Deal or No Deal: Competition Law After Brexit

With less than a week until the UK was originally due to leave the EU, it still remains unclear whether we will leave with the deal proposed in the draft Withdrawal Agreement or with no deal. This article considers how deal or no deal scenarios will affect UK competition law enforcement after exit day.

The current competition law regime

At present, competition law in the UK forms part of the wider EU competition law regime.

• Merger control: the UK Competition and Markets Authority (“CMA”) has jurisdiction to examine relevant merger situations that may result in a substantial lessening of competition in the UK. However, any mergers – including mergers between UK companies – that have an EU dimension must be examined by the European Commission under the “one-stop-shop” principle.
• Competition law infringements: the CMA is required to apply the EU competition rules alongside the equivalent UK rules, it cannot act in cases where the European Commission has opened a formal investigation, and the CMA and UK courts are obliged to apply the UK competition rules consistently with EU case law. Meanwhile, the European Commission can investigate competition law infringements in the UK that may have an impact on competition in the EEA.

UK competition law enforcement under the Withdrawal Agreement

If we leave the EU with the deal set out in the Withdrawal Agreement, the existing competition law arrangements will continue to apply during the transitional period to 31 December 2020.

What will happen at the end of the transitional period is yet to be negotiated.

However, in the event that the UK and the EU fail to agree their future relationship before the end of the transitional period, a “backstop” arrangement will take effect. While the precise details of this are not yet clear, it seems likely that it would look very similar to the current regime.

UK competition law enforcement in a no deal Brexit

If the UK leaves the EU without a deal, the Competition (Amendment etc.) (EU Exit) Regulations 2019 (the “Regulations”) will come into force on exit day. These will revoke Articles 101 and 102 of the Treaty on the Functioning of the European Union and the EU merger regulation, and bring existing EU block exemption regulations into UK law (as amended by the Regulations). The effect will be to separate the UK and EU competition regimes, albeit that the CMA and UK courts will still be obliged to ensure consistency with pre-Brexit EU case law. In practice, this will mean:

• Merger control – mergers that satisfy both the UK and EU merger control thresholds will now need to notified to – and may be subject to parallel investigations by – both the CMA and the EU.
• Competition law infringements: The CMA will only be able to apply UK competition law. However, UK companies may still be investigated by the European Commission if they engage in anti-competitive conduct that affects trade between EU member states.

Conclusion

A no deal exit could have significant and immediate consequences for businesses that are subject to ongoing EU competition or merger investigations. Notably, since the prospect of parallel CMA/EU merger and competition law investigation raises the possibility that parallel merger notifications and leniency applications may be required.

For more information, please contact Daniel De Saulles on 01905 744 865 or at [email protected]