© Reuters. An Illumina office building is pictured in San Diego, California, U.S., October 20, 2023. REUTERS/Mike Blake/File Photo
By Diane Bartz and Mike Scarcella
(Reuters) – A U.S. appeals court on Friday overturned a Federal Trade Commission order against Illumina's (NASDAQ ) purchase of cancer diagnostic test maker Grail, a former subsidiary, saying the agency had applied the wrong legal standard.
The New Orleans-based panel of the Fifth 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 that the deal would reduce competition as the companies seek to bring to market a blood test to detect many types 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 did not adequately consider Illumina's promise to continue selling its DNA sequencing services to other companies. Illumina has offered to sign contracts to supply any of Grail's rivals and not raise prices.
“We are reviewing the decision,” Illumina said in a comment issued after the ruling.
The court rejected Illumina's argument that the FTC exercised its powers unconstitutionally.
“Illumina's constitutional challenges to the FTC's authority are precluded by binding Supreme Court precedent,” he 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 major victory for consumers in the modern economy.”
San Diego-based Illumina filed the appeal in June after the FTC demanded it divest Grail, saying the agency had denied it due process.
Grail, valued at $7.1 billion under the Illumina deal, seeks to commercialize a powerful test to diagnose many types of cancer from a single blood test, known as a liquid biopsy.
The FTC is concerned that Illumina, the dominant provider of tumor and cancer cell DNA sequencing that helps find patients the best treatment option, may 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 returned to FTC commissioners, who reinstated it. Illumina then took it to an appeals court.
Despite the fight with the FTC and a similar battle in Europe, Illumina closed its acquisition of Grail in mid-2021.
Europe has since proposed measures to get Illumina to unwind its acquisition of Grail. Illumina argues that it does not do business in Europe and therefore the EU's competition enforcement body has no jurisdiction.
