The UK competition regime under a no-deal Brexit scenario

On 30 October 2018 the Government published a draft SI amending current UK competition legislation where necessary in order to make the legislation suitable in a no-deal Brexit scenario. The Competition (Amendment etc.) (EU Exit) Regulations 2019 (The Regulations) provide for changes to the following legislation:

• The Competition Act 1998 and secondary legislation issued under it
• The Enterprise Act 2002 and secondary legislation issued under it
• EU Block Exemption Regulations
• Other legislation containing competition provisions

The Regulations also repeal a number of EU Treaty rights, EU competition Regulations and EU Commission decisions which are specific to the EU competition regime and will no longer be relevant once the UK leaves the EU without a Brexit deal. 

The Regulations are adopted under section 8 of the European Union (Withdrawal) Act 2018 (EU Withdrawal Act), which allows Ministers to adopt legislation in order to prevent, remedy or mitigate any failure of retained EU law to operate effectively, or any other deficiency in retained EU law, arising from the withdrawal of the United Kingdom from the EU.

It is important to note that the Regulations will only take effect in the event of a no-deal Brexit on 29 March 2019.

The Government continues to negotiate a withdrawal agreement with the EU and remains hopeful that the UK will leave the EU with a suitable deal.  The draft withdrawal agreement provides for a transition period until the end of December 2020 during which the status quo will continue and a future trade agreement between the EU and the UK could provide for close alignment between the EU and UK competition regimes and cooperation between their respective competition authorities.  Terms in the withdrawal agreement may deal with transitional arrangements for cases in progress at the time of transition.

The Government has indicated that it is keen in any event to explore reciprocal commitments on competition transparency, procedural rights and safeguards with the EU and to reach agreement on cooperation in order to manage parallel competition work.

Changes to the UK Competition Act 1998

After Brexit the CMA will no longer have jurisdiction to apply Articles 101 and 102 TFEU and will no longer be part of the EU competition system.  The Regulations therefore remove all references in the Competition Act to EU law and EU institutions and to any powers or duties on the UK authorities in relation to current EU obligations.

Section 60

Section 60 of the Competition Act, under which the UK competition authorities and courts must, in as far as possible interpret UK competition law in a manner that is consistent with EU competition law and must have regard to any decision or statement of the Commission, is being repealed.  A new Section 60A provides that competition authorities and courts will only be bound by an obligation to ensure consistency with EU competition case law and decisions that pre-date exit day.  So UK courts and competition authorities will no longer need to have regard to EU case law and decisions adopted after that date.

Section 60A(7) further provides that the CMA and the courts may depart from pre-Brexit cases and decisions where it is considered appropriate in the light of specified circumstances, such as for example differences between UK and EU markets, developments in economic activity or the particular circumstances under consideration.  The specified circumstances listed are very broad and Section 60A(7) may end up diluting the requirement for consistency with pre-Brexit case law considerably.

It is somewhat unexpected for Section 60 to be departed from so extensively under these Regulations.  Section 60 was added in the Competition Act 1998 at the UK's initiative and was not required under EU law.  With only a minor change from "must" to "may" it would be entirely consistent with stated UK post-Brexit policy and the terms of the EU Withdrawal Agreement.  The definition of "retained EU law" in Section 2(2) of the EU Withdrawal Act is, however, very broad and it is arguable that Section 60 is covered by Section 2(2)(d), which covers any enactment so far as "relating otherwise to the EU or the EEA", so that the repeal and replacement is within the powers given by the Act.

The changes in relation to the treatment of pre-exit EU case law have the effect of increasing legal uncertainty and it is questionable whether this is either desirable or necessary at this stage.

Follow-on damages claims

Sections 47A and 58A of the Competition Act are amended so that EU Commission decisions adopted after exit day are no longer binding on UK courts in follow-on damages claims.  Decisions adopted before exit day will continue to be binding, even where they only become final (after any appeals have been exhausted or the time for bringing an appeal has expired) after exit day.

UK courts will no longer be bound to treat decisions by the national competition authorities as prima facie evidence of a breach of Articles 101 or 102 TFEU for the purpose of a follow-on claim for damages.  Decisions reached before exit day, even if only final after that date, will retain their status of prima facie evidence.

