UK: 'no deal' Brexit could leave competition cases in limbo

Out-Law News | 14 Sep 2018 | 11:20 am | 3 min. read

It is not clear how and when EU competition and merger investigations with effects in the UK that are ongoing at the point of Brexit will be completed if 'no deal' is reached on the terms of the UK's withdrawal from the EU, the UK government has admitted.

The government made the concession in new guidance it has issued in relation to the potential impact of a 'no deal' scenario on the competition regime in the UK.

"In a ‘no deal’ scenario, businesses should be aware that it is possible that there will be no agreement on jurisdiction over live EU merger and antitrust cases to the extent that they address effects on UK markets," the government's technical notice on merger review and anti-competitive activity if there's no Brexit deal said.

"Businesses subject to an ongoing antitrust investigation should take independent legal advice on how to comply with any ongoing investigation of the European Commission and/or the Competition and Markets Authority (or the relevant UK regulator)," it said.

Competition law expert Alan Davis of Pinsent Masons, the law firm behind, said "the unanswered question of what will happen to these ongoing merger and competition investigations could concern businesses especially given how close we are to the exit date".

The new technical notice was published alongside separate 'no deal' guidance in relation to public procurement, which was also published on Thursday. The two papers complement similar papers previously published by the government, including in relation to the implications for the state aid regime of a 'no deal' Brexit.

In the new competition paper, the government reiterated previous announcements in which it said that Brexit would not trigger any changes to the UK competition regime beyond those necessary to manage the UK’s exit from the EU.

It also confirmed the likelihood of parallel competition and merger investigations in a 'no deal' Brexit scenario.

Currently, mergers which meet EU turnover thresholds and many cases of anti-competitive conduct which affect the UK are handled by the European Commission, with remaining cases handled by the Competition and Markets Authority (CMA) or sector regulators in the UK, such as Ofcom.

"The main change for businesses will be that, in some cases, mergers that currently meet the relevant EU thresholds will be reviewed by both the Competition and Markets Authority and the European Commission," the government said. "The UK’s voluntary notification regime will remain. Similarly, after the UK exits the EU, companies may be investigated by both authorities in parallel for breaches of UK and EU antitrust rules where there are effects in both markets."

The government advised businesses considering mergers in the run up to the UK's scheduled exit from the EU on 29 March 2019 to "consider early engagement with both the Competition and Markets Authority and the European Commission".

The government also used its paper to reaffirm its plans to implement existing exemptions from EU competition law into UK law.

"The EU Withdrawal Act will preserve the EU block exemption regulations (which currently apply in the UK as parallel exemptions to the UK competition prohibitions)," the government's guidance paper said. "The block exemption regulations exempt certain types of agreements from competition rules where there are benefits for consumers. Any necessary modifications will be made to correct deficiencies in the exemptions, for example amounts denominated in euros will be converted and redenominated in pounds sterling."

"The intention is that existing agreements between companies that benefited from the parallel application of an EU exemption to the UK antitrust prohibitions prior to EU exit should continue to benefit from that exemption in the UK. Companies will also be able to benefit from the preserved block exemptions within the UK when they enter into new agreements that meet the relevant criteria after EU exit," it said.

 Alan Davis said the technical paper contained "no real surprises" and it was welcome confirmation that the competition regime would remain substantially unchanged. He said "it is also positive that some legal certainty for business was to be provided as a result of the 'domestication' of the EU block exemptions".

"Unhelpfully though unsurprisingly, the paper avoids reference to any role for historic or future Court of Justice of the EU (CJEU) jurisprudence in terms of interpreting UK competition law in the future, other than stating that the 'CMA and UK courts will no longer be bound to follow future CJEU case law'," he said.  "It had been anticipated that a deal might have facilitated a more sensible outcome that involved the UK courts and competition authorities having "due regard" to CJEU rulings, but it is clear that a "no deal" scenario increases the risk of potential future divergence".

"On the other hand, the technical paper at least clarifies that claimants pursuing claims for damages in UK courts, based on decisions of the European Commission or member state competition authorities that are made before Brexit, will be able to bring those claims in UK courts," Davis said.