FTC reverses Administrative Law Judge on Illumina/Grail

April 4, 2023
DNA sequencing

On April 3, the Federal Trade Commission (FTC) reversed the decision of an Administrative Law Judge by finding that Illumina’s $7.1 billion acquisition of Grail would diminish innovation and harm competition, and the FTC then ordered Illumina to divest Grail. This is a significant decision by the FTC that involves arguments about vertical mergers, efficiencies, and innovation competition.

Illumina is a key producer of gene sequencing platforms. Grail and its rivals are in an innovation race to develop and bring to market multi-cancer screening tests. These multi-cancer screening tests use gene sequencing to screen a liquid biopsy (typically blood) for cancer markers. Grail and its rivals all rely on Illumina’s gene sequencing platforms to process their tests – Illumina is their only viable alternative. The FTC found that post-merger Illumina would earn substantially more profit on the sale of Grail tests than on the sale of rival tests, and that it could easily foreclose Grail’s rivals. Because of this, the FTC found that the merger would lead to increased costs for Grail’s rivals and, subsequently, to consumer harm from reduced innovation and competition to supply multi-cancer screening tests.

CRA Senior Consultant Dr. Fiona Scott Morton was the FTC’s economic expert at trial and was cited extensively by the FTC in its decision to reverse. Dr. Scott Morton testified about relevant aspects of the merger, including upstream and downstream market definition, Illumina’s incentive and ability to foreclose or otherwise harm Grail’s rivals post-merger by raising their costs, the potential for the elimination of double marginalization to mute Illumina’s post-merger incentives to foreclose or raise rivals’ costs, and the ability of Illumina’s open offer supply agreement to alleviate the potential harm from the merger.

Dr. Fiona Scott Morton was supported by a team of CRA consultants listed below.