those authorities themselves had the competence to review the merger under national law. He argued that divergence from this practice would not only create legal uncertainty for merging parties but would also gravely destabilize the enforcement conventions of EU competition law. It would, he explained, effectively create a referral free-for-all, where merging parties would not be able to tell before, during, or even after concentrations of any kind or size whether they could receive scrutiny from the EC.

The ECJ’s Judgment: Curtailing the EC’s Power

On 3 September 2024, the ECJ delivered its judgment, concurring with AG Emiliou’s opinion and setting aside the GC’s earlier ruling. The ECJ found that the EC’s expansive interpretation of Article 22 EUMR exceeded the provision's intended scope and imposed undue uncertainty on businesses operating in the EU. 

The ECJ conceded that the wording of Article 22 EUMR was inconclusive as to whether an Article 22 EUMR referral requires the transaction to be caught by national rules. However, the ECJ then proceeded to deconstruct the GC’s interpretation of historic legislative practice and its detailed contextual analysis, ultimately finding both to be “inconclusive” for the purposes of determining whether the EC was competent to adopt the decisions at issue. 

Concluding with an authoritative teleological interpretation, the ECJ held that Article 22 EUMR does not apply to transactions that are not covered by either EU or national merger rules. The ECJ underscored that the referral mechanism was not designed to serve as a catch-all corrective, but rather to supplement the existing turnover-based system. In unusually strong language, the ECJ held that the EC’s interpretation of Article 22 EUMR “undermines the effectiveness, predictability and legal certainty that must be guaranteed to the parties to a concentration”. 

However, there may yet be a sting in the tail. One element of the ECJ’s reasoning was that stretching Article 22 EUMR in this way was not only unlawful, but also unnecessary, since Member States can easily implement legislative changes should they consider that the current rules are no longer fit for purpose. Such changes could result in catch-all mechanisms becoming the norm across large parts of the EU, though in a piecemeal, and therefore yet more unpredictable, manner.

Implications for Illumina/Grail – (How) Will the Saga Continue?

Following the ECJ’s ruling, the EC swiftly acknowledged the annulment of its decision to prohibit the Illumina/Grail merger and officially withdrew several follow-on decisions related to the transaction, including an EUR 432 million fine for Illumina’s supposed breach of standstill obligations. This outcome was widely expected, as the legality of the follow-on decisions was reliant on the original prohibition. The Saga may now continue evolving around trying to recover any damages Illumina might have suffered on the back of the Commission’s decisions.

Beyond Illumina/Grail: Implications for Other Businesses and Regulators

The impact of this case extends well beyond the parties directly involved.

Referral Risk Tied to National Authority Competence

The EC’s ability to review below-threshold mergers based on Article 22 EUMR is now limited to cases where the referring Member State does not have a merger control regime or has jurisdiction under its own national merger rules. However, it is important to note that in some jurisdictions this could include below-threshold mergers, since the local competition regime itself has allowed them. Thus, the risk of a referral to the EC is now closely tied to the competence of NCAs. Several EU Member States (including Italy, Hungary, Denmark, Latvia, Lithuania, Slovenia, Sweden and the Republic of Ireland), already have the power to “call-in” transactions for review that do not meet national merger control thresholds. More may follow.

EC Starts Exploring Options for Future Reforms

In a public statement responding to the ruling, the EC indicated that it would “carefully study the judgment and its implications.” Nevertheless, it reaffirmed the need to review mergers that could significantly impact competition in Europe, even those that do not meet traditional notification thresholds. It even suggested that it might consider further measures to ensure it can still assess such transactions.

What might these measures look like? Executive Vice-President of the EC, Margrethe Vestager, has already hinted at possible reforms following the ECJ’s Illumina/Grail judgment. She mentioned options such as lowering turnover thresholds or introducing value-based transaction thresholds for deals that pose competition concerns. However, she recognized that these solutions may not be ideal, as they could increase administrative burdens and inadvertently capture many unproblematic transactions. 

Vestager also touched on the idea of introducing a “call-in” power, allowing the EC to require notification of transactions when there are signs of potential competition risks. However, she noted that such an approach could generate the same kind of legal uncertainty that businesses had already criticized in the EC’s broader interpretation of Article 22 EUMR.

