Aug 24 (Reuters) - The U.S. Federal Trade Commission on Tuesday said it seeks to unwind life science company Illumina Inc"s (ILMN.O) $7.1 billion acquisition of Grail Inc (GRAL.O), alleging it would harm innovation and boost prices. FTC senior counsel Susan Musser said in her opening statement at a trial in Washington that cancer test-detection company Grail and its competitors rely on San Diego, California-based Illumina"s DNA sequencing technology. She argued that Illumina"s purchase of Grail would give the company the "incentive and ability to foreclose downstream rivals." Antitrust lawyers are closely tracking the FTC trial as a rare enforcement action against a "vertical" merger in which two companies are not direct competitors. The FTC"s witnesses are expected to include representatives from other companies competing with Grail. "Evidence will show that the war on cancer, if it is to be won, will be won by competition, not by this acquisition," Musser said. Grail is in an "innovation race" to develop and market its early-detection test, she added, and Illumina would have the power to "anoint" Grail the winner if the deal is not canceled. Illumina, founded in 1998, owned Grail but spun it off in 2016 while retaining a 12% ownership stake. Illumina and Grail closed their merger last week, saying no legal barrier blocked the deal. European antitrust regulators said on Friday they "deeply regret" the closure prior to regulatory approval. Illumina"s attorney, David Marriott of Cravath, Swaine & Moore, said in his opening statement that the "reunion" of Illumina and Grail would accelerate the development and adoption of an early cancer-detection product. "The FTC"s theory asks the court to forego the life-saving benefits of this transaction to avoid the potential harm that could not possibly occur for years - that could only occur, we submit, if other tests actually in fact ultimately are developed," Marriott said. He said the FTC theory "needlessly gambles with human lives." A lawyer for Grail said at trial that the company"s merger with Illumina will provide the fastest way toward "widespread commercial acceptance" of its multi-cancer early detection test, which relies on a blood draw. The case is In the Matter of Illumina Inc and Grail Inc, Federal Trade Commission Office of Administrative Law Judges, Docket No. 9401. For the government: Susan Musser of the FTC For Illumina: David Marriott of Cravath, Swaine & Moore For Grail: Al Pfeiffer of Latham & Watkins