The UK may leave the EU on 29 March 2019 without a transition period or agreed arrangements on the terms of its exit. There are multiple implications:
Businesses subject to an ongoing EU antitrust investigation on the date of exit may be subject to an additional investigation by the CMA, since the European Commission will lose its jurisdiction to investigate UK aspects of alleged infringements. Businesses that have applied for leniency to the Commission will need to consider whether a parallel application to the CMA is necessary.
The risk of parallel investigations extends to post-Brexit conduct generally since the existing formal and informal jurisdiction mechanisms between the EU and Member States will no longer apply in the UK.
Claimants pursuing private damages actions for EU antitrust infringements will no longer be able to rely in UK courts on post-Brexit Commission decisions as a binding finding of an infringement in follow-on claims.
The CMA has put forward a number of proposals for the overhaul of the UK competition regime, but a No Deal Brexit may delay implementation of those reforms.
The Brexit date of 29 March 2019 is fast approaching. However, the effect of the UK’s impending exit from the EU remains unclear and hinges on whether it exits the bloc under the terms of the Withdrawal Agreement or without an agreement (No Deal Brexit). Following on from our previous OnPoint, which examined the impact of Brexit on merger control, this OnPoint looks at how Brexit could affect public and private antitrust enforcement.
In the event the UK Government is able to get the Withdrawal Agreement (or a similar agreement) signed into law, the UK competition regime will remain tethered to the EU during the implementation/transition period until at least end 2020. Although the UK will no longer be a Member State, it will still be treated as one for purposes of competition law. There will thus be a period of continuity under this scenario, and in particular the prohibitions in the Treaty on the Functioning of the European Union (TFEU) against anticompetitive agreements (Article 101) and the abuse of dominance (Article 102) will continue to apply in the UK. For ongoing investigations and proceedings at the end of the transition period, i.e., December 2020 or later, the Withdrawal Agreement makes provision for the European Commission (Commission) to retain exclusive jurisdiction over those cases.
If a No Deal Brexit materialises, which remains a possibility amid the political turmoil, the UK will at once become a wholly autonomous jurisdiction. The UK Government allocated the UK Competition & Markets Authority (CMA) additional funding of up to £23.6 million in 2019 to prepare for Brexit and according to its 2019/20 Annual Plan, the organisation has made great strides to ensure it has the resources to take on major international cartel or antitrust cases.Recent proposals for an overhaul of the UK competition regime that were outlined in a letter from CMA Chairman Andrew Tyrie to the Secretary of State for Business, Energy and Industrial Strategy, Greg Clark, reflect an appetite for the CMA to be more vigorous in its enforcement activities. In particular, the letter notes that the legal framework needs to be reformed to enable the CMA to effectively address new forms of competitive harm that flow from digitisation. Those proposals include strengthening the CMA’s regulatory toolkit through increased investigatory powers and much more ambitious use of interim measures. However, the CMA acknowledges that a No Deal Brexit will come with some opportunity cost: the CMA’s ability to launch new but more discretionary work using its markets and enforcement powers will be heavily constrained due to taking on new and mandatory cases, notably merger reviews with the number of additional merger cases expected to jump by over 80%. It follows that there may be a dip in the level of antitrust enforcement after a No Deal Brexit. Indeed, there may not be the bandwidth to advance the legislative reform ambitions.
From a procedural standpoint, the most immediate challenge posed by a No Deal Brexit concerns businesses that are currently subject to an investigation by the Commission at the moment of Brexit. Those businesses could find themselves subject to a separate investigation by the CMA, if the alleged infringement is also caught by the Competition Act 1998. This is because the Commission will immediately lose its jurisdiction to investigate the UK effects of the alleged anticompetitive conduct. Additionally, leniency applications to the Commission will no longer cover the UK aspects of the conduct. Accordingly, businesses that have applied for leniency to the Commission should strongly consider submitting a parallel application to the CMA. The risk of a separate CMA investigation does not extend to pre-Brexit proceedings where the Commission relieved the CMA of jurisdiction and subsequently issued an infringement decision which has not been annulled on appeal.
