By Foo Yun Chee

BRUSSELS (Reuters) -U.S. life sciences company Illumina Inc’s proposed acquisition of cancer test maker Grail Inc could curb innovation and competition, EU antitrust regulators warned Thursday as they opened a full-scale investigation.

The European Commission’s announcement confirmed a Reuters story last week.

Illumina announced the $8 billion cash-and-stock deal for startup Grail last September, buying out investors including Amazon founder Jeff Bezos, to regain control of a company it spun out five years ago.

Grail makes a non-invasive, early detection biopsy test to screen for many kinds of cancers using DNA sequencing.

The EU executive, which acts as the competition enforcer for the 27-country bloc, said its preliminary investigation showed that Illumina could have an economic incentive to block Grail’s cancer detection rivals.

“It is very important to preserve market conditions, allowing the best solutions to emerge for the tests to ultimately reach the market at affordable prices,” Commission Executive Vice-President Margrethe Vestager said in a statement.

The EU watchdog will decide by Nov. 29 whether to clear or block the deal.

Illumina said it will work with the Commission but warned against a veto of the deal.

“Re-uniting GRAIL with Illumina will accelerate availability of the GRAIL test by many years in the EEA and globally, saving tens of thousands of lives, and leading to significant health care cost savings,” said CEO Francis deSouza in a statement.

In Washington, the U.S. Federal Trade Commission has filed a complaint seeking to block the deal, arguing that Illumina is the sole provider of the DNA sequencing that Grail uses and could prevent others from entering the market.

To address antitrust concerns, deSouza told Reuters on Thursday that Illumina had offered a 12-year contract to supply its technology to potential rivals.

He also argued that Illumina was best placed to broadly market the test. “This is all about access,” he said of the proposed deal. “This will be a test for the rich otherwise, for a while.”

The deal will face an August trial at the FTC.

While seeking EU approval for the deal, Illumina is also challenging in court the EU decision to examine it even though it does not meet the revenue criteria. Regulators say such powers are necessary to prevent companies buying rival start-ups to close them down.

Critics however say it creates uncertainties for companies.

(Reporting by Foo Yun Chee; additional reporting by Diane BartzEditing by David Goodman, Kirsten Donovan)

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