Case: 23-60167 Document: 242-1 Page: 1 Date Filed: 08/02/2023
`
`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 from an Order of
`the Federal Trade Commission
`Agency No. 9401
`
`
`
`BRIEF FOR AMERICAN ECONOMIC LIBERTIES PROJECT
`AS AMICUS CURIAE IN SUPPORT OF RESPONDENTS
`
`
`Katherine Van Dyck
`Lee A. Hepner
`AMERICAN ECONOMIC LIBERTIES PROJECT
`2001 Pennsylvania Avenue NW, Suite 540
`Washington, DC 20006
`(202) 904-8101
`kvandyck@economicliberties.us
`
`Counsel for Amicus Curiae
`
`
`
`
`
`
`
`
`
`
`
`
`

`

`Case: 23-60167 Document: 242-1 Page: 2 Date Filed: 08/02/2023
`
`CERTIFICATE OF INTERESTED PERSONS
`
`
`
`The undersigned counsel of record certifies that the following listed
`
`persons and entities as described in the fourth sentence of Rule 28.2.1—
`
`in addition to the persons listed on the certificates of interested persons
`
`submitted by Petitioners Illumina, Inc. and Grail, Inc.; Respondent
`
`Federal Trade Commission; and the various amici curiae— have an
`
`interest in the outcome of this case. These representations are made in
`
`order that the judges of this court may evaluate possible disqualification
`
`or recusal.
`
`
`
`1. American Economic Liberties Project, Amicus Curiae
`
`
`Dated: August 2, 2023
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`s/ Katherine Van Dyck ___________
`Katherine Van Dyck
`Lee A. Hepner
`American Economic Liberties Project
`2001 Pennsylvania Avenue NW
`Suite 540
`Washington, DC 20006
`(202) 904-8101
`kvandyck@economicliberties.us
`
`Counsel for Amicus Curiae
`
`i
`
`

`

`Case: 23-60167 Document: 242-1 Page: 3 Date Filed: 08/02/2023
`
`TABLE OF CONTENTS
`
`CERTIFICATE OF INTERESTED PERSONS ......................................... i
`
`TABLE OF AUTHORITIES .................................................................... iii
`
`CITATION ABBREVIATIONS ................................................................ vi
`
`INTEREST OF AMICUS .......................................................................... 1
`
`SUMMARY OF ARGUMENT ................................................................... 2
`
`ARGUMENT ............................................................................................. 5
`
`I.
`
`THE CLAYTON ACT IS CONCERNED WITH FUTURE
`MARKET CONDITIONS ................................................................. 5
`
`II. THE R&D MARKET IS A PROPER LINE OF COMMERCE ........ 8
`
`A.
`
`B.
`
`C.
`
`The R&D Market for MCED Tests Already Exists ................ 9
`
`The Impact of Innovation on Competition is Widely
`Recognized ............................................................................. 11
`
`Future Market Entrants Play An Important Role in
`Competition ........................................................................... 16
`
`III. CONCLUSION ............................................................................... 21
`
`CERTIFICATE OF COMPLIANCE ........................................................ 23
`
`CERTIFICATE OF SERVICE ................................................................. 23
`
`
`
`
`
`
`
`ii
`
`