Reflecting on directions indicated by the ECJ, Vestager, who is soon to depart from her current position, pointed to two possible paths for her successor: 

• Introducing a “safeguard mechanism” in the EUMR to allow the EC to review below-threshold transactions. This could include revising Article 22 EUMR to permit the referral of such mergers by Member States under specific conditions, even when they do not have jurisdiction; or
• Relying on Member States to expand their own jurisdiction, enabling more referrals under the “traditional approach” to Article 22 EUMR. 

Other Competition Powers to Investigate Non-Notifiable Transactions 

Recent cases show how NCAs are using alternative powers—such as those addressing abuses of dominance or anti-competitive agreements—to investigate potentially contentious transactions.

In the Towercast ruling, the ECJ confirmed that NCAs can investigate transactions under the abuse of dominance framework (Article 102 TFEU) if they are not caught by merger control regimes (for a more detailed analysis, we refer to our previous alert on the Towercast case). Citing Towercast as precedent, the Belgian competition authority imposed interim measures in the acquisition of EDPnet by Proximus and has proceeded to examine it as a possible case of abuse of dominance. 

However, the Towercast ruling has its limitations. It cannot fully replace Article 22 EUMR’s broader referral mechanism, since it relies on Article 102 TFEU, which has only limited grounds for merger prohibition. To prohibit a merger under Article 102 TFEU, the concentration must involve an entity that already holds a dominant position before the merger takes place; it would not be sufficient if the merger itself would create the dominance. The practical impact of Towercast therefore remains limited to companies which are dominant.

Nonetheless, companies need to expect that NCAs will make use of their existing (expanded) toolbox or evaluate the need for reforms on national level. The French competition authority, for instance, responded to the ECJ's Illumina/Grail ruling by reaffirming its commitment to using all available tools, including supplementing merger control tools with traditional antitrust enforcement, to tackle potential competition issues. 

DMA: Gatekeeper Merger Notifications 

The ECJ’s smashing of the EC’s Article 22 EUMR practice, raises further questions in the context of the Digital Markets Act (DMA). Article 14(1) DMA requires gatekeepers to report all intended mergers to the EC, whether they meet notification thresholds or not. The EC forwards this information to Member States so they could then make an Article 22 EUMR referral. However, with the Illumina/Grail judgment now prohibiting referrals which are not caught by the local regime, this mechanism has developed a serious flaw: Those Member States who would not be able to examine the deal at national level, cannot refer it to the EC. In the long term, this partial loophole will likely shrink or even disappear completely: Member States could revise their own national legislation in order to allow them to examine the case locally or at least refer to the EC, or the EC itself could find a way to adapt or alter existing provisions. 

Conclusion - Has Legal Certainty Been Achieved?

For the companies involved in mergers and acquisitions, the “corrective” action of the ECJ can be seen as a positive outcome. The ruling has restored institutional balance, bringing back much-needed legal certainty and more predictability in EU merger control. Businesses now face fewer referral risks and more clarity about whether specific NCAs need to be approached in advance.

That said, the relief should be tempered with watchfulness. The locus of legal uncertainty in merger control may not be at the EU-level anymore, but that does not mean it has gone away. Instead, uncertainty may have simply migrated to the national level, both within the EU’s Member States and in the wider global context. This means that companies still need to carefully assess any notification obligations at national level or call-in risks and include appropriate contractual provisions in the SPA (CP clauses) to address these issues.

In addition, it seems that the EC is keen on finding further ways to develop a regime countering “killer acquisitions”, which must necessarily involve routes to examine below-threshold mergers. Vestager’s remarks suggest that the EC will use precedents like Towercast, and ongoing national-level developments that bring transactions within the remit of Article 22 EUMR referrals, alongside more imaginative mechanisms of its own. Thus, while the Illumina/Grail saga may have brought the EC’s referral “free-for-all” to an end this is not the end of the story and merging parties are well advised to follow it closely.

Special thanks to Alice Strasburger, trainee lawyer in the antitrust law team in Berlin, for her valuable contribution to the preparation of this article.