Case: 23-60167 Document: 96-1 Page: 1 Date Filed: 06/05/2023
`
`
`
`No. 23-60167
`
`IN THE
`United States Court of Appeals
`FOR THE FIFTH CIRCUIT
`
`
`ILLUMINA, INC. AND GRAIL, INC.,
`
`v.
`
`FEDERAL TRADE COMMISSION,
`
`
`
`Petitioners,
`
`Respondent.
`
`PETITION FOR REVIEW OF
`AN ORDER OF THE FEDERAL TRADE COMMISSION
`
`PETITIONERS’ BRIEF
`
`SUBMITTED BY:
`
`
`
`Gregory G. Garre
`Michael G. Egge
`Marguerite M. Sullivan
`Anna M. Rathbun
`David L. Johnson
`LATHAM & WATKINS LLP
`555 Eleventh Street NW
`Suite 1000
`Washington, D.C. 20004
`Telephone: (202) 637-2200
`
`Alfred C. Pfeiffer
`LATHAM & WATKINS LLP
`505 Montgomery Street
`Suite 2000
`San Francisco, CA 94111-6538
`Telephone: (415) 391-0600
`
`David R. Marriott
`Christine A. Varney
`Antony L. Ryan
`Sharonmoyee Goswami
`Michael J. Zaken
`Jesse M. Weiss
`Benjamin A. Atlas
`CRAVATH, SWAINE & MOORE LLP
`825 Eighth Avenue
`Worldwide Plaza
`New York, NY 10019
`Telephone: (212) 474-1000
`
`June 5, 2023
`
`
`
`

`

`Case: 23-60167 Document: 96-1 Page: 2 Date Filed: 06/05/2023
`
`
`
`CERTIFICATE OF INTERESTED PERSONS
`
`Illumina, Inc. v. Federal Trade Commission, No. 23-60167
`
`The undersigned counsel of record certifies that the following listed persons
`
`and entities as described in the fourth sentence of 5th CIR. Rule 28.2.1 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.
`
`Respondent:
`Federal Trade Commission
`
`
`Petitioners:
`Illumina, Inc.
`
`
`
`Counsel for Respondent:
`Matthew M. Hoffman
`FEDERAL TRADE COMMISSION
`600 Pennsylvania Ave., NW
`Washington, D.C. 20580
`Telephone: (202) 326-3097
`mhoffman@ftc.gov
`
`Counsel for Petitioners:
`David R. Marriott
`Christine A. Varney
`Antony L. Ryan
`Sharonmoyee Goswami
`Michael J. Zaken
`Jesse M. Weiss
`Benjamin A. Atlas
`CRAVATH, SWAINE & MOORE LLP
`825 Eighth Avenue
`Worldwide Plaza
`New York, NY 10019
`Telephone: (212) 474-1000
`Facsimile: (212) 474-3700
`
`
`
`
`

`

`Case: 23-60167 Document: 96-1 Page: 3 Date Filed: 06/05/2023
`
`
`
`GRAIL, LLC
`
`Other Interested Parties:
`Illumina, Inc. has outstanding securities
`in the hands of the public, but no parent
`companies, subsidiaries, affiliates, or
`public companies own at least 10% of
`Illumina, Inc.’s stock.
`
`
`
`
`Gregory G. Garre
`Michael G. Egge
`Marguerite M. Sullivan
`Anna M. Rathbun
`David L. Johnson
`LATHAM & WATKINS LLP
`555 Eleventh Street NW
`Suite 1000
`Washington, D.C. 20004
`Telephone: (202) 637-2200
`
`Alfred C. Pfeiffer
`LATHAM & WATKINS LLP
`505 Montgomery Street
`Suite 2000
`San Francisco, CA 94111-6538
`Telephone: (415) 391-0600
`
`
`
`
`ii
`
`

