US court orders new FTC review of Illumina's Grail deal

By Diane Bartz and Mike Scarcella

(Reuters) -A U.S. appeals court on Friday struck down a Federal Trade Commission order against Illumina (NASDAQ:ILMN)'s purchase of cancer diagnostic test maker Grail, a former subsidiary, saying the agency had applied a wrong legal standard.

The New Orleans-based panel of the 5th U.S. Circuit Court of Appeals issued a 34-page order that will require the FTC to reconsider the deal.

The three-judge panel said the agency had substantial evidence to show the deal would lessen competition as companies seek to bring to market a blood test to detect many kinds of cancer.

An FTC spokesperson said the panel's opinion was "an important victory for antitrust enforcement because it clearly recognizes how vertical mergers can threaten competition."

But the panel also said the FTC failed to properly consider Illumina's pledge to continue selling its DNA sequencing services to other firms. Illumina has offered to sign contracts to supply any of Grail's rivals and to not raise prices.

"We are reviewing the decision," Illumina said in a comment issued after the ruling.

The court rebuffed Illumina's argument that the FTC unconstitutionally exercised its powers.

"Illumina's constitutional challenges to the FTC's authority are foreclosed by binding Supreme Court precedent," it wrote.

The FTC spokesperson added that the court's decision marked "a pivotal moment for those who want to protect open, competitive markets, and a huge win for consumers in the modern economy."

San Diego-based Illumina had filed the appeal in June after the FTC demanded that it divest Grail, saying that the agency had denied it due process.

Grail, valued at $7.1 billion under Illumina's deal, is seeking to market a powerful test to diagnose many kinds of cancer from a single blood test, known as a liquid biopsy.

The FTC is concerned that Illumina, the dominant provider of DNA sequencing of tumors and cancer cells that help match patients with the best treatment option, might raise prices or refuse to sell to Grail's rivals.

The agency filed a complaint aimed at stopping the deal in March 2021, but lost before an FTC administrative law judge. The case went back to FTC commissioners, who reinstated the case. Illumina then took it to an appeals court.

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Despite the fight with the FTC, and a similar battle in Europe, Illumina closed the acquisition of Grail in mid-2021.

Europe has since proposed measures for Illumina to unwind its acquisition of Grail. Illumina is arguing it does no business in Europe and therefore the EU competition enforcer has no jurisdiction.