FTC Appeals Judge’s Dismissal of Suit Against Illumina Deal

Administrative law judges work for federal agencies such as the FTC but are neutral arbiters in enforcement cases. Chief Administrative Law Judge D. Michael Chappell rejected the FTC’s position that the deal would hurt competition in the market for multicancer early-detection tests, Illumina said Thursday.

The commissioners sit as an appellate panel and could overrule Judge Chappell or side with Illumina, which completed its acquisition of Grail in 2021, despite pending legal challenges. Illumina declined to comment on the FTC’s decision. If the commission disagrees with Judge Chappell and says the deal should be blocked, Illumina and Grail could ask a federal appeals court to review the decision.

San Diego-based Illumina, which makes genetic-sequencing products, agreed in 2020 to acquire Grail, which is developing blood tests for early cancer detection. Illumina founded Grail and later spun it off, retaining a minority ownership stake. The 2020 deal was to acquire the part of Grail that it didn’t already own.

In 2021, the FTC moved to block the deal, claiming it would harm competition in an emerging field of tests for early-stage detection of several types of cancers.

The FTC said Grail and other developers of early-stage cancer tests all rely on Illumina’s DNA-sequencing platform. “If the acquisition is consummated, Illumina will gain the incentive to foreclose or disadvantage firms that pose a significant competitive threat to Grail,” the FTC wrote in its complaint last year.

Illumina countered that Grail’s test would be a breakthrough product—a blood test that could detect more than 50 cancer types—and no other test companies could offer such a range of cancer detection. The FTC’s challenge of the deal would slow Grail’s ability to develop the test and deprive patients of its benefits, the company said.

Illumina also said it offered to provide continued access to its DNA sequencing to any Grail competitors.

The case led to a rare trial over a vertical merger, or a transaction that integrates complementary instead of competing companies. Vertical deals have often been viewed with far less skepticism, but the FTC last year withdrew guidelines for reviewing them, indicating enforcers planned to subject them to tougher scrutiny.

Write to Dave Michaels at [email protected] and Peter Loftus at [email protected]

Administrative law judges work for federal agencies such as the FTC but are neutral arbiters in enforcement cases. Chief Administrative Law Judge D. Michael Chappell rejected the FTC’s position that the deal would hurt competition in the market for multicancer early-detection tests, Illumina said Thursday.

The commissioners sit as an appellate panel and could overrule Judge Chappell or side with Illumina, which completed its acquisition of Grail in 2021, despite pending legal challenges. Illumina declined to comment on the FTC’s decision. If the commission disagrees with Judge Chappell and says the deal should be blocked, Illumina and Grail could ask a federal appeals court to review the decision.

San Diego-based Illumina, which makes genetic-sequencing products, agreed in 2020 to acquire Grail, which is developing blood tests for early cancer detection. Illumina founded Grail and later spun it off, retaining a minority ownership stake. The 2020 deal was to acquire the part of Grail that it didn’t already own.

In 2021, the FTC moved to block the deal, claiming it would harm competition in an emerging field of tests for early-stage detection of several types of cancers.

The FTC said Grail and other developers of early-stage cancer tests all rely on Illumina’s DNA-sequencing platform. “If the acquisition is consummated, Illumina will gain the incentive to foreclose or disadvantage firms that pose a significant competitive threat to Grail,” the FTC wrote in its complaint last year.

Illumina countered that Grail’s test would be a breakthrough product—a blood test that could detect more than 50 cancer types—and no other test companies could offer such a range of cancer detection. The FTC’s challenge of the deal would slow Grail’s ability to develop the test and deprive patients of its benefits, the company said.

Illumina also said it offered to provide continued access to its DNA sequencing to any Grail competitors.

The case led to a rare trial over a vertical merger, or a transaction that integrates complementary instead of competing companies. Vertical deals have often been viewed with far less skepticism, but the FTC last year withdrew guidelines for reviewing them, indicating enforcers planned to subject them to tougher scrutiny.

Write to Dave Michaels at [email protected] and Peter Loftus at [email protected]