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Illumina-Grail deal heads to FTC trial, as EU weighs penalty

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One of the office complexes of Illumina, Inc is shown in San Diego, California. REUTERS/Mike Blake

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  • Case marks first litigated "vertical" merger trial in years at FTC
  • Cravath heads up Illumina defense, and Latham for Grail
  • Trial expected to run until at least early October

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(Reuters) - Lawyers for Illumina Inc are set to defend the life sciences company's $7.1 billion acquisition of Grail Inc at the U.S. Federal Trade Commission on Tuesday, as European antitrust regulators assail the company for closing the deal without first securing regulatory approval.

D. Michael Chappell, chief administrative law judge at the FTC, is presiding over the trial, which could run until early October. He met virtually with the lawyers in the case on Monday for more than an hour to set the contours and expectations of the trial.

The companies closed their deal last week, despite the FTC's challenge to San Diego, California-based Illumina's tie-up with the cancer-detection test maker and an EU probe that opened in June.

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EU officials said on Friday they "deeply regret" Illumina's decision to move ahead while its investigation was still ongoing.

The FTC has not commented.

Illumina said last week there was no "legal impediment" to closing the deal and that it would hold Grail as a separate company amid European Commission review.

Grail, based in Menlo Park, California, relies on Illumina's DNA sequencing technology for its tests. FTC lawyers, in the agency's challenge lodged in March, asserted the combination of the companies would hurt test-detection innovation and drive up prices. Illumina's chief executive saidat the time that the acquisition "provides huge benefits to people who may have cancer and don't know it."

Cravath, Swaine & Moore litigation partner David Marriott is set to deliver the opening for Illumina, and Latham & Watkins partner Al Pfeiffer, a former co-chairman of the firm's antitrust practice, is prepared to speak for Grail. The Cravath team includes Christine Varney, a former Obama-era head of the Justice Department's antitrust division.

Marriott and Pfeiffer did not immediately respond to messages seeking comment on Monday.

Crowell & Moring antitrust partner Alexis Gilman in Washington said the case is being closely watched as "the first vertical merger case that the FTC has litigated in decades." The parties, he said, had offered "fairly robust commitments to address potential concerns," including an effort to hold and lower prices on sequencing products.

Each side will get up to two hours to make an opening statement. "Two hours is a limit, not a goal," Chappell said on Monday. Chappell also warned that "expert witnesses are not allowed to run wild in this courtroom."

FTC senior trial counsel Susan Musser, who joined the agency in May 2020 from Hogan Lovells, where she was an associate, is set to deliver the government's opening statement.

A handful of Big Law firms are representing non-party clients that provided documents in response to subpoenas issued earlier in the case, according to filings in recent weeks that sought some protection for featuring confidential or proprietary information.

Sidley Austin and DLA Piper lawyers lobbied in the U.S. Congress in support of Illumina's deal with Grail, disclosures showed.

The case is In the Matter of Illumina Inc and Grail Inc, Federal Trade Commission Office of Administrative Law Judges, Docket No. 9401.

For the government: Susan Musser of the FTC

For Illumina: David Marriott of Cravath, Swaine & Moore

For Grail: Al Pfeiffer of Latham & Watkins

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