`

`Case: 23-60167 Document: 96-1 Page: 4 Date Filed: 06/05/2023
`
`
`
`
`
`
`
`/s/ David R. Marriott
`David R. Marriott
`Christine A. Varney
`Antony L. Ryan
`Sharonmoyee Goswami
`Michael J. Zaken
`Jesse M. Weiss
`Benjamin A. Atlas
`CRAVATH, SWAINE & MOORE LLP
`825 Eighth Avenue
`New York, NY 10019
`(212) 474-1000
`Attorneys for Petitioner Illumina, Inc.
`
`/s/ Gregory G. Garre
`Gregory G. Garre
`Michael G. Egge
`Marguerite M. Sullivan
`LATHAM & WATKINS LLP
`555 Eleventh Street NW
`Suite 1000
`Washington, D.C. 20004
`(202) 637-2200
`
`Alfred C. Pfeiffer
`LATHAM & WATKINS LLP
`505 Montgomery Street
`Suite 2000
`San Francisco, CA 94111-6538
`(415) 391-0600
`Attorneys for Petitioner GRAIL, LLC
`
`
`
`
`
`iii
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`

`

`Case: 23-60167 Document: 96-1 Page: 5 Date Filed: 06/05/2023
`
`
`
`STATEMENT REGARDING ORAL ARGUMENT
`
`Petitioners respectfully request that the Court grant oral argument in this
`
`antitrust case. The issues presented are novel and/or of considerable importance.
`
`Resolution of these issues depends on a proper understanding of the disputed claims,
`
`the relevant provisions of the U.S. Constitution and case law and a voluminous
`
`record. Oral argument will aid the Court in properly evaluating the case.
`
`
`
`
`
`iv
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`

`

`Case: 23-60167 Document: 96-1 Page: 6 Date Filed: 06/05/2023
`
`
`
`TABLE OF CONTENTS
`
`Page
`
`CERTIFICATE OF INTERESTED PERSONS ......................................................... i
`
`STATEMENT REGARDING ORAL ARGUMENT .............................................. iv
`
`TABLE OF AUTHORITIES ................................................................................. viii
`
`CITATION ABBREVIATIONS ............................................................................ xiv
`
`GLOSSARY OF TERMS ........................................................................................ xv
`
`JURISDICTIONAL STATEMENT .......................................................................... 1
`
`STATEMENT OF THE ISSUES............................................................................... 2
`
`STATEMENT OF THE CASE .................................................................................. 3
`
`A.
`
`Illumina and Grail ................................................................................ 5
`
`B.
`
`C.
`
`The Transaction ................................................................................... 7
`
`The Open Offer .................................................................................... 8
`
`D.
`
`FTC’s Challenge .................................................................................. 9
`
`E.
`
`The Decision ...................................................................................... 10
`
`SUMMARY OF ARGUMENT ............................................................................... 12
`
`STANDARD OF REVIEW ..................................................................................... 15
`
`ARGUMENT ........................................................................................................... 16
`
`I.
`
`THE COMMISSION EXCEEDED ITS AUTHORITY AND
`INFRINGED PETITIONERS’ CONSTITUTIONAL RIGHTS. .................. 16
`
`A.
`
`B.
`
`The Commission Acted Under an Improper Delegation of
`Legislative Power. ............................................................................. 16
`
`The Commissioners Unconstitutionally Exercised Executive
`Powers While Insulated from Presidential Removal. ........................ 18
`
`v
`
`

