Below-Threshold Deals After Illumina/Grail

Below threshold deals and the Illumina/Grail judgment

Below threshold deals are acquisitions that do not meet the turnover thresholds of the EU Merger Regulation or of the national merger control laws of the member states. For several years, the European Commission tried to review some of these transactions by encouraging and accepting referrals under Article 22 of the Merger Regulation from national authorities that had no jurisdiction themselves. The aim was to capture so-called killer acquisitions, in which an established company buys an innovative target with little turnover but significant competitive potential.

The Court of Justice of the European Union ended this practice in its judgment of 3 September 2024 in joined cases C-611/22 P and C-625/22 P (Illumina/Grail).

According to the Court’s press release No 127/24, the Commission may not encourage or accept referral requests under Article 22 for concentrations without an EU dimension where the requesting national authority lacks jurisdiction under its own national law. The Court set aside the judgment of the General Court of 13 July 2022 (T-227/21) and the Commission decisions accepting the referrals. It stressed that thresholds ensure predictability and legal certainty, and that companies must be able to determine easily whether a deal must be notified and to which authority.

How the Article 22 policy developed

Article 22 of the Merger Regulation was originally intended for member states without their own merger control regime. Over time it became a tool for national authorities to ask the Commission to examine deals that affect trade between member states. In 2021, the Commission announced that it would also accept referral requests from authorities that had no jurisdiction under their national law, and it applied this approach to the acquisition of Grail by Illumina. The deal was announced on 21 September 2020, had no EU dimension and fell below the national thresholds. The French competition authority made the referral request, which several other authorities joined.

The General Court upheld the Commission’s approach in 2022, holding that Article 22 allowed referrals regardless of national jurisdiction. The Court of Justice disagreed. It found that the General Court had wrongly identified a “corrective mechanism” in the Merger Regulation for reviewing all concentrations with significant effects on competition in the Union. The judgment confirms that the system of the Merger Regulation is based on clear jurisdictional thresholds, and that expanding it is a task for the legislature, not for the Commission.

Routes by which below threshold deals can still be reviewed

The judgment did not make below threshold deals immune from scrutiny. Several routes remain, and they now matter more for deal planning.

National call-in powers

Several member states have national rules that allow their authorities to call in transactions below the turnover thresholds, for example where the deal may affect competition significantly. Where a national authority has jurisdiction under such rules, it can still request a referral to the Commission under Article 22. Since the judgment, the Commission has accepted referrals in cases where the referring member state had jurisdiction under a national call-in power. For buyers, this means that the jurisdictional analysis must cover not only turnover thresholds but also call-in regimes in each relevant member state, as well as any changes to them.

Abuse of dominance

The Court of Justice confirmed in Towercast (judgment of 16 March 2023, C-449/21) that a concentration below the thresholds and not referred to the Commission can be examined by a national authority under the prohibition of abuse of dominance in Article 102 TFEU. This route applies only where the buyer is dominant and the acquisition amounts to an abuse, and it operates after the event. It is therefore not a substitute for merger control, but it adds risk for dominant companies that acquire potential competitors.

The German position on below threshold deals

Germany addressed the problem of low-turnover, high-value targets earlier than most member states. Since 2017, the transaction value threshold in § 35(1a) GWB has applied to acquisitions with a consideration of more than EUR 400 million where the target is active in Germany to a significant extent, provided the other conditions are met.

Because the Federal Cartel Office has jurisdiction over such deals, it can also request a referral to the Commission under Article 22 where the conditions of that provision are met. The Federal Court of Justice confirmed in its Meta/Kustomer decision of 17 June 2025 that the requirements for significant domestic activity should not be set high. Our article on the transaction value threshold explains the details.

Germany does not currently have a general call-in power. A provision in § 39a GWB that allowed the Federal Cartel Office to require notification of future acquisitions by certain companies in specific sectors is shown as repealed in the current consolidated text of the Act (§ 39a GWB). Below threshold deals that do not meet either the ordinary turnover thresholds or the transaction value threshold are therefore generally not subject to German merger control, although the abuse of dominance rules in §§ 19 and 19a GWB and Article 102 TFEU continue to apply.

