Article 22 and the Pharma Context

Competition authorities in Europe have for years grown increasingly concerned about so-called “killer acquisitions,” particularly in life sciences where targets often have high innovation potential but little or no turnover. These are transactions where the acquired company’s competitive significance lies in its pipeline, R&D or intellectual property rather than its financials. Such deals can escape traditional turnover-based merger control thresholds, yet – the authorities argue – may still raise serious concerns about future (i.e., potential) competition and innovation. That said, the label “killer acquisition” is something of a misnomer. In practice, transactions undertaken solely to eliminate innovation from a smaller rival are exceedingly rare.

To address this risk, the European Commission has encouraged greater use of Article 22 of the EU Merger Regulation (EUMR), which allows Member States to refer cases for EU review even if they do not meet EU thresholds. Subject to potential further developments, two recent judgments, the Court of Justice’s ruling in Illumina/GRAIL and the General Court’s decision in Brasserie Nationale, now provide the leading interpretation of how Article 22 operates in practice, particularly in relation to call-in powers and timing of referrals.