`

`Case: 23-60167 Document: 96-1 Page: 7 Date Filed: 06/05/2023
`
`
`
`C.
`
`D.
`
`The Commission’s Acts Violated Due Process. ................................ 23
`
`The Commission Followed an Uncodified, Black-box
`“Clearance” Process Incompatible with Equal Protection. ............... 26
`
`II.
`
`THE COMMISSION ERRED IN DEFINING THE RELEVANT
`MARKET. ..................................................................................................... 28
`
`A.
`
`B.
`
`The Commission’s “Market” Violates the Standard of
`Reasonable Interchangeability of Use and Cross-Elasticity of
`Demand. ............................................................................................. 30
`
`The Commission’s “Market” Satisfies Neither the Brown Shoe
`Market Factors nor the HMT. ............................................................ 34
`
`C.
`
`The Commission’s R&D Market Definition Is Baseless. ................. 37
`
`III. THE COMMISSION ERRED IN CONCLUDING THE
`TRANSACTION IS LIKELY TO SUBSTANTIALLY LESSEN
`COMPETITION. ........................................................................................... 39
`
`A.
`
`B.
`
`C.
`
`The Commission’s “Brown Shoe Standard” Misstates the Law
`and Ignores Undisputed Evidence. .................................................... 41
`
`The Commission Misapplied the “Ability-and-Incentive” Test,
`Elevating Possibilities Over Probabilities. ........................................ 46
`
`The Commission Failed To Account for the Real-World
`Effects from the Open Offer. ............................................................. 55
`
`IV. THE COMMISSION ERRED IN IGNORING EFFICIENCIES
`REBUTTING ANY ALLEGATION OF HARM. ........................................ 58
`
`A.
`
`The Commission Applied the Wrong Legal Standard. ..................... 60
`
`B.
`
`C.
`
`The Commission’s Conclusions Lack Support in Substantial
`Evidence............................................................................................. 64
`
`The Commission Failed to Balance Efficiencies Against
`Alleged Harm. .................................................................................... 70
`
`V.
`
`THE DECISION INJURED PETITIONERS AND SHOULD BE SET
`ASIDE IN ITS ENTIRETY. .......................................................................... 72
`
`vi
`
`

`

`Case: 23-60167 Document: 96-1 Page: 8 Date Filed: 06/05/2023
`
`
`
`CONCLUSION ........................................................................................................ 74
`
`CERTIFICATE OF SERVICE ................................................................................ 76
`
`CERTIFICATE OF COMPLIANCE ....................................................................... 77
`
`vii
`
`

`

`Case: 23-60167 Document: 96-1 Page: 9 Date Filed: 06/05/2023
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`
`
`Cases
`
`A.L.A. Schechter Poultry Corp. v. United States,
`295 U.S. 495 (1935) ............................................................................................ 43
`
`Aransas Project v. Shaw,
`775 F.3d 641 (5th Cir. 2014) .............................................................................. 15
`
`Axon Enter., Inc. v. FTC,
`143 S. Ct. 890 (2023) .................................................................................... 17, 24
`
`Bankers Life & Cas. Co. v. Crenshaw,
`486 U.S. 71 (1988) .............................................................................................. 26
`
`Brown Shoe Co. v. United States,
`370 U.S. 294 (1962) .....................................................................................passim
`
`Carr v. Saul,
`141 S. Ct. 1352 (2021) ........................................................................................ 18
`
`City of Arlington v. FCC,
`569 U.S. 290 (2013) ............................................................................................ 20
`
`Comcast Cable Commc’ns, LLC v. FCC,
`717 F.3d 982 (D.C. Cir. 2013) ............................................................................ 40
`
`DISH Network Corp. v. NLRB,
`953 F.3d 370 (5th Cir. 2020) ........................................................................ 47, 51
`
`Free Enter. Fund v. PCAOB,
`561 U.S. 477 (2010) ...................................................................................... 21, 22
`
`Fruehauf Corp. v. FTC,
`603 F.2d 345 (2d Cir. 1979) ................................................................... 39, 43, 44
`
`FTC v. Arch Coal, Inc.,
`329 F. Supp. 2d 109 (D.D.C. 2004) .............................................................passim
`
`FTC v. Ind. Fed’n of Dentists,
`476 U.S. 447 (1986) ............................................................................................ 15
`
`viii
`
`

