Case: 23-60167 Document: 120 Page: 1 Date Filed: 06/12/2023
`
`No. 23-60167
`
`
`IN THE
`UNITED STATES COURT OF APPEALS
`FOR THE FIFTH CIRCUIT
`
`Illumina, Inc. and GRAIL, Inc.,
`Petitioners,
`
`v.
`Federal Trade Commission,
`Respondent.
`
`
`Petition for Review of
`An Order of the Federal Trade Commission
`
`
`Brief of Economists Brianna L. Alderman and Roger D. Blair as
`Amici Curiae in Support of Petitioners
`
`
`
`Kathleen R. Hartnett
`COOLEY LLP
`3 Embarcadero Center, 20th Floor
`San Francisco, California 94111-4004
`Telephone: (415) 693-2000
`
`Kathy O’Neill
`Ethan Glass
`COOLEY LLP
`1299 Pennsylvania Avenue NW,
`Suite 700
`Washington, D.C. 20004-2400
`Telephone: (202) 842-7800
`
` June 12, 2023
`
`
` Adam S. Gershenson
`COOLEY LLP
`500 Boylston Street, 14th Floor
`Boston, Massachusetts 02116-3736
`Telephone: (617) 937-2300
`
`
`
`
`
`
`
`
`
`
`Attorneys for Amici Curiae
`
`i
`
`
`
`No. 23-60167
`
`
`IN THE
`UNITED STATES COURT OF APPEALS
`FOR THE FIFTH CIRCUIT
`
`Illumina, Inc. and GRAIL, Inc.,
`Petitioners,
`
`v.
`Federal Trade Commission,
`Respondent.
`
`
`Petition for Review of
`An Order of the Federal Trade Commission
`
`
`Brief of Economists Brianna L. Alderman and Roger D. Blair as
`Amici Curiae in Support of Petitioners
`
`
`
`Kathleen R. Hartnett
`COOLEY LLP
`3 Embarcadero Center, 20th Floor
`San Francisco, California 94111-4004
`Telephone: (415) 693-2000
`
`Kathy O’Neill
`Ethan Glass
`COOLEY LLP
`1299 Pennsylvania Avenue NW,
`Suite 700
`Washington, D.C. 20004-2400
`Telephone: (202) 842-7800
`
` June 12, 2023
`
`
` Adam S. Gershenson
`COOLEY LLP
`500 Boylston Street, 14th Floor
`Boston, Massachusetts 02116-3736
`Telephone: (617) 937-2300
`
`
`
`
`
`
`
`
`
`
`Attorneys for Amici Curiae
`
`i
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`
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`Case: 23-60167 Document: 120 Page: 2 Date Filed: 06/12/2023
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`CERTIFICATE OF INTERESTED PERSONS
`
`Illumina, Inc. & GRAIL, Inc. v. Federal Trade Commission
`No. 23-60167
`
`Per Fifth Circuit Rule 28.2.1, the undersigned counsel certifies that the
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`
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`following listed persons and entities have an interest in the outcome of this case, in
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`addition to those listed on the certificate of interest persons submitted by Petitioners.
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`These representations are made so the judges of this Court may evaluate possible
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`disqualification or recusal.
`
`
`Amici Curiae
`Brianna L. Alderman
`Roger D. Blair
`
`Attorneys for Amici Curiae
`Adam Gershenson
`Ethan Glass
`Kathleen Hartnett
`Kathy O’Neill
`
`Dated: June 12, 2023
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`
`
`
`
`
`
`
`
`
`
`
`
`
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`
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`
`
`/s/ Adam G. Gershenson
`Adam S. Gershenson
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`i
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`Case: 23-60167 Document: 120 Page: 3 Date Filed: 06/12/2023
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`TABLE OF CONTENTS
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`
`Page
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`
`CERTIFICATE OF INTERESTED PERSONS ........................................................ i
`TABLE OF CONTENTS ......................................................................................... ii
`TABLE OF AUTHORITIES .................................................................................. iii
`INTEREST OF AMICI CURIAE ............................................................................. 1
`INTRODUCTION AND SUMMARY OF ARGUMENT ....................................... 2
`BACKGROUND ...................................................................................................... 3
`ARGUMENT ............................................................................................................ 6
`I.
