Competition authorities in Europe target ‘killer acquisitions’ – what biotech companies need to know

This article is part of our Biotech Review of the Year - Issue 13 publication.

Competition authorities are increasingly targeting so-called 'killer acquisitions' in the life sciences sector, where established firms acquire innovative biotech start-ups to eliminate future competition. We examine the latest regulatory and enforcement developments in Europe and key considerations for biotech companies seeking to manage compliance risks while sustaining innovation-driven growth. 

Summary

The life sciences industry, propelled by fierce competition in innovation, is under heightened scrutiny from competition authorities. The spotlight is on ‘killer acquisitions’ – transactions where a dominant, established company acquires a smaller, often pre-revenue start-up with the aim of potentially eliminating the competitive threat posed by its innovative R&D.

The vast majority of acquisitions of start-ups by established market leaders are not carried out with any improper intent, nor do they necessarily give rise to competition concerns. Many start-ups view acquisition as a preferred exit strategy, so restricting such deals could reduce incentives for innovation. Historically, these deals have often fallen below EU or national merger control thresholds due to the target generating little or no turnover. However, recent case law indicates that competition authorities now apply both merger control and abuse of dominance rules to examine these transactions.

Competition authorities have faced strong criticism for potentially overlooking the ‘killer acquisition’ theory of harm, for example the European Commission’s (EC) review of Facebook’s acquisition of WhatsApp in 2014. Facebook paid $19bn, despite WhatsApp’s annual turnover being less than $10m. This sparked questions about the strategic motives behind such a significant investment. As a result, competition authorities have reassessed their approach in innovation-heavy sectors such as biotech, taking robust and swift action to preserve competition in innovation. 

‘Killer acquisitions’ are likely to be blocked, unwound, or require divestment, all of which can be highly disruptive to business. In addition, a finding of abuse of a dominant position can also result in fines of up to 10% of global turnover.

‘Killer acquisitions’ under focus 

Competition authorities have become increasingly concerned that mergers and acquisitions in concentrated markets such as biotech and pharmaceuticals – where firms compete on innovation – can impact not only prices but also the pace of invention. One key focus is the ‘loss of potential competition’, which underpins the ‘killer acquisition’ theory. This describes established companies buying start-ups to eliminate future threats, often by halting competing projects before new products reach the market.

In November 2024, the EC published a final report analysing the effectiveness of the EC enforcement mechanism in identifying ‘killer acquisitions’ in the pharmaceutical sector. The report concluded that the EU merger regime has generally been effective in identifying potential ‘killer acquisitions’ in notified transactions, but that below threshold transactions remain more difficult to capture, given the limited enforcement tools available to the EC. For instance, the EC is limited either to: Member States referring below-EU-threshold transactions to the EC under Article 22 EU Merger Regulations¹ (EUMR, discussed further below), or a complaint under Article 101/102 Treaty on the Functioning of EU (TFEU) for anti-competitive behaviour and abuse of a dominant position.

Global trend to expand merger jurisdictional thresholds to catch ‘killer acquisitions’

Most merger regimes rely on jurisdictional thresholds based on target turnover which presents challenges where start-ups are pre-revenue. Some countries have adopted transaction value thresholds such as Germany, Austria, the US, and India. Others have broadened ‘call-in’ powers to allow the review of below-threshold mergers that raise competition concerns, including Denmark, Hungary, Ireland, Italy, Latvia, Lithuania, Slovenia, and Sweden.

On 1 January 2026, Australia implemented a mandatory notification regime based on acquirer-focused turnover thresholds targeting ‘killer acquisitions’ and roll-up strategies in sensitive biotech, pharmaceutical, and technology sectors.

UK introduces new merger thresholds to catch ‘killer acquisitions’ 

The UK operates a voluntary merger review regime for transactions that meet either the ‘turnover’ test or the ‘share of supply’ test. Historically, the UK Competition and Markets Authority (CMA) has been granted broad discretion by the courts to interpret the ‘share of supply’ test flexibly and expansively. This has enabled the UK to review transactions involving targets with minimal or no UK turnover, including Illumina’s acquisition of GRAIL in DNA sequencing (discussed further below) and Thermo Fisher’s proposed acquisition in 2018 of Gatan from Roper Technologies in the field of electromagnetic microscopes.

In 2025, the Digital Markets, Competition and Consumers Act 2024 (DMCCA) introduced significant changes to the UK jurisdictional thresholds, specifically addressing ‘killer acquisitions’. Under the new test, a transaction may qualify for review even if the target has no UK turnover and the parties do not have overlapping activities, provided:

• the acquirer has more than £350m in revenue and more than 33% share of supply in the UK; and
• the target has a UK nexus (this is interpreted broadly, such as having a UK branch, owning UK IP rights, or conducting preparatory activity towards supply in the UK with no turnover required).

This new test is particularly relevant in the biotech and pharmaceutical sectors as it captures vertical mergers between suppliers and customers and conglomerate mergers where parties are active in complementary markets.

However, at the same time, the DMCCA also introduced changes aimed at reducing the regulatory burden for start-ups. Under the updated ‘turnover’ test, the target turnover threshold has increased from £70m to £100m. The revised ‘share of supply’ test now contains a small business exemption: a transaction is only caught if the parties have a combined 25% UK share of supply, and either party has turnover exceeding £10m. This means combinations between start-ups which do not raise killer acquisition risks are considered to have pro-growth effects and are not subject to merger reviews. In the context of the CMA’s growth strategy published in November 2025, we expect the CMA to refocus its enforcement efforts on transactions that have a clear UK nexus and raise prima facie competition issues.