Planning below threshold deals after Illumina

For buyers, the judgment restored a measure of legal certainty, but the planning of below threshold deals has not become simpler. A transaction that is not notifiable anywhere is now generally safe from EU merger review, but the list of member states with call-in powers or transaction value thresholds has to be checked carefully. Where one authority has jurisdiction, a referral to the Commission remains possible, and other member states may join the request. The timing of a call-in can also differ: some regimes allow intervention for a period after closing.

Transaction documents

Purchase agreements for such transactions should address the risk that an authority calls in the deal or requests a referral. Typical provisions include a covenant to cooperate with any review, an allocation of the risk of a call-in occurring after signing, and conditions or termination rights covering a referral. Where the risk is significant, parties may choose to approach the relevant authorities before signing to establish whether they intend to intervene. The interaction with the suspension obligation and gun jumping rules must also be considered; see our article on gun jumping risks in German deals.

Minority investments, licensing deals and acqui-hires

Not every transaction that worries competition authorities takes the form of a classic share purchase. Minority investments combined with board rights, exclusive licensing arrangements and so-called acqui-hires, in which a buyer recruits the key staff of a start-up and licenses its technology, can have effects similar to an acquisition. Whether such arrangements amount to a concentration depends on the applicable law.

Under German law, the acquisition of 25 percent of the shares or of competitively significant influence can be a concentration (§ 37(1) GWB), and the acquisition of substantial assets, which can include intangible assets such as customer relationships or know-how, may also qualify. Deal structures should therefore be checked against these concepts, rather than assuming that a non-traditional structure falls outside merger control.

Digital gatekeepers

Companies designated as gatekeepers under the Digital Markets Act must inform the Commission of intended concentrations involving providers of core platform services or other digital services, irrespective of whether the deal is notifiable (Article 14 DMA). The Commission shares this information with national authorities, which can then consider whether they have jurisdiction and whether to request a referral.

Documents and the deal narrative

Because the authorities focus on targets with competitive potential, internal documents discussing the target as a future competitor, the reasons for paying a high price for a company with little revenue, or plans to discontinue overlapping research projects are particularly sensitive. Deal teams should be aware that such documents can be requested in any review. The Commission’s draft merger guidelines also give greater weight to dynamic theories of harm, as discussed in our article on the review of the EU merger guidelines.

Outlook: legislative change and the EU framework

The Illumina/Grail judgment places responsibility for capturing these transactions with the legislature. Several options are being discussed in the EU and the member states, including new call-in powers, transaction value thresholds and amendments to the Merger Regulation itself. The Commission’s ongoing work on merger control, including the review of the merger guidelines, may also affect how it approaches referred cases. Companies active in technology, life sciences and other innovation-driven sectors should monitor these developments, because changes to jurisdictional rules can apply to deals that are already in preparation.

Illustration: a large medical technology group plans to acquire a start-up with a promising diagnostic product but no revenue. The purchase price is EUR 250 million, below the German transaction value threshold. The start-up runs clinical trials in Italy and Denmark. The buyer checks whether those states, or others where the target is active, have call-in powers, assesses the risk of a referral to the Commission and includes a provision in the purchase agreement allocating that risk.

Sellers and target companies also have an interest in this analysis. A referral or call-in after signing can delay closing by many months and expose the target to a period of uncertainty in which employees, customers and competing bidders react. Sellers should therefore ask buyers early for their jurisdictional assessment and negotiate appropriate protection, such as a reverse break fee or a firm commitment to accept remedies.

How TRW & Co helps with below threshold deals

We advise buyers, sellers and investors on below threshold deals: jurisdictional analysis across turnover thresholds, transaction value thresholds and call-in powers, assessment of referral risk, contacts with authorities, and transaction documents that allocate these risks. Our merger control team works closely with our M&A lawyers. For more on the judgment itself, see our article on the CJEU Illumina/Grail judgment. To discuss a transaction, contact us. This article provides general information and is not legal advice.