`

`Case: 23-60167 Document: 96-1 Page: 10 Date Filed: 06/05/2023
`
`
`
`FTC v. Libbey, Inc.,
`211 F. Supp. 2d 34 (D.D.C. 2002) ...................................................................... 55
`
`FTC v. RAG-Stiftung,
`436 F. Supp. 3d 278 (D.D.C. 2020) ........................................................ 28, 34, 36
`
`FTC v. Tenet Health Care Corp.,
`186 F.3d 1045 (8th Cir. 1999) ...................................................................... 58, 60
`
`FTC v. Univ. Health, Inc.,
`938 F.2d 1206 (11th Cir. 1991) .......................................................................... 60
`
`Gibson v. Berryhill,
`411 U.S. 564 (1973) ............................................................................................ 23
`
`Golden Gate Pharmacy Servs., Inc. v. Pfizer, Inc.,
`No. C-09-3854 MMC, 2010 WL 1541257 (N.D. Cal. Apr. 16, 2010),
`aff’d, 433 F. App’x 598 (9th Cir. 2011) ............................................................. 37
`
`Heller v. Doe,
`509 U.S. 312 (1993) ............................................................................................ 27
`
`Humphrey’s Executor v. United States,
`295 U.S. 602 (1935) ................................................................................ 19, 20, 21
`
`Jacob Siegel Co. v. FTC,
`327 U.S. 608 (1946) ............................................................................................ 15
`
`Jarkesy v. SEC,
`34 F.4th 446 (5th Cir. 2022) ............................................................. 10, 16, 17, 18
`
`Jim Walter Corp. v. FTC,
`625 F.2d 676 (5th Cir. 1980) .............................................................................. 15
`
`Ky. Speedway, LLC v. Nat’l Ass’n of Stock Car Auto Racing, Inc.,
`588 F.3d 908 (6th Cir. 2009) .............................................................................. 37
`
`Leegin Creative Leather Prods., Inc. v. PSKS, Inc.,
`551 U.S. 877 (2007) ............................................................................................ 42
`
`Mercantile Tex. Corp. v. Bd. of Governors of Fed. Rsrv. Sys.,
`638 F.2d 1255 (5th Cir. 1981) ...................................................................... 38, 44
`
`ix
`
`

`

`Case: 23-60167 Document: 96-1 Page: 11 Date Filed: 06/05/2023
`
`
`
`Mistretta v. United States,
`488 U.S. 361 (1989) ............................................................................................ 16
`
`In re Murchison,
`349 U.S. 133 (1955) ............................................................................................ 23
`
`Myers v. United States,
`272 U.S. 52 (1926) ........................................................................................ 19, 21
`
`New York v. Deutsche Telekom AG,
`439 F. Supp. 3d 179 (S.D.N.Y. 2020) .............................................. 34, 60, 62, 63
`
`Ohio v. Am. Express Co.,
`138 S. Ct. 2274 (2018) ........................................................................................ 39
`
`Pennzoil Co. v. FERC,
`789 F.2d 1128 (5th Cir. 1986) ............................................................................ 15
`
`PSKS, Inc. v. Leegin Creative Leather Prods., Inc.,
`615 F.3d 412 (5th Cir. 2010) .............................................................................. 30
`
`Republic Tobacco Co. v. North Atl. Trading Co.,
`381 F.3d 717 (7th Cir. 2004) ........................................................................ 40, 58
`
`Romer v. Evans,
`517 U.S. 620 (1996) ............................................................................................ 26
`
`SCM Corp. v. Xerox Corp.,
`645 F.2d 1195 (2d Cir. 1981) ....................................................................... 34, 38
`
`Seila Law LLC v. Consumer Fin. Prot. Bureau,
`140 S. Ct. 2183 (2020) .................................................................................passim
`
`Solid Waste Agency of N. Cook Cnty. v. U.S. Army Corps of Eng’rs,
`531 U.S. 159 (2001) ............................................................................................ 43
`
`STP Nuclear Operating Co. v. NLRB,
`975 F.3d 507 (5th Cir. 2020) .............................................................................. 47
`
`Tenneco, Inc. v. FTC,
`689 F.2d 346 (2d Cir. 1982) ............................................................................... 35
`
`x
`
`

