Part 1: Merger law
On January 17, 2017 British Prime Minister Theresa May outlined for the first time her plan for leaving the EU. Indicating a "hard Brexit", May explained that the UK (i) will leave the EU single market and (ii) will neither be bound by EU rules nor by decisions of the European Court of Justice. In consequence, the UK will have to leave the European Economic Area (EEA) after Brexit, too.
This decision has an impact on European law enforcement and in particular on European competition law. Even though most of the problems arising could be resolved by bilateral agreements between the UK and the EU, it is unclear if the UK will adopt this approach.
Against this background, we summarize the probable (as it stands now) main changes in competition law after Brexit and the corresponding risks and chances for business in three newsletters.
This first newsletter deals with the merger law issues, while the next newsletters will cover competition law enforcement and cartel damage claims.
The end of the one-stop shop - a need for reforms in UK merger control law?
- Currently, EU merger control operates on the basis of a "one-stop shop" principle: Once the turnover of the parties to a transaction meets the thresholds of the EU Merger Control Regulation ("ECMR"), the European Commission has exclusive jurisdiction over the transaction. After Brexit, the British Competition and Markets Authority ("CMA") will have parallel jurisdiction for mergers that meet both the EU and UK merger control thresholds. Companies will have to consider filing mergers both at the Commission and - on a voluntary basis - at the CMA.
- Possible parallel proceedings will not only substantially increase costs and administrative burden in connection with the respective transaction. They may also carry the risk of divergent decisions and possibly divergent commitments that are required by the authorities.
- The number of cases investigated by the Commission will probably decrease since UK turnover will not have to be taken into account in the calculation of EU-wide turnover. On the other hand, the parallel jurisdiction is likely to increase the CMA's workload.
- Under the current voluntary notification system in UK, companies can often not definitively determine if a transaction should be notified. In order to increase legal certainty, the UK legislator might be encouraged to introduce more precise rules to determine if the transaction is subject to merger control, e.g. by abolishing the so-called "size-of-supply-test" (which requires a complex market analysis under certain circumstances). In addition, the UK might consider introducing a mandatory notification system.
- It cannot be excluded that the UK legislator adopts a broader national interest approach in merger control, as the Prime Minister has suggested in previous speeches. The UK could thereby prevent acquisitions of UK companies by foreign takeovers in important sectors. Currently, where the Commission has exclusive jurisdiction over the competition analysis, national governments can only intervene in this process to protect national interest if the strict requirements of Art. 21 para 4 ECMR are met.