`

`Case: 23-60167 Document: 242-1 Page: 4 Date Filed: 08/02/2023
`
`TABLE OF AUTHORITIES
`
`Cases
`
`Atari Games Corp. v. Nintendo of Am., Inc., 897 F.2d 1572 (Fed.
`Cir. 1990) ........................................................................................ 13
`
`Bostock v. Clayton Cty., 140 S. Ct. 1731 (2020) ................................... 6
`
`Brown Shoe v. United States, 370 U.S. 294 (1962) .................. 3, 5, 6, 9
`
`Cal. v. Am. Stores Co., 495 U.S. 271 (1990) ......................................... 5
`
`Catch Curve, Inc. v. Venali, Inc., 519 F. Supp. 2d 1028 (C.D. Cal.
`2007) ............................................................................................... 13
`
`DAT Sols., LLC v. Convoy, Inc., No. 22-cv-00088, 2023 WL
`3058057 (D. Or. Apr. 24, 2023) ...................................................... 13
`
`Ford Motor Co. v. United States, 405 U.S. 562 (1972) ....................... 20
`
`Fraser v. Major League Soccer, L.L.C., 97 F. Supp. 2d 130 (D.
`Mass. 2000) ..................................................................................... 10
`
`FTC v. Elders Grain, Inc., 868 F.2d 901 (7th Cir. 1989) ................. 3, 7
`
`FTC v. PPG Indus., Inc., 798 F.2d 1500 (D.C. Cir. 1986) .......... passim
`
`FTC v. Procter & Gamble Co., 386 U.S. 568 (1967) ............................. 6
`
`Loctite Corp. v. Ultraseal Ltd., 781 F.2d 861 (Fed. Cir. 1985) ........... 13
`
`Mercantile Texas Corp. v. Bd. of Governors of Fed. Rsrv. Sys., 638
`F.2d 1255 (5th Cir. 1981) ....................................................... passim
`
`New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638 (2d
`Cir. 2015 ......................................................................................... 13
`
`PLS.Com, LLC v. Nat’l Ass’n of Realtors, 32 F.4th 824 (9th Cir.
`2022), cert. denied sub nom., 143 S. Ct. 567 (2023) ....................... 12
`
`iii
`
`

`

`Case: 23-60167 Document: 242-1 Page: 5 Date Filed: 08/02/2023
`
`Sanger Ins. Agency v. HUB Int’l, Ltd., 802 F.3d 732 (5th Cir.
`2015) ............................................................................................... 19
`
`SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981) .................. 10
`
`United States v. AlliedSignal Inc., No. 99-cv-2959, 2000 WL
`33115901 (D.D.C. Mar. 22, 2000) ................................................... 14
`
`United States v. Aluminum Co. of Am., 148 F.2d 416 (2d Cir.
`1945) ............................................................................................... 12
`
`United States v. Bos. Sci. Corp., 253 F. Supp. 2d 85 (D. Mass.
`2003) ............................................................................................... 13
`
`United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586
`(1957) ............................................................................................ 6, 7
`
`United States v. El Paso Nat. Gas Co., 376 U.S. 651 (1964) .............. 17
`
`United States v. Falstaff Brewing Corp., 410 U.S. 526 (1973)........... 17
`
`United States v. Grinnell Corp., 384 U.S. 563 (1966) ........................ 18
`
`United States v. Marine Bancorporation, Inc., 418 U.S. 602
`(1974) .............................................................................................. 17
`
`United States v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001) ................... 19
`
`United States v. Penn-Olin Chem. Co., 378 U.S. 158 (1964) ............. 18
`
`United States v. Philadelphia Nat’l Bank, 374 U.S. 321 (1963) ...... 7, 8
`
`United States v. Sungard Data Sys., Inc., 172 F. Supp. 2d 172
`(D.D.C. 2001) .................................................................................. 19
`
`Woods Expl. & Producing Co. v. Aluminum Co. of Am., 438 F.2d
`1286 (5th Cir. 1971) ....................................................................... 12
`
`Administrative Decisions
`
`In the Matter of Adobe Sys. Inc., et al., 118 F.T.C. 940 (1994) .......... 14
`
`iv
`
`

`

`Case: 23-60167 Document: 242-1 Page: 6 Date Filed: 08/02/2023
`
`In the Matter of Am. Home Prod. Corp., 119 F.T.C. 217 (1995) ........ 14
`
`In the Matter of Amgen Inc., et al., 134 F.T.C. 333 (2002) ................. 14
`
`In the Matter of Ciba-Geigy Ltd., et al., No. 961-0055, 1996 WL
`743359 (F.T.C. Dec. 5, 1996) .......................................................... 14
`
`In the Matter of Roche Holding Ltd., et al., 113 F.T.C. 1086 (1990)
` ........................................................................................................ 14
`
`Statutes
`
`15 U.S.C. § 18 .................................................................................... 2, 5
`
`Legislative Materials
`
`H.R. Rep. No. 1191, 81st Cong., 1st Sess. 8 (1949) ................................ 5
`
`S. Rep. No. 1775, 81st Cong., 2d Sess. (1950) ....................................... 7
`
`Other Sources
`
`Prepared Remarks of Federal Trade Commissioner Christine A.
`Varney, Competition Policy
`in Vertical Mergers and
`Innovation Markets (Apr. 1995) ................................................... 3, 4
`
`Richard J. Gilbert & Steven C. Sunshine, Incorporating Dynamic
`Efficiency Concerns in Merger Analysis: The Use of Innovation
`Markets, 63 ANTITRUST L.J. 569 (1995) ......................................... 14
`
`U.S. Dep’t of Justice & Fed. Trade Comm’n, Draft Merger
`Guidelines 15 (2023) ....................................................................... 14
`
`U.S. Dep’t of Justice, Vertical Merger Guidelines (2020) ................... 14
`
`
`
`
`
`
`
`v
`
`