`

`Case: 23-60167 Document: 96-1 Page: 12 Date Filed: 06/05/2023
`
`
`
`Tennessee v. Lane,
`541 U.S. 509 (2004) ............................................................................................ 26
`
`TRW, Inc. v. NLRB,
`654 F.2d 307 (5th Cir. 1981) .............................................................................. 51
`
`U.S. Steel Corp. v. FTC,
`426 F.2d 592 (6th Cir. 1970) .............................................................................. 46
`
`United States v. Anthem, Inc.,
`855 F.3d 345 (D.C. Cir. 2017) ............................................................................ 62
`
`United States v. AT&T Inc. (AT&T I),
`310 F. Supp. 3d 161 (D.D.C. 2018) .............................................................passim
`
`United States v. AT&T, Inc. (AT&T II),
`916 F.3d 1029 (D.C. Cir. 2019) ...................................................................passim
`
`United States v. Baker Hughes Inc.,
`908 F.2d 981 (D.C. Cir. 1990) .......................................................... 57, 61, 63, 70
`
`United States v. E.I. DuPont de Nemours & Co.,
`353 U.S. 586 (1957) ............................................................................................ 28
`
`United States v. Marine Bancorp.,
`418 U.S. 602 (1974) ...................................................................................... 40, 42
`
`United States v. UnitedHealth Grp. Inc.,
`No. 1:22-cv-0481, 2022 WL 4365867 (D.D.C. Sept. 19, 2022) ........................ 55
`
`Universal Camera Corp. v. NLRB,
`340 U.S. 474 (1951) ............................................................................................ 47
`
`Valentine v. Comm’r Soc. Sec. Admin.,
`574 F.3d 685 (9th Cir. 2009) .............................................................................. 62
`
`West Virginia v. EPA,
`142 S. Ct. 2587 (2022) ........................................................................................ 39
`
`Williams v. Pennsylvania,
`579 U.S. 1 (2016) ................................................................................................ 23
`
`xi
`
`

`

`Case: 23-60167 Document: 96-1 Page: 13 Date Filed: 06/05/2023
`
`
`
`Withrow v. Larkin,
`421 U.S. 35 (1975) .............................................................................................. 23
`
`Constitutional Provisions, Statutes & Rules
`
`16 C.F.R. § 2.7 ......................................................................................................... 25
`
`16 C.F.R. § 3.42 ....................................................................................................... 27
`
`16 C.F.R. § 3.43 ....................................................................................................... 27
`
`16 C.F.R. § 3.54 ....................................................................................................... 27
`
`5 U.S.C. § 554 .......................................................................................................... 23
`
`15 U.S.C. § 18 .................................................................................................... 38, 40
`
`15 U.S.C. § 21 .......................................................................................................... 15
`
`15 U.S.C. § 25 .......................................................................................................... 27
`
`15 U.S.C. § 45 ........................................................................................ 16, 17, 18, 27
`
`15 U.S.C. § 53 .................................................................................................... 18, 27
`
`15 U.S.C. § 78u-3 ..................................................................................................... 17
`
`Fed. R. Civ. P. 32 ............................................................................................... 25, 26
`
`U.S. Const. amend. V ................................................................................................. 2
`
`U.S. Const. art. I, § 1 ................................................................................................ 16
`
`Other Authorities
`
`4A Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law (5th ed. 2021)
` ........................................................................................................... 40, 45, 58, 70
`
`Alden Abbott, When Bad Antitrust Costs Lives: The Illumina/GRAIL
`Tragedy, TRUTH ON THE MARKET (Apr. 4, 2023) ............................................... 22
`
`Alex Reinauer, Secondhand Antitrust: FTC Continues to Bully Industries
`that Can Save Lives, COMPETITIVE ENTER. INST. (Apr. 5, 2023) ....................... 22
`
`xii
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`

`

`Case: 23-60167 Document: 96-1 Page: 14 Date Filed: 06/05/2023
`
`
`
`Bruce H. Kobayashi & Timothy J. Muris, Screening Out Innovation—
`Vertical Merger Principles and the FTC’s Misapplication in the
`Illumina-GRAIL Case, COMPETITIVE ENTER. INST. (2021) ................................ 66
`
`Christine Wilson, Reflections on the 2020 Draft Vertical Merger
`Guidelines and Comments from Stakeholders, Remarks at the DOJ
`Workshop on Draft Vertical Mergers (March 11, 2020) .................................... 66
`
`Daniel A. Crane, Debunking Humphrey’s Executor, 83 GEO. WASH. L.
`REV. 1835 (2015) ................................................................................................ 20
`
`Editorial Board, The FTC’s Unholy Antitrust Grail, WALL STREET J.
`(Apr. 3, 2023) ...................................................................................................... 22
`
`John Tamny, Lina Khan Blocks Cancer Cures, WALL STREET J.
`(Apr. 27, 2023) .................................................................................................... 22
`
`Letter from Senator Bill Hagerty et al. to Secretary Antony Blinken et al.
`(Oct. 20, 2022), https://shorturl.at/adEF3 ........................................................... 25
`
`U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger
`Guidelines (Aug. 19, 2010)........................................................................... 59, 68
`
`U.S. Dep’t of Justice & Fed. Trade Comm’n, Vertical Merger Guidelines
`(June 30, 2020)...................................................................................................... 4
`
`U.S. Dep’t of Justice, Non-Horizontal Merger Guidelines (June 14, 1984) ........... 40
`
`
`
`
`
`xiii
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`

