According to a ruling by the European Union's highest court, gene sequencing company Illumina (ILMN.US) has given up its $7 billion acquisition of cancer detection supplier Grail (GRAL.US) which should not have been investigated by the European Union. The judges of the European Union's highest court stated on Tuesday that the European Commission used the acquisition transactions of U.S. companies as a test of new powers to review mergers that were not previously under its regulation, which was an overreach of authority. This ruling undermines the core power of the European Union to review more global transactions.

Despite opposition from both sides of the Atlantic, Illumina finally abandoned the acquisition plan last year, but this ruling may be crucial to how the European Union regulates dozens of other mergers in the future. At the request of competition regulators in France, Belgium, Greece, Iceland, the Netherlands, and Norway, this deal initially landed on the desk of the European Union.

Previously, EU merger officials used broader powers to regulate acquisitions. The European Commission's previous fine of Illumina's $7 billion acquisition of Grail marked the first time the European Commission used new powers to regulate the acquisitions of startups with little or no revenue, which had previously escaped antitrust scrutiny.

The controversy in this case is that the EU merger review process will undergo significant changes to review target acquisitions with low or no revenue that were previously not properly reviewed - a frustrating development, especially for curbing the appetite of large technology companies to acquire startup competitors. Recently, the EU's new powers were used to block Qualcomm's (QCOM.US) acquisition of Israeli chip manufacturer Autotalks, as well as the German exchange's subsidiary's acquisition of Nasdaq (NDAQ.US) European electrical utilities trade.

The company stated in a statement on Tuesday, "Today's judgment confirms Illumina's long-standing view that the European Commission has exceeded its jurisdiction in this merger."

Grail was spun off from DNA sequencing giant Illumina in 2016 to develop a blood test that can detect 50 early cancers. But in 2021, it attempted to reacquire Grail at a price of $7.1 billion. Despite the deal being below the EU's merger revenue threshold, the EU antitrust agency had previously decided to review this transaction for its potential impact on the industry. This sparked a series of legal challenges, until the regulatory agency ultimately vetoed the proposal in September 2022 due to the risks of innovation and choice.

The Court of Justice of the European Union (CJEU), based in Luxembourg, stated: 'The court rejected the decision of the ordinary court and overturned the decision of the European Commission to review the proposed concentration at the request of competition authorities of each country.'

After Tuesday's ruling, several other appeals filed by Illumina against the European Commission's decision may now be dismissed. The company had questioned the European Commission's formal veto, formal divestment order, and 0.432 billion euros (0.478 billion US dollars) fine for the acquisition of Grail before obtaining approval from European regulators.