Out-Law News 3 min. read

No change to substantive competition and state aid rules after Brexit

The government has no plans to make "fundamental changes" to its competition law framework, including to concurrency arrangements, beyond the changes that are necessary to ensure the continued functioning of UK law after Brexit, it said.

Retaining the current regime will "provide the necessary degree of certainty and continuity for businesses, consumers and enforcement bodies", it said. The response also re-states government commitments to additional spending for the CMA and other public bodies to help them to prepare for Brexit.

Existing EU state aid rules will also be fully transposed into UK law after Brexit through the EU Withdrawal Bill, the government has confirmed.

The bill, which is currently before parliament, will transfer any state aid legislation applicable in the UK through EU law at the point that the UK leaves the EU directly onto the UK statute book. Small business minister Andrew Griffiths has now confirmed in a letter that this will apply to existing State aid rules in all sectors, "including agriculture, fisheries and transport", as well as all existing exemptions.

The letter (18-page / 1.26MB PDF) forms the government's formal response to a House of Lords sub-committee report on the impact of Brexit on competition and State aid rules. In it, Griffiths reinforces the government's commitment to a rigorously enforced competition law regime post-Brexit, independently regulated by the Competition and Markets Authority (CMA). The CMA will also take on the role of State aid regulator "at the point when an independent UK State aid authority is required", he said.

"This reflects its experience and understanding of markets as the UK's competition authority and its independence from government," Griffiths wrote in his letter.

The letter also confirms that the UK will continue to apply EU State aid rules in the same way as it does at present during the "time-limited" Brexit transition period agreed between the UK and EU negotiating teams. The European Commission will remain responsible for approving and monitoring aid during this period, Griffiths said.

EU state aid law expert Caroline Ramsay of Pinsent Masons, the law firm behind Out-Law.com, said "for some, the Brexit vote was heralded as an opportunity for the UK to dispose of the perceived bureaucracy of European state aid regulation, but the reality is that the UK, whether in or out of Europe, needs state aid regulation. State aid regulation ensures a healthy economy, built on a type of economic Darwinism, whereby healthy companies can thrive and unhealthy businesses are not bailed-out. The continued regulation of state aid will afford the best opportunity for the UK economy to thrive post-Brexit."

"The continued regulation of State aid in a post-Brexit UK will also hopefully afford the UK a better chance of securing a more favourable trade deal with the EU.  The EU would likely be nervous in adopting a favourable trade deal with a neighbour who was subsidising its national businesses and thus creating an uneven playing field for export across borders."

In its report of February 2018, the EU Internal Market sub-committee said that Brexit would allow the UK to adopt a "more innovative and responsive" approach to competition law and merger regulation. However, it recommended that the UK and EU put in place a "formal cooperation agreement" covering antitrust and merger investigations and enforcement, to reflect the fact that the biggest cases would "have effects in both markets".

The government agreed with the committee about the importance of UK and EU cooperation on competition investigations and enforcement, and intends to develop the most appropriate mechanism or mechanisms for such cooperation as part of its wider negotiations with the EU. These could take the form of formal treaties, agency-to-agency level agreements or even informal agreements, provided that this is permitted by the national laws of any EU member states concerned.

The response also notes the "many practical similarities" between the EU and UK merger control processes, which should help to reduce the burden of dual notification for firms once the current 'one stop shop' arrangement, where larger mergers fall under the exclusive jurisdiction of the European Commission, ends. The CMA will also continue to review its procedures to ensure that they remain as efficient as possible, the government said.

Competition law expert Alan Davis of Pinsent Masons, the law firm behind Out-Law.com, said that the government's response was "a welcome confirmation of the government's commitment to a rigorously enforced UK competition law regime with an independent regulator post-Brexit".

"It is also positive that the government has accepted the recommendations of the sub-committee, and the competition law experts that gave evidence to it, not to make any substantive changes to the regime which are not necessitated simply because of Brexit," he said.

Davis added: "Although the government has also recently pledged additional funding for the CMA, it will nevertheless still be a major challenge to deal with the additional workload following its transition to become an international competition authority," he said.

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