`AN ILLUMINA–GRAIL INTEGRATION WILL GENERATE
`COST EFFICIENCIES AND LIFE-SAVING BENEFITS. .......................... 6
`THE FTC’S OPINION RESTS ON A MISCONCEPTION OF THE
`RISK OF MARKET FORECLOSURE. ......................................................... 8
`III. THE FTC’S REJECTION OF ILLUMINA’S REACQUISITION OF
`GRAIL WILL YIELD HIGHER PRICES AND MORE CANCER
`DEATHS, WITHOUT ANY GUARANTEE OF FUTURE BENEFIT. ..... 12
`CONCLUSION ....................................................................................................... 15
`CERTIFICATE OF COMPLIANCE ...................................................................... 16
`CERTIFICATE OF SERVICE ............................................................................... 17
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`
`II.
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`ii
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`Case: 23-60167 Document: 120 Page: 4 Date Filed: 06/12/2023
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`
`
`TABLE OF AUTHORITIES
`
` Page(s)
`
`Cases
`Brown Shoe Co. v. United States,
`370 U.S. 294 (1962) .............................................................................................. 9
`United States v. General Dynamics Corp.,
`415 U.S. 486 (1974) .............................................................................................. 9
`Statutes
`15 U.S.C. § 18 ............................................................................................................ 9
`Other Authorities
`Brianna L. Alderman & Roger D. Blair, Preserving Potential Entry is
`Not the Holy Grail in Vertical Merger Enforcement, 36(2)
`Antitrust 42 (2022) .......................................................................................... 1, 13
`Jack Hirshleifer, On the Economics of Transfer Pricing, 29 The
`Journal of Business 172 (1956) .......................................................................... 11
`Joseph J. Spengler, 58 J. of Pol. Econ. 347 (1950) .................................................... 7
`Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis
`of Antitrust Principles and Their Application (2022) ........................................... 7
`U.S. Dep’t of Justice & FTC, Vertical Merger Guidelines (June 30,
`2020) ..................................................................................................................... 7
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`
`
`
`
`iii
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`Case: 23-60167 Document: 120 Page: 5 Date Filed: 06/12/2023
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`
`INTEREST OF AMICI CURIAE1
`
`Amici are economists who research and publish in the field of antitrust
`
`economics. They have a particular interest in ensuring that the Court understands
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`why the key economic premises underlying the Federal Trade Commission’s
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`decision in this matter are misguided. In particular, this case involves the
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`competitive effects of vertical integration, a topic on which amici recently published.
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`See Brianna L. Alderman & Roger D. Blair, Preserving Potential Entry is Not the
`
`Holy Grail in Vertical Merger Enforcement, 36(2) Antitrust 42 (2022).
`
`
`
`Brianna L. Alderman is a Thomas H. Ashford Fellow in the Department of
`
`Economics at Harvard University. She holds degrees in Economics, Mathematics,
`
`and Statistics from the University of Florida. Her fields of interest include industrial
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`organization, labor economics, and antitrust economics.
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`
`
`Roger D. Blair is Professor and former Chair of the Department of
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`Economics at the University of Florida and affiliate faculty at the Levin College of
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`Law at the University of Florida. His research focuses on antitrust economics and
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`law and economics.
`
`
`1 Pursuant to Federal Rule of Appellate Procedure 29, undersigned counsel for amici
`curiae certify that no party’s counsel authored this amicus brief in whole or in part;
`no party or party’s counsel contributed money that was intended to fund preparing
`or submitting this amicus brief; and no person or entity, other than amici or their
`counsel, contributed money intended to fund the preparation or submission of this
`amicus brief. All parties have consented to the filing of this amicus brief.
`
`1
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`Case: 23-60167 Document: 120 Page: 6 Date Filed: 06/12/2023
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`INTRODUCTION AND SUMMARY OF ARGUMENT
`
`The Federal Trade Commission’s (“FTC”) decision to prohibit Illumina’s
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`reacquisition of GRAIL is based on fundamentally flawed economic reasoning and
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`assumptions. Far from benefiting consumers and market participants, the immediate
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`and predictable consequences of the FTC’s decision are higher prices for consumers,
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`reduced consumption, and a reduction in both consumer welfare and social (or total)
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`welfare. In other words, Illumina and GRAIL are more valuable—including to
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`society—as a vertically integrated unit, and overall economic welfare would be
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`advanced, not hindered, by allowing Illumina’s reacquisition of GRAIL.