Block exemption Regulations

The EU block exemption Regulations will become 'retained block exemption Regulations' after Brexit and will provide an exemption from the Chapter I prohibition on the basis of the same criteria and market share thresholds.  On their expiry the Secretary of State may decide to replace a retained block exemption with a new block exemption adopted under the relevant Competition Act powers.

Transitional provisions

Where the CMA is conducting an investigation immediately before exit day, it will no longer have jurisdiction to investigate any EU aspects of the case on or after exit day.  Anything done before exit day for the purpose of or in connection with the EU elements of the investigation is to be treated, on or after exit day, as done for the purpose of or in connection with the domestic elements of the investigation.

After exit day the CMA will not be able to open investigations into infringements of UK competition law where the Commission had, before exit day, taken jurisdiction and reached a decision.  The CMA will however have jurisdiction to investigate breaches of UK competition law which took place before exit day where the Commission took jurisdiction but had not yet reached a decision before exit day.

Changes to the Enterprise Act 2002

The EU Merger Regulation (EUMR) will be revoked on exit day and any references to the EUMR regime and its interaction with the UK merger regime will be removed, in order to clearly separate the two merger control regimes.  The Regulations also include a range of transitional provisions for merger control.

Transitional provisions

The CMA will not be able to launch a parallel investigation for a transaction where the Commission has reached a decision before exit day.

For merger cases which are live on exit day (these are cases that have been notified or referred to the EU Commission under the EUMR but on which a decision has not been reached on exit day), the UK aspects of the transaction will come under the CMA's jurisdiction (provided the transaction meets the jurisdictional thresholds of the Enterprise Act).  Similarly, where a Commission decision is subsequently annulled, the CMA may have jurisdiction over the UK aspects of the transaction and provisions are made to ensure that the CMA will not be time barred from investigating the merger.

Changes to other legislation

The Regulations make amendments to a range of other primary legislation, mainly removing all references to Articles 101 and 102 TFEU in the context of the concurrent competition powers of the various regulators.

The Regulations also revoke a range of EU competition Regulations which are specific to the EU competition regime and will no longer be relevant once the UK leaves the EU without a Brexit deal. The list is set out in Schedule 3 and includes Regulation 139/2004 on the control of concentrations between undertakings (the EUMR), Regulation 1/2003 on the implementation of the rules on competition in Articles 101 and 102 and various other implementing and procedural Regulations.

CMA guidance

The CMA has also published guidance on its role after Brexit and more specifically on its role in antitrust and in mergers if there is no Brexit deal.

CMA's role in antitrust if there is no Brexit deal

After the UK's exit from the EU, the CMA will no longer have jurisdiction to apply Articles 101 and 102 TFEU.  Its jurisdiction to apply the Chapter I and Chapter II prohibitions, the UK's equivalent provisions, remains unchanged.  The CMA will inform parties to investigations that are ongoing at exit day if the scope of their investigation is affected by this change.

After exit day the CMA will have jurisdiction to conduct investigations into breaches of the UK prohibitions which took place before or after exit day, including cases where the Commission took jurisdiction but has not yet reached a decision.  In deciding whether or not to open a case the CMA will take into account it prioritisation principles.

In respect of leniency applications, after exit day any existing or potential leniency applicant under the EU leniency regime in respect of conduct which is also covered by the CMA's leniency programme should make a separate application for leniency to the CMA (as is currently the case).

CMA's role in mergers if there is no Brexit deal

The CMA will have no jurisdiction where the Commission has reviewed a merger and issued a decision on or before exit day, unless the decision is subsequently annulled.

Where the Commission has not issued a decision on or before exit day, the CMA will no longer be excluded by the EUMR from taking jurisdiction over the UK aspects of the merger under the UK merger control regime.  Merging parties are advised to contact the CMA at an early stage where they anticipate that such a scenario is possible, in particular where the transaction may raise potential competition concerns in the UK.  The CMA may suggest to the merging parties that they should start pre-notification discussions with the CMA.

The CMA will continue to monitor non-notified cases, including those falling under the jurisdiction of the Commission but over which the UK may obtain jurisdiction over the UK aspects of the transaction after exit day.

Contacts