Current state of play
- EU competition law supports the completion of the EU-wide single market by providing a unified legal framework and common processes across the 28 member states.
- The EU’s general antitrust rules prohibit cartel conduct and abuse of a dominant market position.
- The European Commission and the national competition authorities (NCAs) of EU member states can investigate and impose substantial fines (up to 10 per cent of worldwide turnover) for breaches of these rules.
- If the Commission or an NCA establishes that there has been a breach of EU antitrust rules, the parties concerned can be exposed to third-party actions for damages in national courts within the EU.
- A new Damages Directive is being implemented across the EU, which is designed to further harmonise the approach of national judicial systems to such actions.
- The EU Merger Regulation provides a one-stop shop for the regulation of proposed mergers, acquisitions or joint ventures involving companies operating in Europe (where the parties concerned meet certain worldwide and EU-wide thresholds).
- ‘State aid’ by member states, which can operate as a form of protectionism to the detriment of other undertakings or products, is tightly controlled as it has the potential to distort normal market competition.
What should I be thinking about now?
- Given that the UK has adopted national legislation (the Competition Act and Enterprise Act) that run parallel to the EU provisions, a Brexit is unlikely to change the fundamentals of competition regulation in the UK.
- Indeed in certain respects (eg in relation to private actions), the UK is a frontrunner, with many of the measures sought by the EU in its new Damages Directive (eg disclosure obligations) already a feature of UK law and procedure.
- The adoption of the UK Consumer Rights Act in 2015, which establishes, among other things, an opt-out class action regime for competition damages, demonstrates an ongoing commitment at national level to effective competition regulation and enforcement.
- As far as mergers are concerned, companies will still need to be cognisant of the EU thresholds and will remain subject to EU regulation in cross-border deals. In any event, if the UK were to remain part of the EEA, very little will actually change in terms of the obligations of UK undertakings, including in relation to merger control.
- Nevertheless, a Brexit will inevitably raise substantive and procedural legal issues as the UK regime is decoupled from EU standards, processes and enforcement.
- How would post-Brexit transitional arrangements affect a company’s potential liability for (pre-Brexit) breaches of EU antitrust rules?
- What effect would Brexit have on the way in which my business is regulated?
- Will my business need to adapt compliance strategies in dealing with the Competition and Markets Authority (CMA) or other national regulators with concurrent competition powers (e.g. the Financial Conduct Authority, or sectoral regulators such as OFGEM) which may have different powers and enforcement priorities to the European Commission, and will become more prominent following Brexit?
- Will the risk of diverging views on enforcement between the UK and remaining member states due to the absence of the UK from the European Competition Network lead to uncertainty for my business?
- What status will European Commission or EU NCA decisions have in domestic tribunals?
- Will the UK remain a popular forum for follow-on damages claims?
- Will I be able as readily to enforce rights in Europe if the jurisdiction rules and rules on recognition and enforcement of judgments change?
- What effect would a Brexit have on opportunities to benefit from EU or UK leniency programmes, given the withdrawal of access to the EU’s ‘one-stop-shop’ approach to leniency?
- How will Brexit affect my business’ corporate strategy in relation to any significant M&A activity in the medium term? What are the implications of a dual-track process requiring notification in the EU and the UK? What extra hurdles will we need to navigate?
- Will the UK have greater political freedom to support ‘national champions’?
- Are there implications for sectoral or regional growth initiatives?
- Is there a risk that, without a direct ability to access EU complaints processes, UK companies may be disadvantaged against EU-based competitors following a UK withdrawal from the EU?
Overarching policy and practical considerations
- Will the absence of a UK voice within the EU at political and civil-service levels alter the direction of travel of competition policy (eg the promotion of a more protectionist approach)?
- How would my legal and compliance strategies need to change to ensure the appropriate protection of privileged communications, and so as not to be disadvantaged by the loss of rights of audience before the EU courts?
The answers to many of these questions will depend upon the nature of a post-Brexit UK/EU relationship.