Competition Law Post Transition
The Trade and Cooperation Agreement (TCA) between the UK and EU has been described as a ‘cakeist’ treaty. One thing is for certain, post Brexit transition the slice of competition enforcement and larger mergers is now significantly bigger for the UK’s Competition and Markets Authority (CMA). We take a brief look at the impact on UK competition law now we are post transition.
The UK now has an entirely stand-alone competition regime. The separation of the UK and EU antitrust enforcement and merger control systems has now taken effect. Certain aspects of the regime remain unaffected by Brexit, such as market studies, market investigations and the UK’s criminal cartel offence. The CMA has listed which of its guidance publications are not impacted by EU exit. However, there are a number of changes regarding antitrust, merger control and subsidies to be aware of which have now come into effect.
Antitrust and cartel enforcement
The CMA and the UK’s concurrent regulators can now only investigate competition infringements under the Competition Act 1998, not under the equivalent EU provisions (Articles 101 and 102 TFEU). However, companies may now be subject to both CMA and European Commission (Commission) proceedings in relation to anti-competitive behaviour such as cartels or abuses of dominance. Where anti-competitive behaviour may affect both trade within the UK and trade between EU Member States, the CMA and the Commission may investigate in parallel.
Many of the substantive rules remain unchanged. For instance, EU block exemption regulations, which exempt from competition rules certain categories of agreements (e.g. ‘vertical’ or distribution agreements) have been transposed into UK law as retained EU law. As a result, agreements between companies that previously fell under a block exemption safe harbour remain exempt. In addition, going forward, companies entering into new agreements will also be able to benefit from the retained exemptions provided they meet the relevant criteria and market share thresholds (and subject to the relevant exemption’s expiry date). However, longer term the UK is able to change these now domestic rules should it wish to do so, as EU derived law no longer has supremacy in the UK.
The EU ‘one-stop shop’ will no longer apply in the UK. UK turnover will no longer be relevant in assessing if a transaction meets the EU Merger Regulation thresholds. Therefore, the Commission no longer has exclusive competence to review the effects on any UK market(s) of a merger with ‘Community dimension’. That means the CMA is no longer prohibited from taking jurisdiction over a merger if its jurisdictional requirements are met. For example, the CMA recently issued an invitation to comment in relation to NVIDIA’s takeover of Arm. As a result, mergers may now be subject to parallel reviews by both the CMA and the Commission if their respective jurisdictional tests are met. Merging parties will therefore need to consider whether to voluntarily file with the CMA in addition to filing with the Commission.
Subsidy control (formerly known as State aid)
The UK is no longer bound to follow EU state aid rules as a result of the State Aid (Revocations and Amendments) (EU Exit) Regulations 2020. However, the UK now has an obligation under the TCA to create a new subsidy control regime and establish an operationally independent body to oversee the new regime. The TCA also includes provisions on the role of UK courts in reviewing domestic subsidy decisions by way of judicial review and a reciprocal mechanism that allows either the UK or EU to take rapid unilateral action (or ‘remedial measures’) where a subsidy granted by the other party is causing, or there is a serious risk that it will cause, a significant negative effect on trade or investment between them.
What this all means in practice
In practice, there will be cases where the Commission and the CMA could both open investigations in parallel. The CMA is likely to review larger mergers alongside the Commission’s merger investigations. It is also likely to take on some of the larger competition enforcement cases affecting UK markets which would have been carried out previously by the Commission.
It is important that companies based in the UK are aware they remain subject to EU competition law if anti-competitive conduct is implemented or effects are produced in the EU. EU competition law continues to apply to companies regardless of country of incorporation or where their headquarters are located. Companies with activities in the UK and EU should therefore ensure that their agreements and practices are compliant with both UK and EU competition law. Leniency applicants should also tread carefully as it is even more important given parallel investigations that separate leniency applications are considered. An application to the Commission offers no protection against a UK investigation.
The loss of the benefit of the Commission’s one-stop shop in relation to EU mergers may lead to increased overall costs when faced with parallel merger investigations by the CMA and Commission. However, the CMA frequently liaises with other merger authorities and has stated it will endeavour to coordinate its reviews in multi-jurisdictional mergers. The TCA refers to the importance of cooperation between respective competition authorities with regard to both competition policy and enforcement and that the competition authorities shall endeavour to cooperate and coordinate.
So, while the TCA cake has been well and truly cut and the CMA has grown bigger teeth as a result of Brexit, both the CMA and the Commission will still on occasion be chewing together.
Where can I read more?
The CMA has published guidance on its powers post-transition period which includes the specific transitional arrangements for antitrust and merger cases which were live at the end of the transition period. The CMA has also recently commented in its blog on changes to the merger regime following Brexit transition.
For more information on state aid, please refer to our previous Brexit alert here.
As always, Freeths LLP are very happy to give advice on these aspects. Please get in touch with Andy Maxwell to discuss anything in this article.
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The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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