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Illumina, a leading manufacturer of gene sequencing machines, is tiny compared to the tech giants of Silicon Valley. But like Google and Facebook, Illumina now finds itself at the crossroads of antitrust enforcers in the United States and Europe.

The company has acquired Grail, a promising venture in a related business that doesn’t exist yet. Grail has developed a blood test for early detection of dozens of cancer types. It is the first leader in this technology, but many other companies are developing products that could one day be a major global market for medical technology. They all rely on Illumina’s gene sequencers.

Illumina announced its acquisition plan in September 2020. Six months later, the Federal Trade Commission a complaint to block the deal, saying that Illumina will have the gatekeeper power and financial incentive to strangle the Grail’s opponents. A few months later, the European Commission also began to review the agreement.

Last August, Illumina completed its $8 billion acquisition of Grail, challenging regulators. So far, neither side is backing down in a war that has mostly been waged on legal information.

The Illumina case offers insights into new thinking in antitrust, which says the government must act quickly and forcefully to discourage larger companies from acquiring fledgling innovators. But it also illustrates the difficulty modern confidence hunters will have in persuading the courts to adopt preemptive strike policies.

Illumina took the unusually aggressive step when it closed the Grail deal before the investigations were over and the courts decided. If Illumina loses, the remedy would be to terminate the purchase. This is the same solution the FTC is currently seeking in its lawsuit against Facebook, a subsidiary of Meta. The government wants the company to divest Instagram and WhatsApp, claiming it bought it in 2012 and 2014 to eliminate startup competitors.

Illumina’s antitrust war is being watched closely. Cases that set precedent and shaped judicial thinking often did not involve the corporate giants of the day. For example, the landmark Supreme Court decision in the Lorain Journal v. United States case of 1951 focused on the anticompetitive conduct of a small Ohio newspaper.

“Smaller cases can make big laws, and this could be one of those cases,” said Andrew I. Gavil, a law professor at Howard University.

Not long ago, Illumina’s plan to acquire Grail would likely have passed an antitrust review. Grail uses Illumina’s gene sequencing technology, but in a different market. In traditional antitrust terms, an Illumina-Grail agreement is a vertical merger as opposed to a horizontal merger, which involves merging two companies into the same business.

Vertical combinations have generally been considered beneficial and often lower prices as the buyer brings more investment and stronger competition to the market they are entering.

But in the last few years, antitrust has been rethought. A progressive school of legal scholars and antitrust experts argues that enforcement is too lax, too slow, too backward – thwarting the growing market power of not just internet giants but the entire economy.

Two prominent members of the progressive camp are currently responsible for antitrust enforcement in America: Lina Khan, chair of the Federal Trade Commission, and Jonathan Kanter, head of the Justice Department’s antitrust division.

New merger rules are at the top of their agenda. They jointly announced last month review of agency merger guidelines and particularly horizontal and vertical definitions ready for reconsideration. “Often transactions don’t quite fit into any of these categories,” said Mr. Kanter.

The Illumina-Grail merger is a test case for the new approach. The FTC sued Illumina three months before Ms. Khan took over.

“But this is the kind of case he and his policy group have said the government needs to be more aggressive about bringing in,” said William Kovacic, former head of the FTC and professor at George Washington University.

Illumina and the government, headquartered in San Diego, disagree on many points. But they agree that, according to industry estimates, the market for blood tests that screen for multiple cancers will eventually reach $50 billion by 2035.

Grail introduced the blood test in June and says it can detect more than 50 cancers. A doctor must prescribe it, and the $950 test is not yet covered by insurance.

Some other companies are developing early detection blood tests, but Grail is screening for more types of cancer. Emerging competitors include Exact Sciences, Guardant Health, Natera, Freenome, Singlera Genomics, and Harbinger Health. They are also dependent on Illumina, which today holds about 80 percent of the gene sequencing market.

In Illumina, the FTC sees a monopoly ready to stifle competition in an emerging market. In his complaint against the merger, The agency claims “Illumina will control the fate of every potential opponent against the Grail for the foreseeable future.”

This The European Commission is investigating the deal When the target company is a fledgling innovator with small sales but “high competitive potential,” according to a recently revised rule designed to discourage “killer buys.”

Illumina denies the allegations and is fighting regulators on both sides of the Atlantic. In the United States, the case is currently before an FTC administrative judge. The FTC almost always wins on its own court. If Illumina loses before the commission, she plans to appeal the decision in federal appeals court. In Europe, Illumina is contesting the commission’s jurisdiction, among other things, as Grail is not for sale in Europe.

Illumina is betting on the history of courts and their defendant-biased decisions. In its response to the FTC complaintObserved that Illumina, the commission, and the Department of Justice “have not successfully carried out a vertical merger in over 40 years.” “There is a reason for this record,” he added.

Illumina’s 51-year-old CEO has an energetic salesman for the deal, Francis deSouza. He spoke with regulators, investors, and members of Congress. Some conversations were made over video calls, but most were in-person, including stacked meetings and rapid Covid tests in between, and trips to Brussels, Washington and New York.

“The stakes are high here,” said Mr deSouza. “We think this technology can change lives.”

He said Illumina has the financial resources and expertise to accelerate the development and adoption of Grail’s blood test. Illumina sells in 140 countries and has teams of experts in medical regulations and reimbursement.

Illumina argues that the use of the Hastening Grail could save thousands of lives from early detection of cancers such as pancreas, head and neck, and ovary, which are usually diagnosed when the cancer has advanced and death rates are higher.

The bowl started inside Illumina. In 2013, a pathologist, Dr. Meredith Halks-Miller was reviewing prenatal blood tests for abnormalities. He detected DNA fragments that signal cancer in the blood of some mothers. Eventually, further testing confirmed the discovery.

In 2016, Illumina released Grail as an attempt to develop a cancer test. It has raised $1.9 billion from investors including Jeff Bezos and Bill Gates. Grail was set to go public in 2020. Then came Illumina and offered more than Grail could raise in an IPO.

Illumina promised that any Grail competitor will have the same access and pricing for ranking as other customers. The company promises that sequencing prices – from $150,000 in 2007 to $600 today – will continue to fall.

Mr. deSouza said gene sequencing was and will remain the company’s core business. He points to prenatal blood testing, where Illumina has a business, but sells eight times more sequencers to other companies in this market than it sells in its own testing.

The FTC was not convinced. In the future, the market for multiple cancer blood tests will grow to such an extent that Illumina will have the “incentive to kill or disable” Grail’s emerging competitors, the commission said.

For Grail, early clinical studies have been encouraging.

Assistant director of the Knight Cancer Institute at Oregon Health and Science University, Dr. Tomasz Beer conducted a study Of more than 6,600 adults aged 50 and over who had not been diagnosed with any cancer at the start of the study. The Grail test accurately detected 29 cancers without high false-positive rates. Once it detected cancer, the Grail test found the affected organ 96 percent of the time.

Dr. “It’s hard to know where this field is going to shake,” Beer said. “But there is a lot of scientific promise underlying this approach.”