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`This brief explains three fundamental economic principles that were ignored
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`or misapplied by the FTC in reaching its erroneous decision. First, the brief explains
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`why
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`the vertical
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`integration of Illumina and GRAIL eliminates double
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`marginalization, which is an unadulterated and certain benefit to both consumers and
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`market participants. Moreover, since the price of a Galleri test will be lower, more
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`tests will be performed, more cancer will be detected at earlier stages, and more lives
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`will be saved. Second, the brief demonstrates why the FTC’s concerns regarding
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`market foreclosure are misplaced. Third, the brief explains that the FTC’s decision
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`willingly sacrifices immediate and certain economic gains for the highly speculative
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`prospect of theoretical future economic benefits.
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`2
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`Case: 23-60167 Document: 120 Page: 7 Date Filed: 06/12/2023
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`The FTC’s decision will result in higher prices and more cancer deaths,
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`without any guaranteed future benefit, in contravention of the economic principles
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`that properly guide antitrust decisions.
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`BACKGROUND
`
`Illumina supplies next generation DNA sequencing (“NGS”) platforms and
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`the requisite consumables that are essential for multi-cancer early detection
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`(“MCED”) tests. According to the FTC, Illumina faces no viable competitors; that
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`is, Illumina is a monopolist. (Opinion of the Commission (Mar. 31, 2023)
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`(“Opinion”) at 7.) In 2016, Illumina formed a subsidiary, GRAIL, which began
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`research and development efforts to create an MCED test. (Id. at 10.) Concerned
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`that it would be unable to provide GRAIL with the necessary capital, Illumina sold
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`off about 88 percent of its ownership in GRAIL in 2017. (Id.)
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`GRAIL thereafter received funding from other sources and developed Galleri,
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`which is an MCED test that can detect 50 types of cancer while individuals are
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`asymptomatic. (Id. at 13.) Galleri is being sold while still awaiting full FDA
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`approval. (Id. at 14.) It is the only MCED test available to patients. (Id. at 21.)
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`Illumina then reacquired GRAIL in its entirety in 2021. (Id. at 11.) In voting
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`to approve the reacquisition, the Illumina Board determined that the transaction
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`would accelerate the adoption of Galleri, result in cost saving efficiencies, generate
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`R&D efficiencies, and save lives. (See Respondents’ Post-Trial Brief at 182-89
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`3
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`Case: 23-60167 Document: 120 Page: 8 Date Filed: 06/12/2023
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`
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`(Apr. 29, 2022); Petitioners’ Opening Brief (Dkt. 96) at 58-59.) The FTC challenged
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`that reacquisition as violative of antitrust law. (Opinion at 19.)
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`
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`Initially, the case was heard by an FTC Administrative Law Judge (“ALJ”),
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`who ruled in favor of Illumina. The ALJ held that the FTC had failed to prove that
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`the reacquisition was likely to have anticompetitive consequences. (Id. at 21-22.)
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`Specifically, the ALJ found that “Grail and other cancer screening companies are
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`presently competing to develop the best performing cancer screening test”—i.e., that
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`there is “existing competition”; that “currently, and for the near future, Illumina is
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`the only viable supplier of NGS platforms that meet the requirements of MCED test
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`developers”; that “GRAIL’s Galleri is the only MCED test currently on the market”;
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`and that “commercial competition” is unlikely to “commence in the ‘near future’”
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`because other developers are “five to seven years away from launching any sort of
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`MCED test,” and those tests that are in development “are focused on one or a few
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`cancers,” whereas Galleri “has been demonstrated to detect seven or more cancers.”
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`(Id. at 21.)
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`The ALJ concluded that Illumina theoretically could “adversely impact
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`MCED test developer customers through a variety of means, including by
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`withholding or delaying supply of existing products, withholding or delaying supply
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`of new or improved products, and misusing confidential information,” but found that
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`4
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`Case: 23-60167 Document: 120 Page: 9 Date Filed: 06/12/2023
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`Illumina’s ability to do so pre-existed its reacquisition of GRAIL and was “not a
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`function of” the reacquisition. (Id.)
