Over three years since the EU Referendum and the UK has now left the EU. What does this mean for EU and UK competition law enforcement in the short- and long-term? What legal and practical issues should businesses start considering? How should businesses prepare?
In the short-term, nothing changes. Up until the end of 2020 the UK will continue to be treated as an EU Member State and the European Commission will continue to be a one-stop-shop for large cross-border deals and investigations. However, that doesn’t mean that businesses should ignore the UK’s departure from the EU when planning future deals and managing antitrust investigations. Since the UK left the EU only a few days ago, the British Prime Minister has noted that “there is no need for a free trade agreement to involve accepting EU roles on competition policy…” and that the UK is likely to diverge from its European neighbours in regulatory terms. The Chief Executive of the CMA has also publicly stated that “the upside [of the UK leaving the EU] is that you take back control – genuinely – of the decisions”.
Up until the end of 2020, the European Commission will continue to have exclusive jurisdiction over mergers which meet the EUMR thresholds (except in very limited circumstances). However, all deals formally notified after 1 January 2021 risk dual-track reviews by the Commission and UK’s CMA if they meet both thresholds.
For transactions straddling 2020/2021, businesses can take various steps to minimise the risks associated with potential parallel merger investigations. These include leaving sufficient time for EU pre-notification to ensure formal notification by the end of the year; engaging early with the CMA if there is a possibility of parallel investigations; and identifying, measuring and allocating risks between contracting parties and baking these into the transaction documents.
Post-2021, the UK will become another jurisdiction for international deals covering multiple jurisdictions. However, there are some notable features of the UK regime which companies should be alive to namely: the CMA’s interventionist stance – the CMA referred 20% of its deals to Phase 2 last year, compared to the European Commission’s 2%; the relatively long timetable; lack of access to decision-makers in phase 2; the voluntary nature of the regime; the CMA’s growing reputation for being increasingly burdensome; a remedies process which does not align with those of other jurisdictions; and the fact that the UK is a comparatively litigious regime with a relatively quick turnaround of appeals on procedural and substantive issues. Furthermore, the CMA also considers that Britain is “in a very strong position to lead” competition policy on a global stage and is therefore likely to take some bold decisions once the Transition Period is over.
Similar to merger control, if the European Commission has already formally initiated proceedings (i.e. issued a Statement of Objections or progressed to a certain stage in commitments or settlements discussions) by the 1 January 2021, it will retain exclusive jurisdiction. However, those companies against whom the European Commission has not initiated formal proceedings could be at risk of a parallel investigation if they straddle 2020/2021. They should therefore: consider the risk of the European Commission not having formally initiated proceedings by the end of 2020; the likelihood of the CMA opening its own investigation in 2021, based on UK nexus etc; and the merits of engaging with the CMA early on.
From 2021 onwards, companies should be alive to the real risk of parallel investigations into the same conduct. They should also be aware that enforcement priorities could diverge, particularly with the CMA’s focus on particular sectors (e.g. fast-moving, innovative sectors such as tech and pharma) and consumer protection powers.
While European Commission decisions will (after 2020) no longer have automatic binding effect for the purpose of follow-on damages claims, the UK damages litigation market is expected to remain vibrant. In the short- to medium- term, in-flight cases will continue, and follow-on claims will still be able to be brought within the relevant applicable limitation periods that are based on decisions preceding Exit Day or made during the Transition Period. In the longer term, it remains to be seen whether European Commission decisions will remain of persuasive value, and follow-on claims will likely increasingly be premised on (parallel) UK CMA and sector regulator decisions. The perceived advantages of UK litigation (in the form of access to specialist expertise, disclosure and litigation funding) remain, and the option of bringing opt-out class actions is likely to continue to attract interest.
As 2020 progresses, it is likely that new/updated guidance will be released by both the European Commission and CMA and companies should keep an eye out for this/keep in touch with their lawyers to ensure their strategies remain pertinent.