Beyond investigations ongoing at the time of Brexit, the risk of businesses finding themselves subject to two substantially similar investigations or proceedings on both sides of the English Channel will become a long-term reality. Regulation 1/2003 and the Cooperation Notice will no longer apply post-Brexit, which will result in the removal of the formal and informal mechanisms for the allocation of jurisdiction between the Commission and national competition authorities (NCAs) of Member States. Parallel proceedings will inevitably increase costs, place a greater burden on resources as well as increase uncertainty for businesses that have to manage two separate processes. An even greater concern is that businesses subject to parallel proceedings may be at risk of double jeopardy. Post-Brexit it is unclear how the CMA or the UK courts would interpret the facts of a case that is subject to separate enforcement action by the Commission or an NCA, which will leave businesses facing the prospect of two fines for the same conduct.
In terms of substance, a No Deal Brexit will not entail any short-term significant changes to the UK antitrust regime. The draft statutory instrument (the Competition SI) that was put forward by the Government in October 2018 makes provision for transition to a standalone UK competition regime whilst seeking to preserve as much as possible the current legal framework. The Competition SI removes the CMA’s ability to apply Articles 101 and 102 TFEU, but its jurisdiction to apply the equivalent UK prohibitions in Chapter I and Chapter II of the Competition Act 1998 will remain unchanged. Both prohibitions largely mirror the wording of Articles 101 and 102 TFEU. In addition, the seven EU block exemptions will be retained and amended to reflect the UK’s exit from the EU, which means that agreements that currently fall within the block exemption safe harbours will remain exempt from the Chapter I and Chapter prohibitions. The expiry dates of the retained block exemptions will be preserved, but the Secretary of State will have the power to replace them with new block exemptions.
The most important change envisaged by the Competition SI is the repeal of Section 60 of the Competition Act 1998, which currently requires UK courts and competition authorities to interpret the Chapter I and Chapter II prohibitions in a manner that is consistent with the decisions and principles laid down by the Court of Justice of the EU. Courts and authorities must also have regard to any relevant decision or statement of the Commission. These requirements will no longer apply to new cases opened after 29 March 2019 as well as cases already opened on or before the date of exit. Instead, Section 60A, the new provision inserted by the Competition SI, requires UK courts and competition authorities to ensure that there is no inconsistency with pre-Brexit EU case law and principles when interpreting UK competition law; and to have regard to any relevant pre-Brexit decisions or statements of the Commission. There is nonetheless some scope for divergence since Section 60A provides that courts and competition authorities may depart from pre-Brexit EU case law and principles where appropriate in specified circumstances. These circumstances, which are worded broadly and have been criticised for their ambiguity, include inter alia: differences between EU and UK markets; post-Brexit developments in the economy; generally accepted principles of competition analysis; post-Brexit EU case law and principles; and the “particular circumstances under consideration.”
Private Damages Actions
As with public antitrust enforcement, the UK private damages actions regime will remain unchanged if the UK leaves the EU under the terms of a Withdrawal Agreement. However, in a No Deal scenario, only pre-Brexit Commission infringement decisions will be binding on UK courts as binding evidence of an infringement in follow-on damages claims for breaches of Articles 101 and 102 TFEU. It follows that claimants wishing to pursue a follow-on damages claim will not be able to rely on Commission decisions adopted post-Brexit. Unless the CMA separately finds there was a cartel, claimants would have to pursue a standalone damages action in UK courts based on alleged breach of EU competition law, as a foreign tort claim: but this carries the evidentiary challenge of proving that an infringement took place.
An additional consideration affecting private damages actions in UK courts based on pre-Brexit Commission infringement decisions is that there will be no EU framework for civil judicial cooperation between the UK and EU Member States. In particular, there is the possibility that damages awarded by UK courts will not be enforceable in EU Member States.
In both situations, there is accordingly the prospect of parallel claims in the UK and an EU Member State.