Some items on our site have recently moved. Visit our News Hub for selected articles, special reports, podcasts and other resources.
Illumina-Pacific Biosciences internal docs 'shed light' on CMA phase II probe
24 Oct 2019 12:43 pm by Victoria Ibitoye
Illumina and Pacific Biosciences’ internal documents “shed light” on the UK competition regulator’s in-depth probe and allowed it to discern a “clear and consistent picture” of the competitive impact, the authority has said in provisional findings.
The Competition and Markets Authority inquiry group — which assesses mergers at phase II — said it had placed the “most weight” on the companies’ internal documents which informed it of how the market was developing and provided it with the companies’ “actual plans.”
It echoes earlier concerns raised by the regulator at phase I, where it said the parties’ internal documents had identified other motivations for the tie-up than initially flagged when the deal was announced. The inquiry group is independent and not bound by the CMA’s phase I findings.
Illumina is the dominant maker of sequencing machines using “short-read” technology to decipher snippets of DNA very accurately and relatively cheaply. PacBio makes sequencers with “long-read” technology, which decodes longer strands of DNA but less accurately and at greater cost. The companies have long maintained their products are complementary, and don’t compete.
An Illumina spokesperson emphasized that the CMA’s findings were “provisional” and said it will continue to engage with the CMA.
“We will continue to work with the CMA to answer their questions and help them understand how the acquisition will benefit researchers and clinicians to further accelerate genomic discovery. We look forward to the final decision that will be issued in December,” Illumina said.
The deadline for the CMA’s final decision is Dec. 11.
In a summary of its provisional decision, the CMA inquiry group explained how it came to the view that Illumina’s merger could result in a significant loss of competition between two close competitors — deemed to be leading suppliers of “Next Generation” DNA sequencing systems.
It said Illumina and PacBio’s internal documents showed they “regularly track each other” and adapt strategies to reflect each other’s developments. It also said the documents showed they considered each other as an important competitive threat both on a day-to-day level and a strategic level.
“These documents encompass strategy discussions, technology reviews, the preparation of support materials for sales executives, and commentary on specific competitive situations,” it said.
“PacBio’s internal documents regularly monitor Illumina and include e-mails where PacBio identifies instances when it believes it can win business from Illumina and has been trying to do so for some time. Illumina’s documents discuss PacBio as a competitive threat and indicate that Illumina has taken action or has considered taking action in response to this competitive threat from PacBio,” it added.
The group said it had placed the “most weight” on internal documents, and “substantial weight” on evidence from customers and rivals.
“We place the most weight on the parties’ internal documents which are particularly informative in this dynamic market because they provide context on how the market is developing and how competition takes (and will take) place, while many other forms of evidence provide a more static perspective. In addition, the parties’ internal documents provide us with their actual plans,” it said.
“We note that we have been able to gather a large number of these documents, we have a good understanding of the context in which they were produced, many shed light directly on issues central to our investigation and we are able to discern a clear and consistent picture from them,” it added.
The CMA inquiry group said it had also found the merger could lead to higher prices for certain customers, given the use of selective pricing by both parties. It said Illumina and PacBio are currently able to set prices individually for customers based on the sequencing they wish to conduct and the options that are likely to be available to them.
“This ability to price discriminate means the parties have the ability (and would continue to have the ability post-merger) to worsen prices selectively for those customers whose options are more limited without increasing prices for others and can consequently avoid the risk that those other customers switch away as a result of the price increase.”
The panel deemed switching rates to be low, and barriers to entry and expansion high and said that while some third parties, such as Oxford Nanopore Technologies, increasingly represent a strong competitive threat to both Illumina and PacBio it is not sufficient to replace the loss of the competitive constraint currently provided by PacBio, given the size of the merged group.
The CMA has issued a remedies notice but has indicated it doesn’t believe a structural remedy, a remedy requiring the divestiture Illumina or PacBio’s intellectual property or behavioral remedies will be sufficient to address its concerns without adverse effects.
Instead it has said that its provisional view is that a prohibition of the merger will represent a “comprehensive solution” to the competition issues it has provisionally identified, with minimal risks.
According to the CMA’s administrative timetable, Illumina and PacBio have until the end of the month to respond to the regulator’s provisional decision. The deadline for submitting views on the remedies proposal is Nov. 7.
03 Sep 2021 8:30 am by Natalie McNelisNvidia's notification of its $40 billion Arm buyout to the EU merger authority is imminent
11 Aug 2021 5:28 am by Laurel HenningNAB’s plans to acquire Citigroup’s Australian consumer business could create the country’s second-largest credit card provider.
26 Jul 2021 6:43 pm by Curtis EichelbergerAon's decision was also a victory for antitrust enforcement in the tradition of recent decades.