(Reuters) - A U.S. appeals court on Friday struck down a Federal Trade Commission order against Illumina's (ILMN.O) purchase of cancer diagnostic test maker Grail (GRAL.O), a former subsidiary, saying the agency had applied a wrong legal standard.
The New Orleans-based panel of the 5th U.S. Circuit Court of Appeals issued a 34-page order that will require the FTC to reconsider the deal.
The three-judge panel said the agency had substantial evidence to show the deal would lessen competition as companies seek to bring to market a blood test to detect many kinds of cancer.
An FTC spokesperson said the panel's opinion was "an important victory for antitrust enforcement because it clearly recognizes how vertical mergers can threaten competition."
But the panel also said the FTC failed to properly consider Illumina's pledge to continue selling its DNA sequencing services to other firms. Illumina has offered to sign contracts to supply any of Grail's rivals and to not raise prices.
"We are reviewing the decision," Illumina said in a comment issued after the ruling.
The court rebuffed Illumina's argument that the FTC unconstitutionally exercised its powers.
"Illumina's constitutional challenges to the FTC's authority are foreclosed by binding Supreme Court precedent," it wrote.