`

`Case: 23-60167 Document: 242-1 Page: 7 Date Filed: 08/02/2023
`
`CITATION ABBREVIATIONS
`
`
`
`This Brief uses the same abbreviations used in Petitioners’ Brief
`
`and Respondent’s Brief, including the following:
`
`Conc. Op.
`
`Concurring Opinion of Commissioner Wilson
`
`IDF
`
`Op.
`
`Initial Decision Findings of Fact
`
`Opinion of the Commission
`
`Pet. Br.
`
`Petitioners’ Brief
`
`
`
`
`
`vi
`
`

`

`Case: 23-60167 Document: 242-1 Page: 8 Date Filed: 08/02/2023
`
`INTEREST OF AMICUS
`
`
`
`American Economic Liberties Project (“AELP”) is an independent
`
`nonprofit
`
`research and advocacy
`
`organization dedicated
`
`to
`
`understanding and addressing the problem of concentrated economic
`
`power in the United States.1 AELP organizes and employs a diverse set
`
`of leading policy experts in a wide range of areas impacted by
`
`concentrated power that include the healthcare industry, private equity,
`
`airlines, and the digital marketplace. It advocates for policies that
`
`address today’s crisis of concentration through legislative efforts and
`
`public policy debates. AELP submits this brief because Petitioners are
`
`attempting to rewrite the Clayton Act, so it will become blind to the
`
`effects of mergers and acquisitions on innovation, research, and
`
`development. Our antitrust laws cannot protect competition if merger
`
`challenges supported by clear evidence of foreclosure are rejected based
`
`on convoluted, burdensome, and unrealistic requirements for market
`
`definition that ignore the effects of acquisitions on future market
`
`conditions.
`
`
`1 https://www.economicliberties.us/.
`
`1
`
`

`

`Case: 23-60167 Document: 242-1 Page: 9 Date Filed: 08/02/2023
`
`
`
`Pursuant to Federal Rule of Appellate Procedure 29(a)(4)(E), no
`
`party’s counsel authored this brief in whole or part. In addition, no party
`
`or party’s counsel, and no person other than the amicus curiae, its
`
`supporters, or its counsel, contributed money that was intended to fund
`
`preparing or submitting the brief. All parties have consented to the filing
`
`of this amicus brief.
`
`SUMMARY OF ARGUMENT
`
`
`
`Petitioners Illumina, Inc. and Grail, Inc.’s (“Petitioners”) criticism
`
`of the product market definition adopted by both the full Commission and
`
`the administrative law judge (“ALJ”)—that it is “unprecedentedly broad
`
`and speculative” (Pet. Br. 29)—is wholly inconsistent with the purpose of
`
`Section 7 of the Clayton Act, 15 U.S.C. § 18, and ignores how courts and
`
`enforcers have interpreted the law from its inception. The Supreme Court
`
`told us in its seminal decision in Brown Shoe v. United States that Section
`
`7 is forward looking:
`
`[T]he very wording of [Section] 7 requires a prognosis of the
`probable future effect of the merger.
`
`….
`
`It is the probable effect of the merger upon the future as well
`as the present which the Clayton Act commands the courts
`and the Commission to examine.
`
`2
`
`