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`The ALJ further found that the FTC “had failed to prove that the relative
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`profits and benefits to Illumina of engaging in a foreclosure strategy outweighed the
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`costs, and therefore failed to prove that such a strategy was likely.” (Id.)
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`Finally, the ALJ found that various contractual commitments that Illumina
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`had made to its U.S. oncology customers—including “a 12-year supply agreement
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`under which Illumina would commit not to increase the price of sequencing
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`instruments or consumables; would commit to decrease the cost of sequencing on
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`Illumina’s highest-throughput instrument . . . ; and would commit to provide access
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`to the same sequencing products at the same pricing provided to GRAIL”—“would
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`constrain Illumina from” taking actions that would “raise rivals’ costs or otherwise
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`foreclose GRAIL’s rivals.” (Id. at 20-21.)
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`Because the ALJ found that the FTC “had failed to prove that harm to
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`GRAIL’s rivals was likely during the 12-year term . . . ,” the ALJ concluded that the
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`absence of harm to GRAIL’s competitors in the “reasonably near future”
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`undermined claims of “likely harm to existing innovation and future commercial
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`competition,” such that the FTC could not demonstrate “that a resulting substantial
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`lessening of competition is probable or imminent.” (Id. at 22.) Accordingly, the
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`ALJ dismissed the Complaint. (Id.)
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`5
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`Case: 23-60167 Document: 120 Page: 10 Date Filed: 06/12/2023
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`The full Commission reversed the ALJ’s decision and held that Illumina’s
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`reacquisition of GRAIL violated Section 7 of the Clayton Act and Section 5 of the
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`FTC Act. (Id. at 93.)
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`The FTC’s Opinion is based on its supposition that a vertically integrated
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`Illumina–GRAIL would foreclose alleged future entrants in the provision of MCED
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`tests from competing with Galleri. For the reasons that follow, the FTC’s Opinion
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`was based on mistaken economic premises, and should be reversed.
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`ARGUMENT
`
`I.
`
`An Illumina–GRAIL Integration Will Generate Cost Efficiencies and
`Life-Saving Benefits.
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`According to the FTC, Illumina faces no viable competitors in the supply of
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`NGS platforms and requisite “consumables,” i.e., materials used in the sequencing
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`workflow, making it a monopolist. (Opinion at 7-9.) Also according to the FTC,
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`GRAIL’s Galleri is the only MCED test currently on the market, rendering
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`GRAIL—at least for now—a monopolist as well. (Id. at 21.)
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`
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`The relationship between Illumina and GRAIL is vertical: Illumina’s NGS
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`platform and consumables are inputs in GRAIL’s business of MCED testing. Since
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`the FTC considers both Illumina and GRAIL monopolists, the market structure
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`before the acquisition was one of successive monopoly.
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`
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`It is well known and acknowledged by the FTC that successive monopoly
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`leads to double marginalization. See, e.g., U.S. Dep’t of Justice & FTC, Vertical
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`6
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`Case: 23-60167 Document: 120 Page: 11 Date Filed: 06/12/2023
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`
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`Merger
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`Guidelines
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`(June
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`30,
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`2020),
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`https://www.ftc.gov/system/files/documents/reports/us-department-justice-federal-
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`trade-commission-vertical-merger-guidelines/vertical_merger_guidelines_6-30-
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`20.pdf. Double marginalization occurs when a markup is imposed upon a cost that
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`already has been marked up. Here, for example, double marginalization occurs
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`when Illumina’s markup over its cost becomes part of GRAIL’s cost, upon which
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`GRAIL will also impose a markup. Critically, vertical integration eliminates double
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`marginalization.
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` This is a well-established economic principle and one
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`acknowledged by the FTC. See, e.g., id.; Phillip E. Areeda & Herbert Hovenkamp,
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`Antitrust Law: An Analysis of Antitrust Principles and Their Application 758
`
`(2022); Joseph J. Spengler, 58 J. of Pol. Econ. 347 (1950).
`
`
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`The economic results of eliminating double marginalization are known to be
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`unambiguously positive, immediate, and certain. Namely, the price paid by
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`consumers falls, the quantity consumed rises, the vertically integrated firm’s profits
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`increase, and both consumer welfare and social (or total) welfare increase. Thus,
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`following vertical integration of Illumina and GRAIL, the price of Galleri would
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`fall, the number of life-saving tests would increase, and consumers would be better
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`off. As a result of the increase in the number of Galleri tests sold, more cancer can
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`be detected in the early stages, before it is life-threatening. This can ultimately save
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`many more lives.