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`Case: 23-60167 Document: 96-1 Page: 15 Date Filed: 06/05/2023
`
`CITATION ABBREVIATIONS
`
`ABBREVIATION
`
`MEANING
`
`AA
`
`CCB
`
`Amended Answer
`
`Appeal Brief of Complaint Counsel concerning the
`Initial Decision
`
`Conc.
`
`Concurring Opinion of Commissioner Wilson
`
`ID
`
`IDF
`
`Op.
`
`Order
`
`PX
`
`Initial Decision of the Administrative Law Judge
`
`Initial Decision Findings of Fact
`
`Opinion of the Commission
`
`Final Order of the Commission
`
`Exhibit of Complaint Counsel (Respondent here)
`
`Pre-Hearing Tr.
`
`Transcript of the Final Pretrial Hearing
`
`RAB
`
`RFF
`
`RRFF
`
`RPTB
`
`RX
`
`Tr.
`
`Answering Appeal Brief of Respondents Below
`(Petitioners here)
`
`Proposed Findings of Fact of Respondents Below
`(Petitioners here)
`
`Proposed Reply Findings of Fact of Respondents
`Below (Petitioners here)
`
`Post-Trial Brief of Respondents Below (Petitioners
`here)
`
`Exhibit of Respondents Below (Petitioners here)
`
`Trial Transcript
`
`
`
`
`
`xiv
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`

`

`Case: 23-60167 Document: 96-1 Page: 16 Date Filed: 06/05/2023
`
`GLOSSARY OF TERMS
`
`ABBREVIATION
`
`MEANING
`
`Acquisition
`
`Illumina’s acquisition of the shares of Grail that it did not
`already own by a Merger Agreement dated August 18, 2021
`
`ALJ
`
`CC
`
`CSO
`
`Administrative Law Judge, Chief Judge Chappell
`
`Complaint Counsel of the Federal Trade Commission
`
`Cancer Signal of Origin
`
`Decision
`
`The Final Order or the Opinion of the Commission dated
`March 31, 2023
`
`FTC
`
`Federal Trade Commission
`
`Commission
`
`Commissioners of the Federal Trade Commission
`
`Galleri
`
`MCED Test developed by Grail
`
`Grail
`
`Grail, Inc. (now known as GRAIL, LLC)
`
`Illumina
`
`Illumina, Inc.
`
`LDT
`
`Laboratory Developed Test
`
`MCED test
`
`Multicancer Early Detection Test
`
`Open Offer
`
`Illumina’s offer to oncology customers dated March 30,
`2021 and amended September 8, 2021
`
`Opinion
`
`The Opinion of the Commission dated March 31, 2023
`
`Order
`
`PTD
`
`The Final Order of the Commission dated March 31, 2023
`
`Putative MCED test in development
`
`Transaction
`
`Illumina’s acquisition of the shares of Grail that it did not
`already own by a Merger Agreement dated August 18, 2021
`
`
`
`
`
`xv
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`

`

`Case: 23-60167 Document: 96-1 Page: 17 Date Filed: 06/05/2023
`
`
`
`JURISDICTIONAL STATEMENT
`
`This is an appeal from the Decision of the FTC in In the Matter of Illumina,
`
`Inc. and Grail, Inc., Docket No. 9401, on March 31, 2023, which disposes of all
`
`claims with respect to all parties. Petitioners initiated this appeal by filing a petition
`
`for review under F.R.A.P. 15 and 15 U.S.C. § 45(c) on April 4, 2023.
`
`
`
`
`
`
`
`

