BRUSSELS, Sept 3 (Reuters) - U.S. gene sequencing

company Illumina ( ILMN ) on Tuesday won its court fight against

the European Union's investigation of its $7.1 billion purchase

of cancer diagnostic test maker Grail, a ruling set to

curb Brussels' merger powers.

Illumina ( ILMN ), which founded Grail and spun it off in 2016 only

to re-acquire it in 2021 for $7.1 billion, had fought against

the European Commission's decision to wield a rarely-used power

called Article 22 to assess the deal even though it was below

the EU's merger revenue threshold.

The case has been closely watched by companies wary of EU

scrutiny of minor deals but which regulators fear could be

so-called killer acquisitions in which big companies buy

startups to shut them down.

However, it may have limited implications for Illumina ( ILMN ),

which spun off Grail again in June to comply with an EU order,

keeping a minority stake of 14.5%.

The EU's General Court had in 2022 ruled in favour of the

Commission after Illumina ( ILMN ) challenged the EU merger review that

was triggered by requests from several EU countries.

The higher Court of Justice of the European Union (CJEU),

however, sided with Illumina ( ILMN ).

"The Court of Justice sets aside the judgment of the

General Court and annuls the decisions by which the Commission

accepted requests from national competition authorities seeking

the examination of the proposed concentration," CJEU judges

said.

"The Commission is not authorised to encourage or accept

referrals of proposed concentrations without a European

dimension from national competition authorities where those

authorities are not competent to examine those proposed

concentrations under their own national law," they said.

The Commission, the EU's competition enforcer, blocked the

deal in 2022 and ordered Illumina ( ILMN ) to divest Grail. It also fined

Illumina ( ILMN ) 432 million euros ($478 million) for closing the deal

in 2021 before securing its approval.

Illumina ( ILMN ) said the CJEU ruling meant it did not have to pay

the fine.

"Today's judgment confirms Illumina's ( ILMN ) longstanding view that

the European Commission exceeded its authority by asserting

jurisdiction over this merger. The basis for the 432 million

euro fine has now been removed and will no longer be payable,"

it said.

The ruling is final and cannot be appealed.

The Commission said it would carefully study the judgment

and its implications.

"More generally, we will consider the next steps to ensure

that the Commission is able to review those few cases where a

deal would have an impact in Europe but does not otherwise meet

the EU notification thresholds," it said.

The cases are Cases C-611/22 P Illumina v Commission and

C-625/22 P Grail v Commission.

($1 = 0.9039 euros)