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`7
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`Case: 23-60167 Document: 120 Page: 12 Date Filed: 06/12/2023
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`At the same time, the profit earned by the vertically-integrated Illumina–
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`GRAIL will exceed the combined profits of Illumina and of GRAIL prior to the
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`vertical integration. In other words, vertical integration would yield all winners and
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`no losers.
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`These economic results are uncontroversial. Moreover, they should
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`materialize immediately since they flow from profit maximizing behavior. Finally,
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`these benefits are certain, i.e., not probabilistic. By rejecting Illumina’s reacquisition
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`of GRAIL, the FTC has sacrificed these certain benefits for prospective benefits that
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`may never materialize.
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`II. The FTC’s Opinion Rests on a Misconception of the Risk of Market
`Foreclosure.
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`The FTC’s decision to require Illumina to divest GRAIL is also based on a
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`flawed assumption regarding Illumina’s motivation to engage in market foreclosure
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`following its acquisition of GRAIL. Market foreclosure occurs when a firm has both
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`the incentive and ability to prevent an actual or potential rival from competing to sell
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`its products to customers, and proceeds to do so. The FTC argues that post-merger,
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`Illumina will undermine its rivals in the MCED test division of its business. But the
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`FTC fails to recognize that as a monopolist in the provision of NGS platforms and
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`consumables, Illumina can extract all the economic profit through its pricing of its
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`NGS, and thus has neither the need nor the incentive to engage in market foreclosure
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`8
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`Case: 23-60167 Document: 120 Page: 13 Date Filed: 06/12/2023
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`
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`so as to undermine participants in the MCED market. Accordingly, market
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`foreclosure is not a reasonably probable effect of Illumina’s reacquisition of GRAIL.
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`
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`As the FTC observed, Section 7 of the Clayton Acts forbid mergers “‘the
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`effect of which may be substantially to lessen competition, or to tend to create a
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`monopoly.’” (Opinion at 23 (quoting 15 U.S.C. § 18).) Citing Brown Shoe Co. v.
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`United States, 370 U.S. 294, 362 (1962), the FTC further observed that it need only
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`prove a “reasonable likelihood” of the ill effects of a merger. (Id. at 23.) And citing
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`United States v. General Dynamics Corp., 415 U.S. 486, 505-06 (1974), the FTC
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`identified the ultimate issue as whether anticompetitive effects are “reasonably
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`probable in the future.” (Id. at 23.) A conclusion that an outcome is reasonably
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`probable requires more than determining that an outcome is a theoretical possibility.
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`The FTC argues that Illumina stands to earn far more profit on the sale of its Galleri
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`tests than on the sales of its NGS platforms and consumables. (Id. at 45, 49-52.)
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`This assertion, however, is incorrect. Once Illumina is vertically integrated, it can
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`report its profit in either division. We expand on this point below.
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`
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`In the context of Illumina’s reacquisition of GRAIL, one can posit—as the
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`FTC does (Id. at 44-45, 48)—an assortment of potential, would-be disruptive acts
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`by Illumina that would lead to this result. But which, if any, of the possible reactions
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`the FTC enumerated is reasonably likely or probable? From an economic
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`perspective, none of them are. After merging with GRAIL, the newly merged firm
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`9
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`
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`will strive to maximize its profit. Foreclosing rival suppliers of MCED tests is not
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`likely to occur simply because, according to the FTC, Illumina could theoretically
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`do so. A conclusion that market foreclosure is reasonably probable must be
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`consistent with profit maximization by Illumina. Since, according to the FTC’s
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`claims, all providers of MCED tests supposedly must rely on Illumina NGS
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`platforms and consumables, market foreclosure means turning away profitable
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`business. As the FTC tells it, Illumina would be essentially shrinking its own market,
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`which is not reasonably probable.
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`
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`The FTC claims that “Illumina is the only viable supplier of the critical NGS
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`inputs on which MCED developers depend” (Id. at 40), meaning it claims there are
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`no reasonable substitutes for Illumina’s NGS platform in that there is no other
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`“short-read NGS platform[] . . . that [is as] highly accurate with high throughput at
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`a reasonable cost” (Id. at 36). Accordingly, taking those claims at face value,
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`Illumina’s incentive is to expand, rather than contract, the MCED market that relies
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`on its NGS platform.
