Competition Law and Brexit: Some things to be aware of!

Alex CanhamPartner, Herrington Carmichael LLP

Now that the UK has formally left the European Union, we have set out below a summary of two key points that businesses across the UK need to be aware of from a competition law perspective.

The UK formally left the European Union on 31 January 2020, and by virtue of the transition period in the Withdrawal Agreement, Articles 101 and 102 (which prohibit, respectively, restrictive agreements and arrangements and abuse of market power) continue to apply in relation to the UK only until 31st December 2020 as at the time of writing. At that point the UK’s Competition and Markets Authority (CMA) and the UK courts will cease to apply EU competition laws in relation to future activities, but they will continue to apply these laws in respect of conduct that took place before the exit date.

Antitrust Enforcement and Investigations

Once the transition period is over, the applicable Chapter I and Chapter II prohibitions under the Competition Act 1998 in the UK will remain in place, subject to any future amendment. However, conduct which infringes both UK and EU competition laws post-Brexit will be subject to a separate investigation by the CMA and the European Commission (EC). One notable point that will be different will be that the EC will not have the power to carry out dawn raids on a business in the UK: it will have to send a request for information (as it does now with businesses outside the EU such as businesses in the US). It is important to note that commercial practices conducted by companies outside the EU will continue to be subject to potential investigation by the EC, where there is an actual or potential effect on EU trade, and also by the CMA where there is an actual or potential effect on trade within the UK.

The Block Exemption Regulations or the so called “safe harbour” regulations will continue to apply in the UK during the transition period but after the transition period, they will be adopted into UK law with the same expiry dates but domesticated to remove any EU references. As a result, any UK agreement which currently enjoys a safe harbour under one of these block exemptions will continue to do so after the transition period.

Merger Control

During the transition period the UK will continue to be treated as if it were a Member State under the EU Merger Regulation (EUMR), such that the ‘one-stop shop’ principle under the EUMR continues to apply meaning the UK turnover generated by merging parties must still be taken into account to ascertain whether the EC should have exclusive competence.

At the end of the transition period there will be some merger cases which are under review by the EC where a final decision has not yet been taken, and in such cases, the EC will retain exclusive jurisdiction until a final decision is reached where a merger has been formally notified or subject to referral to the EC before the end of the transitional period. However, the Competition (Amendment etc.) (EU Exit) Regulations 2019 revokes the application of European merger regulation in the UK with effect from the end of the transition period, meaning that a post-transition period EC decision for or against a particular merger will not apply to the UK. Therefore, if a final decision has not been reached by the EC by the end of the transition period, then, the CMA may have jurisdiction to review the merger.

After the end of the transition period, mergers with a UK dimension will no longer be subject to the EU exclusive one-stop-shop principle. The EU merger regulation test is a complex multi-jurisdictional turnover test where the turnover threshold in much higher than it is in the UK. The UK merger jurisdiction test requires there to be either an increment to share of supply in a market over 25% or a £70 million turnover for the target (or £1 million where the target falls into a special category of business type). This is likely to capture significantly more merger transactions as the turnover threshold is much lower than it is in the EU. Where a merger satisfies the jurisdictional thresholds of both merger regimes, the CMA and the EC may conduct parallel assessments. This will give rise to additional administrative burden and uncertainty, as the two authorities may not reach the same outcome.

Conclusion

From a competition law perspective, the full effect of Brexit will largely be seen after the transition period and will therefore take some time to emerge. After the end of the transition period, there will be an increased likelihood of parallel investigations in the antitrust and merger control fields and it may be possible that the two authorities do not reach the same conclusion. However, it is likely that EU case law will influence UK competition cases for some time after the transition period has ended.

How can we help?

For expert advice on commercial and competition law matters, please contact Alex Collinson or Mark Chapman on 01276 686222 or via email: Alex.Collinson@herrington-carmichael.com or Mark.Chapman@herrington-carmichael.com.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.