On 13 September 2018, the UK government published guidance on the application of competition law and merger control if there is no Brexit deal.
The guidance forms part of the Government's broader publication of technical notices to help businesses and individuals understand and prepare for a possible no-deal Brexit scenario.
Consistent with current government policy, the guidance starts with a reminder that a no-deal scenario remains unlikely given the mutual interests of the UK and the EU in securing a negotiated outcome. The guidance is therefore positioned as relevant only in the 'unlikely' scenario that there is no Brexit deal.
The key points arising from the guidance are as follows.
Application of competition law to commercial agreements and conduct
- Competition law in the UK would remain unchanged, aside from tidying-up changes in light of the UK's exit from the UK (such as removing references to EU law and institutions);
- The EU block exemptions (such as those that apply to vertical agreements, technology transfer agreements, R&D and in the motor vehicle industry) will continue to apply in the UK, by virtue of provisions of the EU Withdrawal Act, again subject to tidying-up changes. Parties to both existing and new (ie post-Brexit) agreements will therefore continue to be able to benefit from the legal certainty offered by the current block exemptions;
- Overall, the intention is that businesses will not need to take any action to ensure they continue to comply with competition law post-Brexit: if their commercial arrangements comply pre-Brexit then they should continue to comply post-Brexit. This should be the case for at least the short to medium term that the guidance seeks to address;
- It will become clearer in due course whether UK competition law may start to diverge from EU law over time. Any changes are perhaps most likely with regard to issues such as territorial restrictions, which at an EU level have been heavily driven by single market considerations.
- Post-Brexit, the European Commission would cease to have jurisdiction to review conduct within the UK. It follows that 'new' investigations relating to the UK would be launched only by the CMA (or one of the UK sectoral regulators who have concurrent powers, such as Ofcom). Alleged infringements relating to both the UK and the EU would potentially be subject to review by both the CMA and the European Commission;
- The guidance recognises that a no-deal Brexit could leave ongoing investigations by the European Commission in something of a limbo with regard to any UK aspects of the case. Any businesses involved in such cases will need to consider the consequences carefully.
Follow-on damages claims
- The guidance indicates that, following a no-deal Brexit, claimants would not be able to rely on a European Commission decision as proof of a competition law infringement for the purposes of a possible damages claims. This would be of considerable frustration to prospective claimants, given the prevalence of such claims in the English courts. It remains to be seen whether this position will be softened in response to pressure to maintain the UK as a venue of choice for such claims.
- There will be no changes to the UK merger control regime. Merger notifications will remain voluntary;
- Transactions that currently benefit from the one-stop-shop under the EU Merger Regulation (and which, accordingly, are generally currently reviewed only by the European Commission within the EU) would potentially be subject to review by both the CMA and the European Commission;
- A practical recommendation for businesses is to plan ahead and prepare for the possibility of uncertainty as whether their deal may be subject to review by the European Commission or the CMA (or possibly both), for deals taking place in the run up to 29 March 2019.
Overall, the government's guidance on these issues is helpful, if fairly predictable.
The confirmation that competition law in the UK will not substantively change from the current position will be reassuring to businesses, since it signals that businesses will not be required to conduct an urgent re-assessment of the lawfulness of their commercial arrangements. Indeed, that should also be the case in a scenario in which a Brexit deal is agreed.
The real challenges will be for businesses that are involved, or soon to be involved, in active engagement with the European Commission in the context of competition investigations and merger control. The guidelines recognise that a no-deal Brexit would imply no agreement with the EU on jurisdictional issues, which could cause considerable uncertainty.
A related implication of Brexit is a likely increase in workload for the CMA. In particular, the CMA's merger control case load is expected to increase significantly, as large deals cease to benefit from the EU's one-stop-shop. Similarly, the CMA's competition law enforcement activity may increase if it conducts investigations in parallel with the European Commission. The CMA will also acquire new powers over matters such as state aid. In readiness, the CMA has already announced expansion plans, through new larger premises in London's Canary Wharf and in Edinburgh.