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`
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`Currently, Illumina has two divisions: the DNA sequencing division and the
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`MCED test division. These divisions are vertically related. The DNA sequencing
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`division provides an essential input for the MCED test division. The managerial
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`problem for Illumina is to provide the proper incentives to the division manager so
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`that overall profit for Illumina is maximized.
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`10
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`Case: 23-60167 Document: 120 Page: 15 Date Filed: 06/12/2023
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`Both divisions cannot be separate profit centers as a matter of economics. If
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`the managers of each division attempted to maximize their division’s profit, the
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`effect would be a successive monopoly structure within Illumina. The economic
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`result would be double marginalization. Illumina’s profit would not be maximized.
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`Illumina can eliminate this double marginalization by providing the division
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`managers with the correct incentives. To maximize profit, Illumina can instruct the
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`DNA sequencing manager to maximize the profit of its division and instruct the
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`MCED test division manager to sell its output at marginal cost. In doing so, the
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`market structure is one of upstream monopoly and downstream competition. If these
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`instructions are followed, there will be no internal successive monopoly and firm—
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`rather than division—profit will be maximized. The performance of each manager
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`must be evaluated on successfully carrying out their respective responsibilities. In
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`particular, the manager of the downstream division cannot be penalized for not
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`earning profit, as that manager is not supposed to show a profit. See Jack Hirshleifer,
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`On the Economics of Transfer Pricing, 29 The Journal of Business 172 (1956)
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`(addressing the transfer pricing problem of a divisionalized firm).
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`
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`If, as the FTC claims, there are new entrants in the future at the downstream
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`stage, Illumina would have no incentive to abuse them. The demand for Illumina
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`DNA sequencing would either expand or remain the same. In either event, Illumina
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`11
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`Case: 23-60167 Document: 120 Page: 16 Date Filed: 06/12/2023
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`
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`can extract all the monopoly profits upstream. Market foreclosure would make no
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`sense as Illumina earns all the profit in the upstream division.
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`III. The FTC’s Rejection of Illumina’s Reacquisition of GRAIL Will Yield
`Higher Prices and More Cancer Deaths, Without Any Guarantee of
`Future Benefit.
`
`
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`If the FTC’s decision denying Illumina’s reacquisition of GRAIL is allowed
`
`to stand, the market structure will be one of successive monopoly unless and until a
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`GRAIL rival enters the market, which may take five to seven years. There will be
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`double marginalization, which means higher prices for the only MCED test available
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`to patients, fewer tests used, and more cancer deaths that would have been
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`preventable through early diagnosis.
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`If an entrant materializes, several outcomes are possible:
`
`
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`First, Grail and the new entrant may collude either tacitly or overtly in the
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`MCED test market. In this event, the outcome is precisely the same as successive
`
`monopoly because GRAIL and the entrant are cooperating rather than competing.
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`Thus, we suffer the consequences of double marginalization without any benefit.
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`
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`Second, GRAIL and the entrant may compete by setting the quantity that they
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`will supply. This is known as a Cournot duopoly. The result will be an improvement
`
`over successive monopoly, but there are two things to keep in mind. One, the
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`improvement will not occur until there is entry—in the meantime, we suffer the full
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`12
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`Case: 23-60167 Document: 120 Page: 17 Date Filed: 06/12/2023
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`
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`double marginalization. Two, Cournot duopoly is inferior to vertical integration and
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`the latter eliminates double marginalization.
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`
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`Third, GRAIL and the entrant may compete by setting the price at which they
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`will supply the MCED tests. This market structure is known as Bertrand duopoly.
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`In this event, price will eventually reach the level that a vertically integrated
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`Illumina-GRAIL would charge. Again, there are two points to consider. One, this
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`improvement over double marginalization does not occur until there is entry. Two,
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`the result is not an improvement over vertical integration.2
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`
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`At best, then, denying the reacquisition yields no gains relative to allowing
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`the reacquisition to proceed. And at worst, it yields results inferior to vertical
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`integration. The FTC’s rejection thus at best results in no overall economic gain and
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`quite likely will lead to even worse economic outcomes.
