In light of recent political developments in the UK it is becoming an increasing possibility that the UK will leave the EU on 29 March 2019 without a deal. Businesses involved in merger activity will face significant implications in the event of a “no-deal” Brexit as the EU’s merger control regime will no longer cover the UK. Mergers may face investigations by both the CMA and the European Commission even where they have already been notified in Brussels.
Currently, where a merger has a European Community dimension and is notifiable under the EU Merger Regulation (the “EUMR”), the European Commission has exclusive competence to investigate the merger (subject to some exceptions). The merger will not be investigated by the national merger control authority of any other Member State, such as the Competition and Markets Authority (the “CMA”) in the UK. This is known as the “one-stop-shop” regime.
If the UK leaves the EU on 29 March 2019 under the terms set out in the Withdrawal Agreement then the “one-stop-shop” regime will stay in place until at least the end of December 2020. Although the UK will no longer be a Member State, EU legislation including EUMR, will remain applicable to the UK. Mergers with a European Community dimension will be dealt with by the European Commission and UK turnover will be calculated in the normal way for EUMR, as if the UK were still a member of the EU.
If however, the UK leaves the EU on 29 March without a deal then the EU and UK merger control regimes will run in parallel and mergers may be subject to parallel investigations from both the European Commission and the CMA. The CMA has estimated that this will lead to an increase in the number of UK merger investigations by up to 40%.
Mergers where there is a decision before exit day
If the European Commission has investigated a merger and issues a decision before exit day, then the CMA has no jurisdiction over that merger unless the decision is annulled, in full or in part, following an appeal.
Mergers notified but with no decision before exit day
Where a merger has been notified to the European Commission under the EUMR but there has not been a decision before exit day, then the CMA will no longer be excluded by the EUMR from taking jurisdiction over the UK aspects of the merger under the UK merger regime (provided the transaction meets the UK’s jurisdictional thresholds). EU aspects of the merger will remain with the European Commission, assuming the transaction still meets the EUMR turnover thresholds, given the fact that UK turnover will no longer be taken into account.
Mergers occurring after exit day
For new transactions which are notified after Brexit day, they may face parallel investigations under both the EUMR and the UK merger control regime if they satisfy the jurisdictional thresholds of both regimes.
Consequences for businesses
If merger parties anticipate a scenario where their merger has been notified to the European Commission, but no decision has been issued by exit day, the parties should follow the CMA’s recent guidance in making sure that they contact the CMA at an early stage in the transaction. This will be particularly important where the transaction may raise potential competition concerns in the UK. Parties should also be aware that the CMA may suggest to the merging parties that they should start pre-notification discussions with the CMA.
Given this guidance from the CMA and the fact that new transactions notified after Brexit may face parallel investigations under both the EUMR and the UK merger regime, businesses involved in merger activity should look to factor this into their deal timetables and consider reflecting these changes in the conditions precedent.