Illumina faces record fine over purchase of Grail without EU approval

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Illumina faces a record fine from the EU as early as next week after the world’s biggest gene sequencing company bought Silicon Valley cancer screening start-up Grail for $8bn without Brussels’ approval.

The fine, which can be up to $453mn or 10 per cent of the group’s turnover, would exceed the previous record of €125mn imposed on telecoms group Altice in 2018 — 1 per cent of the company’s turnover, according to two people with knowledge of the decision.

“The EU never went above 1 or 2 per cent. This will be higher than any other previous ones. At least twice in percentage terms,” said one of the people with knowledge of the case.

Illumina, based in San Diego, took the rare step of finalising the transaction in August 2021 even though the European Commission was still investigating whether it was anti-competitive. US regulators had also not approved the deal.

A year later, the EU prohibited the merger on concerns it would stifle innovation and reduce choice.

Regulators hope a record-breaking fine will serve as a deterrent to other companies looking to close a deal without Brussels’ approval.

Earlier this year, the company’s chief executive Francis deSouza resigned following a bruising proxy battle with activist investor Carl Icahn, who led a shareholder campaign criticising the “reckless decision” to close the acquisition against the wishes of Brussels and the Federal Trade Commission in Washington.

Illumina, which intends to make an appeal against the fine, insists regulators are potentially risking lives by blocking a deal that aims to help the fight against cancer.

Grail is seeking to develop an early cancer screening test for people who do not have symptoms.

As well as fighting a fine and potential divestiture of Grail, Illumina is also contesting before courts in Luxembourg whether it is in the EU’s jurisdiction to investigate the merger.

The European Commission declined to comment.

Illumina said: “We disagree that the commission has jurisdiction to review the Grail transaction as well as with the premise of the commission imposing a fine.

“We have appealed the EU’s jurisdiction and will appeal any decision imposing a fine. Illumina’s merger with Grail is pro-competitive and in the best interests of patients in Europe and worldwide.”

Brussels is later this year expected to force Illumina to unwind the acquisition of Grail to restore “the independence” that the company had before the deal.

Regulators, who are anticipated to force the unwinding as early as the autumn, say this would make Grail “viable and competitive”, ensuring innovation in the sector, people with knowledge of the plans said.