`

`Case: 23-60167 Document: 242-1 Page: 10 Date Filed: 08/02/2023
`
`370 U.S. 294, 332 (1962) (emphasis added).
`
`
`
`Petitioners’ claim that the Federal Trade Commission “invent[ed] a
`
`legally erroneous R&D market”, (Pet. Br. 38) (emphasis added), is belied
`
`not only by the long history of enforcement focused on protecting
`
`innovation and future market conditions. See infra Section II.B-C. It is
`
`explicitly contradicted by the enforcement prerogatives articulated by
`
`counsel for Illumina when she sat as a commissioner at the FTC. As then-
`
`Commissioner Varney explained in an uncontroversial set of remarks
`
`about vertical merger policy, “it is the Commission’s statutory
`
`responsibility to consider the possibility, or likelihood, of future
`
`anticompetitive effects.” Prepared Remarks of Federal Trade
`
`Commissioner Christine A. Varney, Competition Policy in Vertical
`
`Mergers and Innovation Markets, at 6 (Apr. 1995) (citing FTC v. Elders
`
`Grain, Inc., 868 F.2d 901, 906 (7th Cir. 1989)). Thus, “innovation market
`
`analysis does not require any radical departure from the traditional tools
`
`used in antitrust analysis.” Id. at 13 (emphasis added). True, there is
`
`little to no pricing data to consider. But the parameters are still clear. “In
`
`the innovation context, the product market consists of R&D [research and
`
`3
`
`

`

`Case: 23-60167 Document: 242-1 Page: 11 Date Filed: 08/02/2023
`
`development] directed to particular new or improved goods or processes,
`
`and the close substitutes for that R&D.” Id. at 15.
`
`
`
`Petitioners’ argument today—that “speculation about future
`
`substitutability cannot prove a relevant market” (Pet. Br. 30)—simply
`
`cannot be squared with counsel for Illumina’s own prior interpretation of
`
`the Commission’s statutory responsibilities. As Amicus AELP
`
`demonstrates below, and courts have nearly always accepted, Section 7
`
`is necessarily and almost exclusively concerned with future market
`
`conditions and will always involve some degree of speculation. Thus, the
`
`relevant product market adopted by the Commission—the “research,
`
`development, and commercialization of MCED tests” (the “R&D
`
`Market”)2—is wholly appropriate under both a plain reading of the
`
`statute and courts’ interpretation of the phrase “any line of commerce.”
`
`(Op. 24, 34; Conc. Op. 1.)
`
`
`2 “MCED tests” are multicancer early detection tests that use a single
`blood sample to screen for multiple types of cancer. (IDF ¶21.)
`
`4
`
`

`

`Case: 23-60167 Document: 242-1 Page: 12 Date Filed: 08/02/2023
`
`ARGUMENT
`
`I.
`
`THE CLAYTON ACT IS CONCERNED WITH FUTURE
`MARKET CONDITIONS
`
`Section 7 was designed to stop the “rising tide of economic
`
`concentration.” Brown Shoe, 370 U.S. at 317. It “[wa]s intended to permit
`
`intervention … when the effect of an acquisition may be a significant
`
`reduction in the vigor of competition.” H.R. Rep. No. 1191, 81st Cong., 1st
`
`Sess. 8 (1949) (emphasis added). The final language adopted by Congress
`
`is therefore quite broad:
`
`No person engaged in commerce or in any activity affecting
`commerce … shall acquire the whole or any part of the assets
`of another person engaged also in commerce or in any activity
`affecting commerce, where in any line of commerce or in any
`activity affecting commerce in any section of the country, the
`effect of such acquisition may be substantially to lessen
`competition, or to tend to create a monopoly.
`
`15 U.S.C. § 18 (emphasis added). This “creates a relatively expansive
`
`definition of antitrust liability.” Cal. v. Am. Stores Co., 495 U.S. 271, 284
`
`(1990). It provides “authority for arresting mergers at a time when the
`
`trend to a lessening of competition in a line of commerce was still in its
`
`incipiency.” Brown Shoe, 370 U.S. at 317 (emphasis added).
`
`
`
`The Supreme Court understood that “Congress used the words ‘may
`
`be substantially to lessen competition’ … to indicate that its concern was
`
`5
`
`