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`The reason that results would most likely be inferior follows from the
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`established economic principles of vertical integration: allowing Illumina’s
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`reacquisition of GRAIL would remove double marginalization, thereby yielding
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`certain benefits. The FTC presumably believes that by denying reacquisition, it is
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`preserving some probabilistic benefit that would be realized—if ever—at some point
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`in the future. Thus, instead of realizing the benefits of eliminating double
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`2 For a more complete account of the economic analysis of these results, see Brianna
`L. Alderman & Roger D. Blair, Preserving Potential Entry is Not the Holy Grail in
`Vertical Merger Enforcement, 36(2) Antitrust 42 (2022).
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`Case: 23-60167 Document: 120 Page: 18 Date Filed: 06/12/2023
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`marginalization immediately, the FTC has chosen a path that incurs the adverse
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`economic consequences of double marginalization for what appears to be a
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`prediction of distant future benefits.
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`Those predictions, however, are fundamentally speculative in two respects.
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`To start, there is little, if any, evidence that existing rivals will develop an MCED
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`test comparable to GRAIL’s Galleri, which tests for 50 different types of cancer, in
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`the foreseeable future. The FTC simply does not know whether any MCED test
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`comparable to Galleri will ever materialize, when such competition is apt to
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`materialize, or if it will actually improve or save lives. And the FTC does not know
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`whether or on what basis any entrants will compete with GRAIL. Accordingly, if
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`the Illumina–GRAIL merger is forbidden and if, as is likely, no viable competition
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`for GRAIL emerges (at least not in the short to medium term), then the FTC will
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`have reinforced a market structure of successive monopoly without any consequent
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`gains.
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`Moreover, the FTC’s concern for dampening the incentives for potential entry
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`seems to rest on the claim that vertical integration will lead to market foreclosure.
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`But if there are new entrants at the MCED test stage, this will increase the demand
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`for Illumina’s DNA sequencing. Accommodating the new entrants will increase
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`Illumina’s profit. Thus, it would be economically irrational to foreclose the new
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`entrants.
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`Case: 23-60167 Document: 120 Page: 19 Date Filed: 06/12/2023
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`Ultimately, the FTC’s decision in this case amounts to a choice to prioritize
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`speculative future benefits over known efficiencies in saving costs and lives. That
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`misguided decision is contrary to the fundamentals of economics and should not
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`stand.
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`CONCLUSION
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`The Court should reverse the FTC’s decision.
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` Respectfully submitted,
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`Kathleen R. Hartnett
`COOLEY LLP
`3 Embarcadero Center, 20th Floor
`San Francisco, California 94111-4004
`Telephone: (415) 693-2000
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`Kathy O’Neill
`Ethan Glass
`COOLEY LLP
`1299 Pennsylvania Avenue NW,
`Suite 700
`Washington, D.C. 20004-2400
`Telephone: (202) 842-7800
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`Dated: June 12, 2023
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`/s/ Adam S. Gershenson
`Adam S. Gershenson
`COOLEY LLP
`500 Boylston Street, 14th Floor
`Boston, Massachusetts 02116-3736
`Telephone: (617) 937-2300
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`Attorneys for Amici Curiae
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`Case: 23-60167 Document: 120 Page: 20 Date Filed: 06/12/2023
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`CERTIFICATE OF COMPLIANCE
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`I hereby certify that this brief contains 3,255 words and has been prepared in
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`a proportionally spaced typeface using Microsoft Word in 14-point Times New
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`Roman font, and so complies with the typeface requirements and length limits of
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`Federal Rules of Appellate Procedure 27, 29, and 32(a)(5)-(7) and the corresponding
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`local rules.
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`Dated: June 12, 2023
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`/s/ Adam S. Gershenson
`Adam S. Gershenson
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`Case: 23-60167 Document: 120 Page: 21 Date Filed: 06/12/2023
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`CERTIFICATE OF SERVICE
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`I hereby certify that on June 12, 2023, I electronically filed the foregoing
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`document using the Court’s CM/ECF system. Because all parties in the case are
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`CM/ECF users, service will be accomplished through the CM/ECF system.
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`Dated: June 12, 2023
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`/s/ Adam S. Gershenson
`Adam S. Gershenson
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