Limitations of Article 22 EUMR to refer below-threshold transactions to the EC

Under Article 22 of the EUMR, Member States may refer transactions that do not meet the EUMR thresholds to the EC for substantive competition assessment. 

In 2020, Illumina, the global leader in DNA sequencing technology, sought to acquire GRAIL, a developer of an early cancer screening test, for $7.1bn. As with Facebook/WhatsApp, concerns arose that GRAIL’s competitive importance was not reflected by its lack of turnover compared to the high purchase price. Several Member States referred the case to the EC under Article 22 as they were concerned that Illumina would foreclose GRAIL’s competitors by restricting access to, or increasing the price of, DNA sequencing. The EC eventually prohibited the acquisition following an in-depth Phase 2 merger review and required Illumina to divest GRAIL. The EC also fined Illumina for illegally closing the deal prior to gaining clearance. Illumina appealed both the gun-jumping and the prohibition decisions to the European courts. 

In a subsequent judgment² in September 2024 relating to Illumina’s completed acquisition of GRAIL, the European Court of Justice (ECJ) held that an Article 22 referral is possible only in relation to transactions that meet the national merger thresholds. This ruling was a set-back for the EC as it has significantly curtailed the EC’s primary route for catching below-threshold ‘killer acquisitions’ before they close.

Revival of Article 102 TFEU to plug enforcement gaps

Due to the limitations of Article 22 EUMR and national merger regimes mentioned above, the EC’s primary enforcement route for challenging ‘killer acquisitions’ has shifted back to Article 102 TFEU, which prohibits dominant companies from abusing their market power to the detriment of consumers. This strategy is based on the 2023 Towercast ECJ judgment³ which confirmed that acquiring a competitor to eliminate it (a ‘killer acquisition’) could constitute abuse of dominance under Article 102 TFEU, even if the deal did not meet standard merger thresholds. 

The French Competition Authority was the first national authority to apply the Towercast principle to the healthcare sector. In November 2025, it fined an online medical booking platform €4.67m for eliminating its competitor following an acquisition in 2018. The transaction was below threshold and therefore not notified for review. 

In March 2024, the EC opened its first Article 102 inquiry into the termination of an advanced pipeline product subject to third-party rights. The investigation concerns a US-based veterinary medicine company that, as part of a larger transaction in 2017, acquired a competing late stage pipeline asset which was subject to a commercialisation agreement with a third party. In 2019, the acquirer unilaterally decided to terminate development of the competing pipeline drug to concentrate on its own existing pipeline product for the same clinical indication. 

The EC is not challenging the acquisition of the pipeline product itself (as it was below the jurisdictional thresholds), but rather the post-acquisition decision to halt its development and refusal to transfer it to the third party that held exclusive commercialisation rights in the EU for development. 

The EC received a complaint from the third party rightsholder in 2020 and opened an investigation in 2021. There is currently no deadline for the EC to issue a final decision. Complex Article 102 cases can take three to five years (or even longer) to conclude but much sooner if the EC decides to close the case. 

These cases show that, despite the current limitations of merger control rules described above, the EC and national regulators have not been deterred from scrutinising acquisitions where the target has little or no turnover (as is generally the case with pre-clinical or clinical stage biotech companies). With this in mind, we set out below a high level list of points for parties involved in acquisitions in the life science sector to bear in mind. 

Checklist for acquirers 

• Competition authorities have broad powers to obtain internal documents, including emails, texts and Teams/WhatsApp messages. ‘Smoking gun’ documents can be used by authorities to initiate enforcement actions. Regular compliance training will ensure dealmakers are aware that they should only cite legitimate reasons in communications about potential transactions.
• Any dominant firm must ensure that the strategic rationale for acquiring a small innovator is clearly documented, with a focus on genuine synergy, the acceleration of innovation, and supporting scientific evidence, rather than aiming to eliminate a competitive threat.
• Post acquisition, dominant firms should be aware that decisions to terminate overlapping pipeline projects may attract customer or competitor complaints and prompt authorities to investigate under abuse of dominance rules. Clearly documenting commercially sound reasons for any such termination and seeking competition law advice will mitigate the risk.
• For companies competing for targets, consider whether a rival acquirer could be pursuing a ‘killer acquisition’ strategy. Bear in mind that any complaint to competition authorities must be supported by evidence that the transaction is harmful to consumers.

Checklist for sellers/targets

• Don’t assume that target company is too small for merger clearances to be required, even where target is an early stage pre-revenue biotech company.
• Sellers/targets are unlikely to be aware of any intention by the acquirer to deploy ‘killer acquisition’ strategies. If such concerns do arise, the matter should be escalated to the legal team and all communication with the acquirer should be paused until further advice is obtained.
• When assessing multiple acquirers/bidders, sellers should evaluate whether merger clearances are required, as any review carries risks (for example the transaction could be blocked or require undertakings to remedy any competition harms). Review processes can be lengthy and demanding on management time; the need (or not) to obtain merger clearances could be a key factor which distinguishes between different bidders.
• If merger clearances are required, or if sellers believe there is otherwise a prospect that the acquisition may prompt scrutiny from a competition regulator, the sellers should negotiate upfront how far the buyer must go to secure clearances and who bears the risk if regulators require remedies.

Footnotes

[1] Council Regulation (EC) No 139/2004

 [2] Joined Cases C‑611/22 P and C‑625/22 P

 [3] Case C-449/21