`

`Case: 23-60167 Document: 242-1 Page: 13 Date Filed: 08/02/2023
`
`with probabilities, not certainties.” Id. at 323. “The section is violated
`
`whether or not actual restraints or monopolies, or the substantial
`
`lessening of competition, have occurred or are intended.” United States v.
`
`E.I. du Pont de Nemours & Co. (“E.I. du Pont”), 353 U.S. 586, 589 (1957).
`
`“If the enforcement of § 7 turned on the existence of actual
`
`anticompetitive practices, the congressional policy of thwarting such
`
`practices in their incipiency would be frustrated.” FTC v. Procter &
`
`Gamble Co., 386 U.S. 568, 577 (1967). It would, as Justice Gorsuch wrote
`
`in his textualist interpretation of Title VII of the Civil Rights Act,
`
`effectively rewrite the law and “deny the people the right to continue
`
`relying on [its] original meaning ….” Bostock v. Clayton Cty., 140 S. Ct.
`
`1731, 1738 (2020).
`
`
`
`“No doubt, Congress could have taken a more parsimonious
`
`approach.” Id. at 1739. Section 7 could have used the phrase “will [or
`
`shall] lessen competition or create monopolies.” Cf. id. (regarding Title
`
`VII, Congress “could have added ‘solely’ to indicate that actions taken
`
`‘because of’ the confluence of multiple factors do not violate the law. Or it
`
`could have written ‘primarily because of’ to indicate that the prohibited
`
`factor had to be the main cause of the defendant's challenged employment
`
`6
`
`

`

`Case: 23-60167 Document: 242-1 Page: 14 Date Filed: 08/02/2023
`
`decision”) (citations omitted). But Congress specifically aimed “to make it
`
`clear that [Section 7] is not intended to revert to the Sherman Act test.”
`
`S. Rep. No. 1775, 81st Cong., 2d Sess. (1950). Instead, it “was intended to
`
`supplement the Sherman Act. Its aim was primarily to arrest
`
`apprehended consequences of inter corporate relationships before those
`
`relationships could work their evil.” E. I. du Pont, 353 U.S. at 597
`
`(emphasis added) (internal citation omitted), quoted by Mercantile Texas
`
`Corp. v. Bd. of Governors of Fed. Rsrv. Sys., 638 F.2d 1255, 1265 (5th Cir.
`
`1981).
`
`
`
`Courts have consistently held that Section 7’s standards are
`
`forward-looking. “[T]he statute requires a prediction, and doubts are to
`
`be resolved against the transaction.” Elders Grain, 868 F.2d at 906
`
`(emphasis added). And contrary to Petitioners’ position, it “does not
`
`command us to determine whether only present competition has been
`
`substantially lessened. In evaluating a merger under Section 7, the
`
`courts have looked at its effect on future competition.” Mercantile Texas,
`
`638 F.2d at 1265 (emphasis added); see also United States v. Philadelphia
`
`Nat’l Bank, 374 U.S. 321, 362 (1963) (Section 7 “requires not merely an
`
`appraisal of the immediate impact of the merger upon competition, but a
`
`7
`
`

`

`Case: 23-60167 Document: 242-1 Page: 15 Date Filed: 08/02/2023
`
`prediction of its impact upon competitive conditions in the future”); FTC
`
`v. PPG Indus., Inc., 798 F.2d 1500, 1504 (D.C. Cir. 1986) (“an antitrust
`
`court must, of necessity, attempt to predict the future market and the
`
`merging firm's share of that market”). This applies not just in evaluating
`
`how the merger might affect competition, but in determining what lines
`
`of commerce are affected in the first place.
`
`II. THE R&D MARKET IS A PROPER LINE OF COMMERCE
`
`
`
`Petitioners argue that the R&D Market adopted by the Commission
`
`and the ALJ is too broad and ask this Court to decide whether a relevant
`
`product market can “include speculative products that do not exist [or]
`
`may never exist and are not interchangeable.” (Pet. Br. 2.) Their
`
`argument ignores a vast body of work by the courts and enforcers
`
`applying our antitrust laws to research and development markets, and it
`
`erroneously claims that products not approved by the Food and Drug
`
`Administration are too far removed from the marketplace to be
`
`considered.
`
`
`
`Centrally, the phrase “any line of commerce” refers to the relevant
`
`market affected by the merger. Philadelphia Nat’l Bank, 374 U.S. at 356.
`
`It is facially broad, and the Supreme Court has instructed that “the
`
`8
`
`

