Regrettably, but not unexpectedly, the Federal Trade Commission (FTC) yesterday threw out a reasoned decision by its administrative law judge and ordered DNA-sequencing provider Illumina Inc. to divest GRAIL Inc., makers of a multi-cancer early detection (MCED) test.
The FTC claims that this vertical merger would stifle competition and innovation in the U.S. market for life-saving cancer tests. The FTC’s decision ignores Illumina’s ability to use its resources to obtain regulatory clearances and bring GRAIL’s test to market more quickly, thereby saving many future lives. Other benefits of the transaction, including the elimination of double marginalization, have been succinctly summarized by Thom Lambert. See also the outstanding critique of the FTC’s case by Bruce Kobayashi, Jessica Melugin, Kent Lassman, and Timothy Muris, and this update by Dan Gilman.
The transaction’s potential boon to consumers and patients has, alas, been sacrificed at the altar of theoretical future harms in a not-yet-existing MCED market, and ignores Illumina’s proffered safeguards (embodied in contractual assurances) that it would make its platform available to third parties in a neutral fashion.
The FTC’s holding comes in tandem with a previous European Commission holding to prohibit Illumina’s acquisition of GRAIL and impose a large fine. These two decisions epitomize antitrust enforcement policy at its worst: the sacrifice of clear and substantial near-term welfare benefits to consumers (including lives saved!) based on highly questionable future harms that cannot be reasonably calibrated at this time. A federal appeals court should quickly and decisively overturn this problematic FTC holding, and a European tribunal should act in similar fashion.
The courts cannot, of course, undo the harm flowing from delays in moving GRAIL’s technology forward. This is a sad day for believers in economically sound, evidence-based antitrust enforcement, as well as for patients and consumers.
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Decisions like this unambiguously demonstrate (again) that consumers would clearly be better off if the FTC just ceased to exist. What could possibly be the counter-argument? Would anyone care to defend the FTC’s long sordid case-history and argue, perhaps, that the benefits of enforcement have exceeded the costs? Didn’t think so. And theory wise, would someone care to explain the objective meaning of an “unfair practice”; or why if so-called “deceptive practices” are fraudulent, they could not simply be privately litigated? Which leaves so-called “unfair methods of competition” which, if we could ever objectively define terms, could always be prosecuted under the Clayton or Sherman Act. My long-lost friend Jim Liebeler demolished any and all justification for the FTC decades ago. When will economists and law professors that specialize in this area have the courage to recommend the outright defunding and termination of this monstrosity?