On 26 July 2017 the Brexit Competition Law Working Group (BCLWG) published its report containing its conclusions and recommendations on the implications of Brexit for UK competition law and policy (Report). The BCLWG, chaired by Sir John Vickers, comprises experts in the study and practice of competition law. Following the UK’s vote to leave the EU on 23 June 2016, the BCLWG was established to encourage public debate and inform government policy on the repercussions of Brexit for competition law and policy. Premised on the assumption that the UK will leave both the ‘single market’ and the European Economic Area (EEA) as a consequence of Brexit, the Report closely follows the analysis of the issues paper (October 2016), notes on the first and second roundtables (November and December 2016, respectively), provisional conclusions and recommendations (April 2017) and responses to these documents.
The Report recognises the significant convergence in competition law, policy and enforcement across the world, which has resulted in increased effectiveness, consistency and international cooperation in this area. It further notes that even post-Brexit, UK firms and transactions will often still be subject to EU competition law. In pursuing its aim to help achieve a smooth and effective transition for UK competition policy in a post-Brexit era, the Report has two key themes. First, that the interests of the UK economy, businesses and consumers will be best protected by the legislative and institutional continuity of UK competition law. Secondly, transitional arrangements to facilitate coordination and cooperation between the UK and EU competition authorities are highly desirable.
The Report considers that Brexit does not require significant changes to the landscape of UK competition law, policy and enforcement, and in fact argues that such changes would be undesirable. Given that the UK competition law provisions closely mirror their EU equivalents, Brexit will not cause a legislative or enforcement ‘gap’. The most significant legislative amendment is likely to be to section 60 of the Competition Act 1998 (CA98), which imposes a duty on UK courts and authorities to act consistently with European jurisprudence. Potential amendments to this provision were discussed at the Competition and Markets Authority’s (CMA) June 2017 board meeting. The Report recommends that the provision be altered such that UK courts and authorities need only “have regard to” European jurisprudence, noting that this duty “should not be onerous”; the CMA and courts should not need to devote substantial resource to explaining any departure from EU precedent. Such a change would allow parties to rely on wellestablished principles in the short-term (in the interests of legal certainty) whilst ultimately leaving room for UK competition law to evolve organically.
As regards antitrust, retaining the current provisions contained in Chapters I and II of the CA98 will provide legal certainty to businesses, regulatory authorities and consumers. Additionally, the criminal offence for cartel behaviour enshrined in the Enterprise Act 2002 (EA02) may prove to be an important enforcement tool for the CMA post-Brexit. The BCLWG further recommends that the possibility of liability in private actions should be preserved. With respect to block exemptions, the Report suggests that, subject to their expiry or amendment or revocation by UK authorities, current exemptions should continue to apply (with the exception of the agricultural products exemption). In contrast, future EU block exemptions should not have any effect as a matter of domestic law; instead, the UK authorities should enact their own block exemptions.
The Report does not recommend any substantive changes to the legislation for mergers or market investigations, as the BCLWG considers the current regimes to be fit for purpose (other than advocating against importing a domestic equivalent of the current EU provision that precludes remedies relating to agreements between firms that go further than the antitrust rules). The BCLWG acknowledges that many transactions previously reviewable at EU-level will also be reviewable in the UK post-Brexit, which will result in parallel investigations and require close cooperation with the European Commission.
Transitional arrangements are paramount to ensuring the continued smooth operation of UK competition law post-Brexit, in order to provide a degree of certainty for businesses, consumers and regulatory authorities. The BCLWG stresses the need for urgent clarification of the practical procedures for transition, coordination and competition.
For both antitrust and merger control cases, the BCLWG recommends that transitional provisions should be put in place regarding: (i) the nationalisation of existing Commission commitments or remedies affecting UK markets, such that they remain binding and enforceable by the CMA; (ii) the continued recognition of legal professional privilege in Commission cases involving pre-Brexit acts or conduct; and (iii) in cases involving pre-Brexit behaviour, clear and effective procedures for information sharing and case allocation between the EU and the UK. Although the aim is to avoid the duplication of work between the EU and UK competition authorities, parallel investigations are conceivable and this further emphasises the need for effectual information sharing and cooperation.
To avoid the risk of under-enforcement of antitrust cases involving pre-Brexit conduct and affecting UK markets (which may arise if the Commission drops such investigations or, post-Brexit, struggles to justify the time and resource expenditure of an investigation with a UK focus), the BCLWG recommends that the CMA retains its power to enforce Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) with respect to such conduct. The Report further recommends that where the CMA is conducting a parallel investigation alongside the Commission, the CMA should recognise any pre-Brexit conditional leniency granted by the Commission.
For merger reviews that have been notified to the Commission by the time of Brexit, the Report proposes the pre-emptive use of referral procedures under the European Merger Regulation (EUMR), beginning at least nine months before Brexit is implemented. Under the EUMR, the merging parties or a national competition authority may request the referral of a merger review back to the relevant Member State. For cases in pre-notification at the time of Brexit, the BCLWG recommends that the merging parties enter discussions with both the CMA and the Commission, who should collaborate and properly allocate the case to either the UK or the EU upon notification.
Coordination and cooperation
Brexit poses a significant risk in terms of duplication of work by the EU and UK competition authorities. This could affect the efficiency and effectiveness of case delivery, increase costs and reduce legal certainty. Accordingly, the BCLWG recommends that the UK government negotiate for the UK’s continued participation in the European Competition Network (or, failing that, the forum for European Competition Authorities) to ensure continued proficient case delivery across parallel investigations. Alternatively, the BCLWG proposes a series of bilateral agreements between the UK competition authorities and other national competition authorities, prioritising jurisdictions with active merger control regimes that are likely to be triggered by deals that also have a significant UK nexus, such as the EU or major EU Member States. These agreements should make provision for: (i) communication at the outset of and during an investigation in which substantial cooperation may be advantageous; (ii) the coordination of investigative timings; (iii) the harmonisation of information gathering; and (iv) the coordination of remedies. In addition, for wider policy issues, the BCLWG recommends that the UK continues to actively participate in relevant international bodies, such as the Organisation for Economic Cooperation and Development and the International Competition Network.
CMA: resourcing, process and priorities
As a result of Brexit, the CMA’s workload is likely to substantially increase and diversify. The Report indicates that the additional financial resources and personnel required should be in place before Brexit, to avoid diverting focus from other CMA work streams (such as market studies or consumer law enforcement). This may be a cost-neutral situation as the financial burden may be met through the merger filing fees and potential infringement fines generated by this additional work. Separately, the BCLWG does not recommend any measures to reduce the CMA’s workload, but does pose some alternative solutions to simplify the merger review procedure; for example, the introduction of a shortened, simplified Phase II procedure for parallel EU/UK cases or targeted, narrower analysis and information requests for Phase I cases.
The EFTA option
The Report considers the possibility of the UK becoming a member of the European Free Trade Association (EFTA) (thus remaining within the EEA) as a transitional measure post-Brexit. Given that most EU competition law and practice is replicated within the EEA and that the UK is already a contracting party to the EEA, this would require far fewer changes than if the UK were to leave the EEA entirely. Amendments to legislation and sectoral guidance would focus on replacing the EU provisions with their EFTA equivalents, rather than any substantive changes. This would, however, result in an increased workload for the EFTA institutions.