`

`Case: 23-60167 Document: 242-1 Page: 16 Date Filed: 08/02/2023
`
`boundaries of the relevant market must be drawn with sufficient breadth
`
`to include the competing products of each of the merging companies and
`
`to recognize competition where, in fact, competition exists.” Brown Shoe,
`
`370 U.S. at 326. Such competition can exist even among competitors, like
`
`those identified by the Commission in its opinion and internally by Grail,
`
`who employ different methodologies to meet the same market demand,
`
`where “the trend in their respective technological evolutions is clearly in
`
`the direction of an eventual coalescence.” PPG Indus., 798 F.2d at 1502.
`
`
`
`In the present case, the Commission (and the ALJ) properly
`
`identified a product market for the research and development of
`
`potentially lifesaving cancer screening products and a small group of
`
`firms already actively participating in that market. Petitioners’
`
`argument that it is too speculative, and that the research and
`
`development of MCEDs by Grail’s competitors is not reasonably
`
`interchangeable with Grail’s research, should be rejected.
`
`A. The R&D Market for MCED Tests Already Exists
`
`
`
`The concept of existing markets that Petitioners advocate for is
`
`vastly different from the one adopted by the courts. When courts refer to
`
`“existing lines of commerce,” they are describing “the acquisition or
`
`9
`
`

`

`Case: 23-60167 Document: 242-1 Page: 17 Date Filed: 08/02/2023
`
`merger of existing business enterprises” as opposed to “the formation of
`
`an entirely new entity which itself represented the creation of an entirely
`
`new market.” Fraser v. Major League Soccer, L.L.C., 97 F. Supp. 2d 130,
`
`140 (D. Mass. 2000). In the latter scenario, where there are no existing
`
`competitors, the creation of an entirely new entity and an entirely new
`
`product cannot reduce competition. Id. But this Court is faced with the
`
`former scenario, the acquisition of an existing enterprise within an
`
`established product market with a small number of known, existing
`
`competitors.
`
`
`
`Grail was formed in 2015 with the purpose of researching and
`
`developing MCED tests. (IDF ¶¶20–21.) “At the time of Grail’s formation,
`
`no other oncology testing company was developing liquid biopsy cancer
`
`screening tests.” (Id. ¶30.) The formation of Grail and its initial endeavor
`
`to create MCED tests did create an entirely new line of business, just as
`
`the creation of Major League Soccer introduced a professional Division I
`
`soccer league to the United States and just as Xerox’s acquisition of
`
`certain patents led to an entirely new market for plain paper copiers.
`
`Fraser, 97 F. Supp. 2d at 140; SCM Corp. v. Xerox Corp., 645 F.2d 1195,
`
`1211 (2d Cir. 1981).
`
`10
`
`

`

`Case: 23-60167 Document: 242-1 Page: 18 Date Filed: 08/02/2023
`
`
`
`However, the market today has changed considerably. Grail may
`
`have been the first entrant into the R&D Market, but it is no longer the
`
`only one. The FTC identified seven, all at different stages of research and
`
`development. (Op. 14–19.) Grail itself identified six firms actively
`
`engaged in MCED test development that Grail viewed as its “top tier”
`
`competition. (IDF ¶¶324, 380, 422, 447, 509); see also PPG Indus., 798
`
`F.2d at 1505 (describing evidence that competitors were identified by
`
`merging parties in their own internal documents as “overwhelming”).
`
`And all of the cited MCED test developers, including Grail, perceive the
`
`technology that Illumina owns and licenses to MCED test developers as
`
`critical to their work and “the only technology available.” (Op. 21; IDF
`
`¶¶588, 591, 593, 598, 601–634.) The line of commerce very much exists,
`
`such that a vertical merger between Petitioners would unquestionably
`
`give Illumina the ability and incentive to use its control of next-
`
`generation sequencing technology to foreclose new entrants in the R&D
`
`Market. (Op. 43–45, 47–53; IDF ¶¶746–805.)
`
`B. The Impact of Innovation on Competition is
`Widely Recognized
`
`
`
`Having established that the R&D Market is an existing one, the
`
`question becomes who falls within it. Petitioners argue that the
`
`11
`
`

