As it now seems unlikely the UK will stay in the EEA, we consider below the situation in which the UK leaves the EU and the EEA. This involves very significant changes to the current position.
The UK exit from the EU will have limited impact as far as the EU antitrust rules are concerned (Article 101 TFEU on anti-competitive agreements and Article 102 TFEU on abuse of a dominant position), because these rules apply equally to non-EU companies who carry on business in the EU or whose activities affect trade in the EU. In addition, the UK competition rules (the Chapter I and Chapter II prohibitions of the Competition Act 1998) completely mirror the EU antitrust rules and businesses are therefore subject to a very similar regime where conduct has an impact in the UK only. However, one impact of the UK exit from the EU will be that there will be many more cases where both the EU and the UK could in parallel open an investigation and impose fines and other remedies for anti-competitive conduct affecting both the continuing EU and the UK. While the UK is within the EU it cannot investigate where the European Commission takes jurisdiction. This could potentially add to risk and costs for affected businesses.
We should also expect a number of changes to the Competition Act 1998 after Brexit. Section 60 of the Competition Act 1998 requires UK competition law to be interpreted as far as possible consistently with EU law and decisions of the EU courts and the European Commission. This requirement is likely to be removed and its removal may over time result in a divergent approach under UK and EU competition law.
EU block exemption Regulations (eg on vertical agreements, technology transfer agreements, research and development and specialisation agreements) are imported into UK competition law by virtue of Section 10of the Competition Act 1998 which provides for a system of parallel exemptions from the UK Chapter I prohibition. The Government will need to redefine this parallel exemption and decide on its approach to equivalent exemptions under UK competition law.
In respect of merger control, again the impact of exit is likely to be parallel investigations. The EU Merger Regulation (EUMR) introduced a so-called one stop shop regime, under which a transaction that qualifies under the EUMR is no longer subject to the merger control regime(s) of the relevant Member State(s) (subject to some exceptions). Once the UK is no longer a Member State, the EUMR and UK merger control regimes would run in parallel. A transaction that qualifies under the EUMR may also be subject to UK merger control (provided the jurisdictional threshold for UK merger control is met). This could add a burden and cost for businesses, in particular in view of the level of the UK merger fees (ranging from£40,000 to £160,000 depending on the UK turnover of the enterprises acquired) and the longer time frames for UK merger control clearance.
Once the UK is no longer bound by the EUMR there will be greater scope for the UK competition authorities to intervene in mergers on public interest or industrial policy grounds. Currently, once a transaction qualifies under the EUMR, the UK can only intervene in limited circumstances on the grounds set out in Article 21(4) EUMR (public security, plurality of the media, prudential rules and any other public interests requiring approval by the European Commission on a case by case basis). This provision has to date been applied successfully in only very few cases. The UK Government has already announced its intention to adopt legislation in order to increase its powers to review mergers on public interest grounds not related to competition, and to give it greater control over foreign ownership in particular in respect of critical infrastructure.
Follow-on damages actions for breach of competition law, in which the claimant relies on an existing infringement decision are increasingly common in the UK. Following Brexit, EU infringement decisions will cease to have a binding effect on the UK courts and claimants may look to other jurisdictions when choosing the forum to bring such claims, although this change should not affect claims dating back to when the UK was a member of the EU. In addition the English courts are likely to be ingenious in finding a basis for jurisdiction in relation to claims against parties subject to the jurisdiction of the English courts for breach of EU competition law and, because of wide English law disclosure rules, the English courts should remain an attractive forum.
State aid and public procurement
Post-Brexit, the continued application of the EU State aid rules will likely depend on the degree of EU Single Market access that the UK and the EU agree as part of any post-Brexit free trade agreement.
In the event that the UK leaves the EU without any new free trade agreement or interim arrangement with the EU in place at all, and relies on the WTO rules, the UK would only be subject to the WTO anti-subsidy regime which is much narrower both in terms of its substantive scope and procedurally in terms of enforcement. The result from the UK-EU negotiations could be some kind of sui generis regime that could be in-between the full application of EU rules and the WTO regime.
This is a sovereignty related issue and the UK Government would be likely to choose to keep the flexibility gained from this change as far as possible. The same structural outcome applies to public procurement rules. However, these rules ultimately derive from WTO requirements that the UK will continue to need to meet and, as the UK currently has quite stringent procurement rules of its own supplementing the EU regime, it is incentivised to continue with public procurement rules and an enforcement regime closely based on current EU law.