`

`Case: 23-60167 Document: 96-1 Page: 18 Date Filed: 06/05/2023
`
`
`
`STATEMENT OF THE ISSUES
`
`At issue is whether FTC erred in finding Illumina’s acquisition of Grail (the
`
`“Transaction”) unlawful and ordering divestiture—specifically:
`
`1. Whether the Commission exceeded its lawful authority and violated the
`
`U.S. Constitution, including Article I, Article II and the Due Process
`
`and Equal Protection Clauses of the Fifth Amendment;
`
`2. Whether the Commission erred in defining the relevant product market
`
`to include speculative products that do not exist, may never exist and
`
`are not interchangeable;
`
`3. Whether in finding the Transaction anticompetitive, the Commission
`
`applied the wrong test, ignored real-world facts and cherry-picked the
`
`record;
`
`4. Whether the Commission evaluated the Transaction’s efficiencies on a
`
`mistaken legal standard; and
`
`5. Whether the Decision should be set aside in its entirety and judgment
`
`entered for Petitioners without remand.
`
`
`
`
`
`2
`
`

`

`Case: 23-60167 Document: 96-1 Page: 19 Date Filed: 06/05/2023
`
`
`
`STATEMENT OF THE CASE
`
`This is a case of flagrant government overreach. FTC seeks to scuttle a merger
`
`between Illumina and Grail that will accelerate the adoption of a revolutionary
`
`cancer screening test, Galleri, that will save countless lives. Under a proper
`
`application of the antitrust laws, FTC should have cleared the deal long ago. For the
`
`first time decades, FTC’s own ALJ found for the merging parties after presiding over
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`a five-week trial. Had FTC approved the merger, commercialization of Grail’s
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`award-winning test would be greatly progressed today. Instead, FTC has gone to
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`unprecedented lengths to kill the Transaction, even colluding with European
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`regulators to evade scrutiny from Article III courts. FTC’s actions have brought
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`longstanding constitutional defects in the agency’s structure and proceedings into
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`sharp focus. Now that the case is before an Article III court, those defects should be
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`quickly addressed so Illumina/Grail can make Galleri available to as many people
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`as possible.
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`The Transaction at the heart of this case easily passes antitrust muster. It is a
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`vertical merger between non-competitors:
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`Illumina
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`transformed genomic
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`sequencing and Grail revolutionized cancer diagnoses using Illumina’s sequencing
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`platform. There is no possibility—much less probability—that the merged parties
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`would or could engage in foreclosure. Not only would that make no economic sense,
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`but also it is prohibited by binding supply agreements that Illumina has with its
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`3
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`customers. It is also defied by real-world evidence: Illumina has had a financial
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`stake in Grail since it founded the startup in Illumina’s laboratories in 2015, and FTC
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`concedes there has been no evidence of foreclosure in all that time.
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`None of this is surprising. Courts have long recognized the benefits of vertical
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`mergers. FTC itself recognized those benefits at the time Illumina and Grail agreed
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`to the Transaction. U.S. Dep’t of Justice & Fed. Trade Comm’n, Vertical Merger
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`Guidelines 12 (June 30, 2020). The evidence so heavily favors Illumina and Grail
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`that FTC’s own ALJ ruled in their favor. That almost never happens, and it is a
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`testament to overwhelming evidence supporting the Transaction. But the
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`Commission snatched victory from the jaws of defeat and overruled its own ALJ in
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`a thinly reasoned decision that misapplies basic principles of antitrust law and
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`disregards overwhelming evidence showing that the merger is pro-competitive.
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`To make matters worse, the FTC proceeding violated fundamental
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`constitutional protections. It violated Article I because FTC’s administrative
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`proceedings were an unconstitutional delegation of legislative power. It violated
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`Article II because for-cause removal protections insulated the Commissioners from
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`critical accountability to the President—and ultimately the people. It violated due
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`process by depriving Illumina and Grail of a fair proceeding before an impartial
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`tribunal. And it violated equal protection by leaving the possibility of review before
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`DOJ (and ultimately a federal district court) subject to a random, uncodified “black-
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`4
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`box” clearance process. Nothing in the Clayton Act gives FTC unbridled authority
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`to block transactions based on its own ipse dixit or “ephemeral possibilities.”