`

`Case: 23-60167 Document: 242-1 Page: 19 Date Filed: 08/02/2023
`
`Commission “invent[ed] a legally erroneous R&D market” and that there
`
`is no “basis to define a relevant antitrust market based on the fact that
`
`firms are working toward a general objective (e.g., developing a cancer
`
`screening test).” (Pet. Br. 37–38.) This is entirely out of line with how
`
`Section 7 has been applied and interpreted to acquisitions implicating
`
`research and development efforts.
`
`
`
`Our antitrust laws have always been concerned with the impact of
`
`anticompetitive behavior on innovation. Judge Learned Hand famously
`
`wrote:
`
`Many people believe that possession of unchallenged
`economic power deadens initiative, discourages thrift and
`depresses energy; that immunity from competition is a
`narcotic, and rivalry is a stimulant, to industrial progress;
`that the spur of constant stress is necessary to counteract an
`inevitable disposition to let well enough alone.
`
`United States v. Aluminum Co. of Am., 148 F.2d 416, 427 (2d Cir. 1945).3
`
`In sum, a “threat to innovation is anticompetitive in its own right.”
`
`United States v. Anthem, Inc., 855 F.3d 345, 361 (D.C. Cir. 2017).
`
`
`3 See also Woods Expl. & Producing Co. v. Aluminum Co. of Am., 438
`F.2d 1286, 1303 (5th Cir. 1971) (antitrust laws exist “to establish an
`atmosphere which will stimulate innovations for better service at a
`lower cost”); PLS.Com, LLC v. Nat’l Ass’n of Realtors, 32 F.4th 824, 839
`(9th Cir. 2022), cert. denied sub nom., 143 S. Ct. 567 (2023) (plaintiff
`
`
`12
`
`

`

`Case: 23-60167 Document: 242-1 Page: 20 Date Filed: 08/02/2023
`
`
`
`Again, this concept is not new. As written in 1995:
`
`Innovation resulting from vigorous research and development
`is often the precursor to entry in markets characterized by
`sophisticated and rapidly evolving technology. A merger or
`acquisition that adversely affects innovation, therefore, may
`reduce the probability of entry into and the intensity of
`competition in markets where the merging firms do not
`compete prior to the merger.
`
`Richard J. Gilbert & Steven C. Sunshine, Incorporating Dynamic
`
`Efficiency Concerns in Merger Analysis: The Use of Innovation Markets,
`
`
`properly alleged that conduct “prevent[ing] innovative competitors from
`entering the market and growing large enough to meaningfully
`compete” was an anticompetitive effect); New York ex rel. Schneiderman
`v. Actavis PLC, 787 F.3d 638, 652 (2d Cir. 2015 (“[p]roduct innovation
`generally benefits consumers and inflicts harm on competitors”); PPG
`Indus., 798 F.2d at 1504 (“Competition between them exists not only in
`bidding but … at the stage of research and development as
`transparency manufacturers try to influence airframe customers about
`types of transparencies for future generations of aircraft.”); Atari Games
`Corp. v. Nintendo of Am., Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990)
`(citing Loctite Corp. v. Ultraseal Ltd., 781 F.2d 861, 876–77 (Fed. Cir.
`1985)) (antitrust laws are “aimed at encouraging innovation, industry
`and competition”); DAT Sols., LLC v. Convoy, Inc., No. 22-cv-00088,
`2023 WL 3058057, at *11 (D. Or. Apr. 24, 2023) (accepting allegation
`that “restraint harms competition by effectively eliminating ‘would-be
`competitors’ … by stifling innovation in the trucking industry”); Catch
`Curve, Inc. v. Venali, Inc., 519 F. Supp. 2d 1028, 1036 (C.D. Cal. 2007)
`(allegation that conduct “ha[d] a dangerous probability of ‘stifl[ing]
`innovation’ in the market” sufficient for antitrust injury); United States
`v. Bos. Sci. Corp., 253 F. Supp. 2d 85, 89 (D. Mass. 2003) (pre-merger
`“[c]ompetition between the two was intense, and the competition was a
`major catalyst for catheter innovation”) (emphasis added).
`
`13
`
`

