Brexit and Competition law: Plus ça change plus c’est la même chose


Author: Alex Haffner


Alex Haffner, Partner, Fladgate LLP (ahaffner@fladgate.com)


 

While debate continues in Parliament as to deal with the current blockage around the UK’s Withdrawal Agreement (‘Brexit – a legal quagmire?’), back in the “real” world, businesses need to plan for the various outcomes currently being left in the hands of the politicians.

An area of law which has undoubtedly become more important in recent years from a business compliance point of view is Competition law, or as our friends from across the pond in the US often refer to it as “anti-trust”. Ironically in view of the ongoing debate about EU influence on our laws and sovereignty, this is one area of legal practice in which UK and EU law are very much intertwined.  Indeed, as explained below, it is arguable whether BREXIT will have any impact on things, whatever form it takes, at least in the short-medium term.

The EU’s competence over the application of competition law across the European Union dates back to the 1957 Treaty of Rome, which established the EEC as then was and provided for a “system ensuring that competition in the common market is not distorted”.  Today, the EU’s competition policy is derived from the rules set out in the Treaty on the Functioning of the EU and encompasses three key pillars:

  • “behavioural” rules on anti-competitive agreements and abuse of dominance;
  • merger control; and
  • state aid (the rules which prevent Member States using state resources to favour certain companies over any of their competitors, eg by creating “national champions”.

The closeness of UK and EU competition law can broadly be attributed to three key dynamics. First, the requirement (imposed through EU Regulation) and enforced at present through section 60 of the UK Competition Act 1998, that UK authorities and courts must interpret the UK competition rules in a manner consistent with the competition case law of the ECJ and decisions of the European Commission (EC).  Second, there is a clear demarcation between the competencies of the European Commission on the one hand, and national competition authorities on the other, in enforcing of the competition rules.  For example, the European Commission has exclusive jurisdiction to review the impact on competition within the EU of cross-border mergers involving parties with sufficient EU/worldwide revenues, as well as the state aid rules.  Finally, the simple fact that the biggest competition law cases that affect UK businesses and consumers – whether under merger control or antitrust – are dealt with under EU law as enforced by the EU Commission and the EU courts.

As a competition law practitioner, it is fair to say that any advice to clients in this area will need to be based on EU precedent and practice, irrespective of whether it is actually UK competition law which applies

Will this still be true going forward so it is, in the words of the French novelist Jean-Baptiste Karr “the more it changes the more it’s the same thing”? Arguably, yes.

If it does pass (which of course seems unlikely), the Withdrawal Agreement includes provisions to ensure that the UK maintains a degree of alignment on fundamental aspects of its legal and regulatory regime relevant to competitiveness, including ensuring effective State Aid and Competition Law regimes. Article 92 of the Withdrawal further provides that the EC will continue to be competent for all administrative procedures commenced during the transition period, including any live antitrust and merger control reviews.  In the case of state aid, the EC will be able to open new investigations into suspected breaches of the rules by the UK with respect to aid granted before the end of the transition period and for a period of 4 years after the end of that period.

Alternatively, in a no deal scenario, pursuant to the Withdrawal Act the entire body of EU law will be incorporated into UK law at the point of departure and then changes made to specific statutes to remove inappropriate references and deficiencies that would make laws unworkable.

The government recently published a draft set of Regulations setting out the detailed changes to be made to UK competition law in the event of a no deal Brexit – http://www.legislation.gov.uk/ukdsi/2019/9780111173930/contents.

These Regulations seek as far as possible to recognise the close alignment between UK and EU competition law. This is best encapsulated by the proposed replacement for section 60 of the Competition Act – a new section 60A will provide that there should be no such inconsistency unless it is considered “appropriate to act otherwise” in specified circumstances.  As such, the government has already recognised that UK competition law cannot function effectively without access to the body of EU precedent already available to it and used in its present incarnation with the UK as an EU Member State bound by the obligations already described.

As in so many different areas, any no deal scenario will require careful thought as to the prospect of parallel investigations of transactions and allegations of anti-competitive behaviour. Concerns have previously been raised as to whether Competition and Markets Authority will be able to cope with the increased workload that results. However, it has recently been given more budget and commenced a substantial recruitment round.   The remaining question therefore is whether that increased budget and resource will be needed sooner rather than later…

For legal updates and news, please visit Fladgate’s Brexit briefings blog

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