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`Sometimes the price of an unconstitutional agency can be measured in lost
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`dollars. This time, the price is lost lives. This Court should reverse the
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`Commission’s decision and render judgment for Illumina and Grail, clearing the way
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`for them to continue their life-saving work together.
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`A.
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`Illumina and Grail
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`Illumina is a global leader in next-generation sequencing (“NGS”), a
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`technology that involves determining the “sequence” of the base pairs in genetic
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`material. (IDF¶¶8, 521.) NGS may be used for many downstream applications,
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`including cancer screening. (IDF¶¶6, 522.)
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`Illumina has been instrumental in the development and adoption of NGS
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`technology, dramatically reducing the cost of NGS—from $10 million to sequence
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`a full human genome in 2007 to less than $1,000 today. (IDF¶¶809-10.) By doing
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`so, Illumina has expanded existing NGS applications and enabled new ones.
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`(RFF¶¶849, 857, 861.)
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`In 2013, Illumina acquired a company called Verinata, expanding vertically
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`into non-invasive prenatal testing (“NIPT”). (RX3337.1.) The acquisition not only
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`increased competition and lowered prices (RX3864¶¶164-67), but also led to Grail’s
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`founding after Illumina scientists discovered that genetic abnormalities in blood
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`samples of pregnant women were signals of undiagnosed cancer. (Tr. 1868-74.)
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`Realizing that NGS could identify cancer signals in the blood, Illumina
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`founded Grail in 2015 to develop a multi-cancer early detection (“MCED”) test: a
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`test that can identify multiple cancer types from a single blood sample. (IDF¶21.)
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`Grail was so named because it represents the “Holy Grail” of cancer research.
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`(IDF¶21.) Grail would require costly studies to prove whether the idea would work,
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`and even then the clinical utility of such a test was uncertain. (IDF¶¶30-32.)
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`In 2017, Illumina spun off Grail to encourage outside investment to fund the
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`large clinical trials needed to develop and validate its test. (IDF¶¶37-40.) But
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`Illumina has always maintained a significant economic interest in Grail, holding an
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`equity interest of at least 12%, and, from 2017 until its reacquisition of Grail in 2021,
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`retaining the right to a significant, perpetual royalty from Grail’s future oncology
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`revenues. (IDF¶¶40-42.)
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`Through extensive research, Grail compiled an “atlas” of cancer signals in the
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`blood and developed a machine learning platform to distinguish cancer signals from
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`non-cancer signals to create a one-of-a-kind test called Galleri. (IDF¶¶213-31.)
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`Galleri can simultaneously detect more than 50 cancer types in asymptomatic
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`patients from a single blood draw and accurately localize cancer in positive cases.
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`6
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`(IDF¶¶228, 231.) In April 2021, Grail launched Galleri in the U.S. as a laboratory
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`developed test (“LDT”). (IDF¶52.)
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`But Galleri’s potential was limited with Grail operating independently.
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`Galleri costs nearly $1,000 and is not covered by most insurers, making it
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`inaccessible for many Americans. Galleri faces many challenges to achieve wide-
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`scale commercialization,
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`including obtaining
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`regulatory approvals, payor
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`reimbursement, and production/distribution at scale. (IDF¶¶169-70, 198-99, 258;
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`Tr.1420-21.)
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`B.
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`The Transaction
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`In September 2020, Illumina and Grail concluded that the best way to
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`accelerate Galleri’s adoption and unlock other efficiencies was for the companies to
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`fully reunite.1 (IDF¶58; Tr.2341-80, 2971.) As Grail’s founder and a leader in NGS,
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`Illumina is uniquely situated to help Galleri succeed.
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`The companies concluded that Illumina’s full reacquisition of