`

`Case: 23-60167 Document: 242-1 Page: 21 Date Filed: 08/02/2023
`
`63 ANTITRUST L.J. 569, 570 (1995). Recognizing these potential
`
`anticompetitive effects, federal agencies have routinely enforced the
`
`Clayton Act against mergers threatening harm to innovation.4 The FTC
`
`
`4 See, e.g., U.S. Dep’t of Justice, Vertical Merger Guidelines at 4 (2020)
`(a merged firm can use its control of access to a related to deter rivals
`from “innovation, entry, or expansion”); U.S. Dep’t of Justice & Fed.
`Trade Comm’n, Draft Merger Guidelines, App’x 3 at 15 (2023) (“the
`Agencies may define relevant antitrust markets around the products
`that would result from that innovation, even if they do not yet exist”);
`In the Matter of Amgen Inc., et al., 134 F.T.C. 333, 340 (2002) (consent
`decree resolving challenge to merger that would reduce “innovation
`competition” in the research and development of various treatments
`related to cancer and arthritis); United States v. AlliedSignal Inc., No.
`99-cv-2959, 2000 WL 33115901, at *17 (D.D.C. Mar. 22, 2000) (consent
`decree following merger challenge based in part on harm to innovation
`in the relevant markets); In the Matter of Ciba-Geigy Ltd., et al., No.
`961-0055, 1996 WL 743359, at *33 (F.T.C. Dec. 5, 1996) (consent degree
`recognizing that merger would affect competition in market for research
`and development of gene therapies despite no therapies having FDA
`approval); In the Matter of Am. Home Prod. Corp., 119 F.T.C. 217, 220
`(1995) (consent decree based in part on merger’s effects on market for
`research and development of rotovirus vaccine, in which only three
`vaccine producers had “research projects either in clinical development
`or near clinical development”); In the Matter of Adobe Sys. Inc., et al.,
`118 F.T.C. 940, 943 (1994) (consent decree recognizing that merger
`would “allow the merged firm to reduce innovation by delaying or
`reducing product development”); In the Matter of Roche Holding Ltd., et
`al., 113 F.T.C. 1086, 1087 (1990) (consent decree defining the product
`market as “the research, development, production and marketing of: (1)
`vitamin C, (2) therapeutics for treatment of human growth hormone
`deficiency or other short stature deficiency …, and (3) CD4–based
`therapeutics for the treatment of AIDS and HIV infection”).
`
`14
`
`

`

`Case: 23-60167 Document: 242-1 Page: 22 Date Filed: 08/02/2023
`
`in particular has kept close tabs on the pharmaceutical and biomedical
`
`industry, where innovation is a particularly important component of
`
`firms’ successes. The instant case—in which a handful of firms are
`
`competing but all require Illumina’s technology—is no different.
`
`
`
`Competition is a critical driver of innovation among existing
`
`entities in the R&D Market. Grail and its MCED developer rivals are
`
`variously engaged in the development of MCED tests using next-
`
`generation sequencing (NGS) technology, which share the goal of
`
`screening asymptomatic adults for cancer. (IDF ¶¶130–131.) But the
`
`various MCED developers also take different technical approaches, such
`
`as Exact/Thrive’s analysis of “biomarkers”, Freenome’s “multiomic”
`
`approach, and Singlera’s “methylation” analysis. (Id. ¶¶136, 275, 351,
`
`491.) Yet each of these approaches to developing competing MCED tests
`
`rely on Illumina’s NGS platform. Different methods will have different
`
`rates of success and are likely to face different challenges in the FDA
`
`approval process, heightening the need for a multitude of approaches
`
`that could bring tests to market more quickly. (Id. ¶186.) The different
`
`firms and different methods exist in what Judge Bork once dubbed a
`
`“high technology market.” PPG Indus., 798 F.2d at 1504.
`
`15
`
`

`

`Case: 23-60167 Document: 242-1 Page: 23 Date Filed: 08/02/2023
`
`
`
`As Judge Bork explained, the propriety of such a market is not
`
`called into question by the varying features of the different products. Id.
`
`Instead, it is “buttressed” by the fact that none of them “alone will be able
`
`to meet the [] demands of the near future.” Id. And competition between
`
`Grail and the other firms does not begin when they receive FDA approval.
`
`It exists in the current research and development stage when these firms
`
`are trying to influence what type of MCEDs will ultimately be accepted
`
`and adopted by the medical community. Id. Thus, they are clearly in
`
`“direct competition” in an active, existing R&D Market. Id.
`
`C. Future Market Entrants Play An Important Role
`in Competition
`
`
`
`Innovation markets are not the only place where the impact of
`
`future market entrants on competition is considered. Take, for example,
`
`the “actual potential competition” and “perceived potential competition”
`
`doctrines applied to Section 7 and long ago adopted by the Fifth Circuit.
`
`Mercantile Texas, 638 F.2d at 1264–65. The fir